KELECHUKWU MBAGWU is the Managing Director of CMB Building Maintenance and Investment Company Limited, one of Nigeria’s biggest property firms. He spoke on its merger with a Polish firm, Vertikal,as well as on how the government can serve the interest of private developers and prospective homeowners.
The government has announced plans to provide 180,000 cost effective and affordable housing for various categories of workers in the federal civil service by 2019. Is this government not changing its monetization policy? What should be the role of private developers under the proposed scheme?
I believe and have always believed that the Government’s role should be to create an enabling environment. The Government can make it more rewarding for those who have to construct by giving huge or even total concession on cost of land and providing infrastructure as well as statutory approvals. The private sector will participate fully because it will become worth their while. I do not think the Government plans to build these houses themselves. However, I must emphasize that all levels of Government will have to participate in creating the enabling environment which should include, tax and import duty concessions to mortgage guarantees for the off-takers.
It is a known fact that the present building techniques and technology are not amendable for mass housing in Nigeria. What options and policies should government consider in providing mass housing for the teeming population?
Yes, you are correct that brick and mortar – concrete and cement are not the fastest or cheapest ways to build. They are supposed to be the longest lasting though. It’s a trade off. If we want swift and less costly houses using wood and other materials, we have to contend with the fact that the salt in the air especially in the Lagos area will lead to faster degradation of the building materials. However, treating the exposed wood properly would lead to an increase in longevity. This is not really a Government Issue unless it is to encourage the necessary approvals. Importation of finished building materials, tax break and access to finance will help greatly but even then I fear that there will still be a capacity problem at the end of the day.
The Federal Government has been mooting some new concepts such as the social housing scheme. How can the programme work in Nigeria as the authorities rarely provide infrastructure, developers face building approval and land documentation challenges in housing projects?
Like I said, there are areas in which the Government can add value rather than trying to become builders. If these challenges were properly mitigated, it would ensure much faster progress. Social housing without serious Government subsidies will be impossible anywhere in the world. The programme can only work with full government participation.
The middle class seems non-existent in the real estate sector. How can the developers empower the middle class and ensure their participation in projects?
By building specifically to target their tastes and income. Do not forget the middle class are the most upwardly mobile of the three classes and will not necessarily remain where they presently are. As we speak, there are no products in financial institutions targeting this larger group of people. Mortgages are the key to middle class participation but only after specifically targeted products can be delivered in terms of costs and quality. CMB-Vertikal has a great deal of experience here.
Financing housing projects have been a major headache for property developers, especially members of the Real Estate Developers Association of Nigeria (REDAN). Now it is getting worse, do you think that offshore funding should be the way to arrest the problem? What are your recommendations?
Offshore funding for obvious reasons will be desirable because of the relatively low cost of funds and the capacity of the funders. The structures of the transactions are also more user friendly due to the long period of moratorium usually given. The downsides include the indefatigable forex risk as well as the high level of due diligence to be satisfied. The problem with offshore finance is not that it is undesirable but the fact that it is unattainable by majority of our existing developers, whose structures are not defined enough to satisfy the most exacting practitioners. It is also a little dangerous in the long term if the exchange rate does a somersault. For offshore financing to become ubiquitous in the industry, some major Government guarantees (strong and irretraceable guarantees) would be needed. As it is, very few of us would qualify.
CMB has entered into partnership with Vertikal and you will be leveraging on its delivery channel for building materials. Don’t you think with the current economic crunch, the exchange rate will erode the benefits of affordable housing to Nigerians?
Not really. CMB-Vertikal Construction will not be operating as a foreign firm but an indigenous company with the benefits of expertise from the best builders in Europe. The cost for buildings and work plans will be done within the aegis of the Nigerian Market and when affordable accommodation is specifically targeted, the company will deploy its expertise to achieve the required costs. In fact, the expertise of CMB-Vertikal will make it even easier to achieve, as the first cost savings will start from the designs of the buildings.
Which project are you using as a pilot scheme to kick-start the merger with Vertikal? If it is the Lagos-Badagry housing scheme, how many units are you planning and when do you hope to move to site?
There will be more than one starter scheme for CMB-Vertikal some of which corroboration has already started. The Badagry scheme is mainly site and services but we await the Government’s final approvals. We would certainly have to build a few prototypes to display the possibilities and the costs.
- The Guardian