Posted: 2022 | Pages: 130 | Format: MS Word | Chapters: 1-5 | Others: Questionnaires & References

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ABSTRACT

Real estate development required huge capital outlay, which is often beyond the capacity of the middle income or low-income group in Aba. The recent population upsurge and increased demand for residential and commercial accommodation has established the need to invest in real estate, however due to the present economic depression, availability of adequate funding has slowed down the development process in Abia state. The aim of this study is to identify and critically examine the problems and prospects of financing real estate development in a depressed economy in Aba. The research objectives include; to determine the earning capacity of the citizens in financing real estate development, to examine the operation of the mortgage financing institutions in real estate development and to determine the problems militating against efficient financing of real estate development in Abia state. The research adopted a case study research method. Data was collected with well-structured close ended questions. A total of 254 questionnaires were administered, 205 were returned while 49 questionnaires were not returned. The study discovered that the earning capacity of the citizen found in Aba, Abia State is low, this discouraged people from developing real estate, bank officials interviewed attributed the lack of investable funds as due to the increase in the population of the number of banks opening their offices in Nigeria on daily basis has made chasing funds a fierce battle, the unstable political climate in Nigeria has in most cases dealt a devastating blow on the financial institutions operating in the country, all these hinders financing Real Estate Development and has affected the growth of the economy, a substantial size of the population of the country say 60% are illiterate, uneducated and therefore don’t see the need of depositing money with the financial institution or taking insurance policy. The study therefore recommends that government should make available investable funds that will enhance real estate development and also regulate the number of banks that is been established. Government and its agencies should finance only viable projects and avoid unnecessary grandiose projects which they cannot accomplish on time or may abandon either for political reasons, bribery and corruption or for bad project management. This research concludes that the capital base of existing mortgage institutions be strengthened to cater for the housing demand of the nation.

CHAPTER ONE

1.0     INTRODUCTION

To every individual, shelter is one of the basic needs in life besides food and clothing, shelter is needed for productivity, health, welfare, etc. it is in actual realization of this importance that private sector and government made some effort in developing estates for investment purposes. In view of this, Sangosanya (1988) reasoned that what should be the aim of good housing policy in Nigeria is to provide enough housing in a good environment to meet the needs of average Nigerian family to support the growth of the economy in all its ramifications.

Inadequate finance for real estate development is one of the critical problems encountered in this country. This project is intended to reveal the problems and prospects of financing real estate development in a depressed economy, with a case study of Aba in Abia State.

It was a common practice for individuals, partnerships, groups, corporate bodies to raise fund for capital project either by launching an appeal fund or by borrowing from those who can afford to lend out. The federal and state governments as well as private organizations have made commendable efforts by providing financial institutions that assist in funding Real estate projects. Before the advent of the colonial masters, it used to be a thing of pride to have completed a building development project without being indebted to somebody especially when it is an owner occupied building.

Real estate financing, however goes beyond providing adequate shelter, but it includes utilities and disposal services, such as water supply, energy, access road, sewage disposal system as well as educational and health facilities. Nigeria which derives about 80% of its revenue from crude oil sales is experiencing shortage of funds for its populace, including real estate development. The financial institutions in Nigeria have been unable to meet the demands of its numerous customers for the past years.

1.1     BACKGROUND OF THE STUDY

Real estate development serves as the major catalyst for the growth of any nation’s economy, as it provides the enabling shelter through which production process and services can be made available for the wellbeing of man and his environment. But real estate is known to require huge capital outlay because of the role it plays government always work towards enhancing its productivity. It is in view of these that a serious federal government intervention in public housing began in 1971 during the Second National Development Plan.

Prior to this time, the government during era engaged in the provision of real estate development with the primary aim of housing the expatriate staff and few categories of indigenous workers like the police and railways. However, there was also within this period, some municipal and regional administrations attempts at public housing; notably among which was that of the Lagos Executive Development Board in 1954. A good number of the housing Estates in the country today originated from such effort. This move was later frustrated as a result of misappropriation and embezzlement of fund experienced by the managing authorities (Adeniyi,1996).

During the era of the first civilian administration from 1960-1969. A noticeable improvement was made as this period was the beginning of the five-year National Development Plan aimed at providing growth in the country but no significant impact was made on housing partly as a result of turbulent party politics.

Subsequently, during the civil war from 1967-1969, the attention of the government was on the war that was going on much emphasis was not placed on real estate development, not until 1970 when the National Council on Housing was established and the National Housing programme was launched in 1971. A total of 59,000 housing units were proposed for the country; 15,000 in Lagos and 4,000 in each of the eleven state capital then. The Federal Housing Authority was later established in 1973 to coordinate the implementation of the housing programmes nationwide. In the third National Development Plan (1975-1980), the envisaged active and direct involvement of federal government in housing led to the setting aside of the sum of 2.6billion of various projects associated with housing. A total of 202,000 dwelling units was again programmed for construction; 50,000 units in Lagos and 8,000 units was again programmed for each of the remaining nineteen states. This marked the beginning of government’s specific attention to the provision of real estate housing for the low income group. At the end of the plan period however, only 15% of the targeted number of houses was realized (federal ministry of works, 2001). Also within this period, the federal government constructed the Festival Town in Lagos, comprising a total of about 11,000 housing units. The low income group was to receive 55% of these housing units but it has been seen that they lost out completely in its implementation.

Again, the Shagari administration (1979-1983) made the provision of real estate development for the general public a priority project. An elaborate housing programme based on a concept of affordability and citizen participation was launched, because of the huge sum required to own property. A target of 2,000 units annually in each of the nineteen state capital the and Abuja; giving a total of 40,000 annually across the country was proposed. The low income earner were the target beneficiaries and were to receive 80% of the houses. By mid 1983 however, only 20% of the targeted figure-32,000 out of the targeted 140,000 could be realize while again the low income lost out almost completely in the allocation.

However, the new housing policy has established a two-tier housing finance structure, with Federal Mortgage Bank of Nigeria (FMBN) as an apex institution and a decentralized network of Primary Mortgage Institution (PMIs) such as Building societies, housing co-operatives, home savings and loans associations. This structure aims to streamline processes and organizational relationship  within the real estate finance system and encourage expansion in private initiative (Enuenwosu, 1985). In this regard, the legal framework for the organization and implementation of the apex role of FMBN has been defined by the mortgage institution Decree No. 53 of 1989. However, it is arguable if this policy has been satisfactory performed to date.

It is therefore, evidential that the basic factor for any real estate development is finance. Of all problems of real estate development in Nigeria, the problem of finance is very critical and decisive. The best programmes of any government of any government, no matter how grand and viable on scope and content will remain a day dream, unless there is sufficient capital  to concretize it, but this capital can only be acquired when the economy is stable and sufficient. Despite various pronouncements, regulations and deregulations, and all financial implementation policies of this country, the issue of accessing sufficient funds for an effective housing (real estate) delivery  system remain perpetually unsolved; this is why this work is aimed at evaluating the problems and prospects of financing real estate development in a depressed economy using Aba, Abia State as a case study.