Posted: 2020 | Pages: 66 | Format: MS Word | Chapters: 1-5 | Others: Questionnaires & References

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ABSTRACT

There is no doubt that funding is an important factor in real estate development and investment, hence a critical appraisal of contributions of institutional finance to real estate development in Enugu state. The study adopted survey research approach. A sample size of 129 was chosen using Taro Yamane model while stratified random sampling technique was used to select the sample. Data recovered from 92 completed questionnaires was subsequently presented in tables. After data analysis, the following findings were made; Federal Mortgage bank of Nigeria has been helpful in providing funds for real estate development in Enugu urban, contributions made into the NHF account has been beneficial to contributors and funds provided by the AG Mortgage Bank has been adequate for real estate developers even as the amortization period seem to be reasonable too, the major challenges faced by AG Mortgage Bank plc Enugu state include amongst others; problem of loan repayment and problem of inadequate staffing of the AG Mortgage Bank. However, recommendations made include; improvement of the services of AG Mortgage Bank, improvement of staff strength so as to adequately reach out to the least members, restructuring of sensitization strategies of AG mortgage bank, regular appraisal and investigation of loan disbursement and consulting Estate surveyors on matters relating to real estate development.

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Study

The major issue in real estate development and investment is finance. There is no doubt that funding is an important factor in real estate development and investment. The complexity and to a large extent, its capital-intensive nature demands proper and adequate funding to make it realizable. The terms and availability of the needed funds determine the trend of estate operation. Availability and easy accessibility of estate finance in sufficient quantity will definitely accelerate all forms of property development. Estate financing is concerned with the production of finance for building houses and office complexes which are basic necessities in a growing economy like Nigeria (Agbada, 2016). The benefits to be derived from a rise in estate financing in Nigeria are many and include; Increased rural and urban houses for the teaming Nigerian population, the construction of industrial estate for the localization of industries and commerce, an increase in employment for those in the construction industry. The sourcing of funds for investment in real estate development poses a great deal of problem for the developer. This is largely due to economic instability and stringent measures imposed by most financial institutions. This is compounded by the fact that the interest rate structure has had an unfavourable impact on funding the development of real estate. Since the financing of real estate development is a long term project, it has necessitated the high interest rate that is being charged on the funds provided for such development purposed (Acha, 2012).

Ezimuo (2014), revealed that six major real estate financing methods are used across the world namely; Joint Venture, Equity and Debt Financing, Sale-lease Back Financing, Advance Payment of key money and Sale of Securities.

Traditional funding of real estate is either by Equity funding (Equity funds), Loan Capital (Debt Funds) or a combination of both. The well-established and tested methods of funding real estate are as follows;

1. Equity Capital
2. Loan Capital
3. Mortgage Funding
4. Debenture
5. Contractor Financing.

Traditionally, real estate development was based on equity funds. Equity funds wholly generated and owned by one and to which there is no attachment. The chief source of equity funds is savings and these savings arise out of that part of income of individual or corporate organization. Equity funds sources could be private or public. Private equity may be drawn from individuals or corporate savings, that is, retained earnings, assets stripping, for cash or revenue reserves of companies over a period of time and accumulated savings of individual from employment and/or profits from business enterprises. Other sources of private equity funds apart from savings include funds from family sources, friends, Isusu system and thrift system. Public equity on the other hand is derived from invitation extended to the public to subscribe to the equities/ownership of a real estate company set up for that purpose. Some examples of this are capital issues, equity warrant issues, securitization and unitization (Adebamowo, 2012).