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How Nigeria's PENCOM guidelines aims to drive new homeownership
Eligible Nigerian Retirement Saving Account Holders are a step closer to achieving the dream of owning their own homes as they can now approach their Pension Fund Administrators to gain access to 25 per cent of their pension savings for mortgage purposes. Adeniyi Akinlusi, Director, Greenstem Group to discuss the issuance and immediate implementation of this move.
Tue, 27 Sep 2022 16:31:59 GMT
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AI Generated Summary
- Access to 25% of pension savings for mortgages empowers Nigerians, especially in the informal sector, to own homes
- PENCOM guidelines stimulate affordable housing construction and complement existing housing finance initiatives
- Introduction of a mortgage guarantee company aims to boost mortgage lending and mitigate credit risks, fostering market growth
Nigeria's housing deficit has long been a concern, with millions of Nigerians unable to afford their own homes. However, a recent development in the country's mortgage industry is set to change the game. The issuance of new guidelines by the Pension Commission (PENCOM) now allows eligible Retirement Savings Account (RSA) holders to access 25% of their pension savings for mortgage purposes. This move aims to empower Nigerians, especially those in the informal sector, to achieve their dream of homeownership. Adeniyi Akinlusi, Director of Greenstem Group, shed light on the significance and immediate implications of this policy shift.
Akinlusi highlighted the transformative impact of this development on the mortgage industry, emphasizing that it addresses a critical barrier to homeownership - the lack of upfront funds for down payments. Traditionally, accessing a mortgage required three key components: a mortgage lender, a property to purchase, and equity for the down payment. Many Nigerians struggled to meet this last requirement, hindering their ability to buy property. With the option to tap into their pension funds for mortgage financing, individuals now have an alternative source of funds, paving the way for increased homeownership rates.
The new guidelines are expected to have a multi-dimensional effect on the Nigerian housing market. By providing access to pension funds for housing purposes, the initiative will stimulate the construction of affordable housing units, thereby addressing the demand for cost-effective residential options. Additionally, the policy complements existing initiatives like the National Housing Fund loans, offering a more inclusive approach to homeownership.
One key aspect of the PENCOM guidelines is the requirement of a minimum of five years of consecutive contributions to be eligible for accessing pension funds for mortgage financing. This stipulation aims to ensure a level of financial stability and commitment from RSA holders seeking to utilize their savings for home purchases. Akinlusi also addressed concerns around the trust deficit in the system, acknowledging that Nigerians may have reservations about accessing their pension savings for mortgages. However, he emphasized the importance of the stringent timelines set by PENCOM, which provide clear guidelines and accountability for pension administrators and mortgage lenders.
Moreover, the discussion delved into the role of a proposed mortgage guarantee company in boosting mortgage lending in Nigeria. The implementation of such an entity would mitigate credit risks for mortgage lenders, encouraging them to extend more loans to potential homeowners. By sharing the risk associated with mortgage defaults, the guarantee company could catalyze lending activities and enhance the overall efficiency of the mortgage market.
Looking ahead, Akinlusi highlighted the potential for new products and services, such as diaspora mortgages and intergenerational mortgages, to further expand access to homeownership opportunities. These innovative solutions cater to diverse segments of the population, including individuals nearing retirement who may seek alternative guarantors for their mortgages. The evolving landscape of the Nigerian mortgage industry holds promise for increased capital inflows and improved market dynamics.
While challenges like fund withdrawal management and trust issues remain, the progressive steps taken by regulators and stakeholders signal a positive trajectory for the housing sector in Nigeria. With a comprehensive approach that combines regulatory oversight, financial incentives, and product innovation, the country is poised to usher in a new era of inclusive and sustainable homeownership.
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