AN ASSESSMENT OF THE ROLE OF PRIMARY MORTGAGE INSTITUTIONS IN MORTGAGE FINANCING OF RESIDENTIAL PROPERTIES IN ABUJA
ABSTRACT
This study assesses the role of
primary mortgage institutions in mortgage financing of residential
property in Abuja. The specific objectives are: to determine the
mortgage facilities offered by primary mortgage institutions, to examine
the applications and approvals for purchase, rehabilitation and
construction of residential property and to assess the role of primary
mortgage institutions in mortgage financing of residential property in
the study area. The researcher adopt the use of questionnaire,
observation and personal interview to gathered relevant data from the
respondents while tables, simple percentage and descriptive statistics
were used for data presentation and analysis. The research reveals that
online marketing business have a significant effects on real estate
market in Abuja and therefore it should be encourage to cover all areas
of real estate market such as estate agency, development, sales, and
management of real estate property. The research has shown clearly the
problem of the mortgage industry in Nigeria which include: high interest
rate tagged to PMI funded loans, the cumbersome process in the NHF
application, the flexibility of interest rates on loans would also be of
great interest to the mortgagors and would increase their interest in
mortgage facilities given the assurance by PMIs that the interest rates
are negotiable which creates additional costs and thus makes them
un-affordable to many Nigerians. The following recommendations are
presented for deliberation by the primary mortgage institutions and the
mortgage industry as a whole: PMIs should be encouraged to improve their
capital base in order to empower them for greater effectiveness in
financing of residential property in Abuja.
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Study
The importance of housing finance in any
economy cannot be overstressed. It drives the provision of housing which
is more than shelter, since it involves all the services and utilities
that make a community a livable one. Housing is also one of the best
indicators of a person’s standard of living mid his or her status the
society. In spite of the crucial role housing plays as a basic needs, it
has remained inadequate in supply in practical all human societies’
right through history. An active and buoyant housing sector is an
indication of a strong programme of national development. It serves a
foundation for and the first step to the future economic growth and
social development. The housing sector plays a more critical role in a
country’s welfare than is always recognized as it affects not only the
well being of the citizens but also the performance of the sectors in
the economy.
Mortgage financing represents the genuine
means of housing in the world’s developed economies and is also more of
a challenge in developing cuntnes. For example, United Kingdom has the
largest mortgage market in Europe which is approximately 25% of the
European market. In Mexico, the housing finance market is in a state of
retrenchment, the macroeconomics environment has not been favorable to
the development of primnaiy niortgage market (Lea, 1996). The Mexican
mortgage is highly segments with a verity of mortgage programs designed
for different sectors.
In Nigeria, presently the mortgage sub
sector accounts for >10% of Nigeria’s Gross Domestic Product which
means that the opportunities that exist in this sector to boost the
nation’s economy cannot be exaggerated. The federal mortgage bank of
Nigeria puts an estimated over 10 million homes ‘as housing deficit in
Nigeria; the implication of this is that with time the mortgage industry
will also become large in the Nigeria capital market.
The mortgage industry in Nigeria involves
few active players which are often banks subsidiaries and a collection
of smaller inadequate mortgage institutions. These institutions include
semi government agencies, mortgage banks and building societies.
Mortgage financing has often been fingered as the most difficult
constraints in the Nigerian housing sector. One of the major problem has
been the inadequate supply of long term funds which represents the
major in cans of providing mortgages. Thus, the system has relied on
compulsory savings into National Housing Trust Fund (NTITF) scheme. As a
result of this, effort has been made by the regulatory authorities in
Nigeria to increase the supply of long-term funds for onward lending to
prospective homeowners A few of these effort include the recent
recapitalization of Primary Mortgage Institutions (PIvlls) in Nigeria,
the pension and financial sector reform’s and the recently promoted
Mortgage Backed securities on the future of investment return in the
mortgage industry. This study is therefore set to conduct a thorough
research into the Nigerian mortgage sector and the contribution of
primal)’ mortgage institutions to housing finance in Nigeria.
1.2 Statement of Problems
There is shortage of adequate housing
facilities in Nigeria towns. Lagos, for instance, has an average of 3.8
persons per room and extreme density ranging between 5 to over 7 persons
per room has been recorded (Omirin , 1998). Housing problems are
exacerbated by the combination of many factors. The bulk of traditional
housing available in our urban centers are mainly in dilapidate
conditions and unsuitable for habitation . Secondly, more houses are
needed to relieve the existing overcrowding in many Nigeria urban
centers. Thirdly, natural increase demand additional dwelling units to
house the increasing population. Fourthly, rural- urban migration, which
has assumed great dimensions during the last three decades, has
aggravated housing needs of urban centers in Nigeria. In response to the
great demand for houses, unplanned, and sub- standard private housing
districts continues to emerge in many towns in Nigeria. These in turn
led to emergence of slums. The Association of Housing Corporations of
Nigeria estimated on the basis of the 2006 population census that at
least 200,000 dwelling units should be provided annually throughout the
federation and that government authorities should produce at least
10,000 housing units annually.
The provisions of Decree No. 3 of 1992 are intended not only
to improve the operational impact of the housing financial system but
also to ensure the realisation of the social economic objectives of the
National Housing Policy. It has however, been observed that some of the
provisions of the decree have not been sufficiently enlarged to give
broad definitions to concepts such as Housing and
Financing options. Other problems observed are the absence of
Institutional Protection for providers of long term funds (depositors)
are the lack of development of secondary markets for mortgages encourage
investors and active market conditions within the sector in the Capital
Market. This project intends to assess the role of primary mortgage
institutions in mortgage financing of residential property in Abuja.
1.3 Aim and Objectives of the Study
Aim
The aim of this project is to assess the
role of primary mortgage institution in mortgage financing of
residential property in Abuja.
Objectives
To achieve the above set aim the following specific objectives shall be pursued:
- To determine the mortgage facilities offered by primary mortgage institutions
- To examine the applications and approvals for purchase, rehabilitation and construction of residential property
- To assess the role of primary mortgage institutions in mortgage financing of residential property in the study area.
- To evaluate the challenges of primary mortgage institutions
1.4 Research Questions
The following research questions shall guide the researcher in order to achieve the set objectives:
- What are the mortgage facilities offered by primary mortgage institutions
- What are the applications and approvals process for purchase, rehabilitation and construction of residential property?
- What is the contribution of mortgage banks institution in housing provision in the study area?
- What are challenges of primary mortgage institutions
1.5 Significance of the Study
This research assess the role of primary
mortgage institutions in mortgage financing of residential property in
Abuja. It appraises the mortgage facilities offered by primary mortgage
institutions and the contributions of mortgage bank institution in
housing provision in Abuja. The result of this study will relevant to
property developers, investors and government authority as it will
enlighten them on the contribution of primary mortgage institutions in
financing housing provision and development in Nigeria.
The result of this research will
contribute to the body of knowledge in provision of mortgage financing
for housing development thus, will serve as research material for
interested researchers who will like to further research into the
contribution of primary mortgage institutions to housing provision.
1.6 Scope and Limitation of the Study
This project work covers entirely the
role of primary mortgage institution in financing residential property
in Abuja. The scope of this study is limited to the contribution of
primary mortgage institutions in financing residential property in
Abuja. .
Limitation
Its major limitation was the problem of
getting information from the institution under study. There is always
the fear of giving out information to the public as such, vital
information needed was not readily available.
Time equally would not be left out;
getting permission to leave school and the issue of finance cannot be
ignored as much was spent in procuring materials. However, with fact and
judicial use of the limited resources, reasonable analyses have been
carried out in this research work.
1.7 Definition of Terms
Mortgage: Cambridge English Dictionary define mortgage as an agreement
that allows you to borrow money from a bank or similar organization,
especially in order to buy a house, or the amount of money itself:
Finance: Merriam Webster define finance as money or other liquid resources of a government, business, group, or individual.
Institution: Institution
is a structures or mechanisms of social order, they govern the
behaviour of a set of individuals within a given community. Institutions
are identified with a social purpose, transcending individuals and
intentions by mediating the rules that govern living behavior.
Housing: Housing
refers to houses or buildings collectively; accommodation of people;
planning or provision of accommodation by an authority; and related
meanings. The social issue is of ensuring that members of society have a
home in which to live, whether this is a house, or some other kind of
dwelling, lodging, or shelter.
Primary Mortgage: The
primary mortgage market is the market where borrowers and mortgage
originators come together to negotiate terms and effectuate mortgage
transaction. Mortgage brokers, mortgage bankers, credit unions and banks
are all part of the primary mortgage market.
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