Introduction:

Nigeria's real estate sector has undergone a lot of changes over the years, with financing options changing and evolving to meet the needs of the market. From the traditional mortgage system to more modern and innovative financing options, this blog explores the evolution of Nigerian real estate financing options.

Traditional Mortgage System:

The traditional mortgage system dominated Nigeria's real estate sector in the '80s and '90s. However, the system was dependent on commercial banks, which were not able to provide affordable and readily available long-term capital to meet the demand of the market. This led to the introduction of the National Housing Fund (NHF) in 1992, which was meant to provide a cheaper and more accessible alternative to the traditional mortgage system. The NHF required beneficiaries to be registered contributors and subscribers to the NHF scheme, and the loan amount was limited to the value of the property, which impacted its effectiveness.

Introduction of FMBN:

The introduction of the Federal Mortgage Bank of Nigeria (FMBN) in 1994 was a significant milestone in Nigeria's real estate financing history. The FMBN was established to provide long-term credit facilities to mortgage institutions, which, in turn, would lend them to individuals and cooperatives for the acquisition and development of residential properties. This made it easier for people to access affordable housing finance, however the bank was viewed as being bureaucratic.

The Rise of Islamic Finance:

One of the most innovative financing options to emerge in Nigeria in recent years is Islamic financing. Islamic financing is based on the principles of Islamic law and prohibits the payment or receipt of interest (riba) and promotes risk sharing. In 2013, Jaiz Bank, Nigeria's first full-fledged Islamic bank, was established, with a focus on providing Sharia-compliant banking services to individuals and businesses. Since then, Islamic financing has become increasingly popular in Nigeria, with more banks introducing Sharia-compliant products.

Crowdfunding:

Crowdfunding has emerged as a popular real estate financing option for small-scale development projects. Nigerian crowdfunding platforms like Farmcrowdy, Crowdyvest, Thrive Agric, and others, allow investors to pool their funds towards the purchase and development of real estate. This enables people with limited resources to participate in property development and ownership, which was previously outside their reach.

Conclusion:

From the traditional mortgage system to modern financing options like Islamic finance and crowdfunding, Nigeria's real estate sector has undergone significant changes and innovations. These changes have made real estate investment more accessible and affordable to Nigerians, providing a boost to the country's real estate industry.

Image source: www.freepik.com