Affordable mass housing
Affordable mass housing
Business Model Description
Provide affordable housing to low and medium income earners through new constructions, property acquisitions or minority equity investments in companies operating along the housing value chain.
Expected Impact
Ensure households with limited income have access to clean and safe living environments
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Nigeria: Countrywide
Sector Classification
Infrastructure
Development need
Nigeria will face several challenges in the next decades, with the infrastructure sector as the basis for the country’s sustainable development due to its cross-cutting characteristics. There are several potential areas for investments. These opportunities focus on, but do not exclusively relate to, serving rapidly growing urban populations, and include electricity generation or waste management.
Policy priority
National Integrated Infrastructure Master Plan 2019 - The value of Nigeria’s core infrastructure stock represents only about 25% of gross domestic product (GDP) according to 2013 estimates, a value significantly lower than the global benchmark of 70%. This low stock has been attributed mainly to low public and private spending on infrastructure.(1)
Gender inequalities and marginalization issues
Poor infrastructure can exacerbate the gender gap. In low income countries, women are responsible for over 70% of water and fuel wood collection. The time spent on water collection adds up to 200 million hours every day. Unsafe and low security transport also disadvantages women, by exposing them to violence. This affects their wellbeing and workforce participation.(8)
Investment opportunities introduction
To efficiently revamp infrastructure across various sectors, estimated investment of USD 30 trillion is required over 30 years (2014 – 2043). This estimate includes investments in the following priority areas: Energy, transport, social infrastructure and housing. (1)(2)
Key bottlenecks introduction
The low infrastructure stock has been attributed mainly to low public and private spending on infrastructure.(1)
Real Estate
Development need
Despite improvements in macroeconomic indicators over the years, housing remains a perennial problem in Nigeria. Mortgages still stand at 1.13% of gross domestic product (GDP) and the total number of outstanding mortgages in the country is 113,069. With a projected population of 263 million by 2038, Nigeria's housing situation calls for an emergency response.(3)
Home Builders
Pipeline Opportunity
Affordable mass housing
Provide affordable housing to low and medium income earners through new constructions, property acquisitions or minority equity investments in companies operating along the housing value chain.
Business Case
Market Size and Environment
> USD 1 billion
With the current yearly population growth of 2.7%, and the building requirements expected to increase to 2 million units a year, an estimated USD 363 billion is required to build affordable homes.(4)
Nigeria had an estimated housing deficit of 17 million dwellings at August 2012. Further, an estimated additional 700,000 houses must be built annually to keep up with demand, currently below 100,000. (4)
Indicative Return
20% - 25%
A private company investing in affordable housing realized a return of 23.3% (average internal rate of return).(5)
Another private equity firm realized 26% internal rate of return on equity.(5)
Investment Timeframe
Long Term (10+ years)
Based on studied benchmark projects, cash flow generation is expected in the long term, between 15 - 20 years.
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Market - Highly Regulated
Capital - Limited Investor Interest
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
Despite improvements in macroeconomic indicators over the years, housing remains a perennial problem in Nigeria. Mortgages still stand at 1.13% of gross domestic product (GDP) and the total number of outstanding mortgages in the country is 113,069.(3)
With a projected population of 263 million by 2038, Nigeria's housing situation calls for an emergency response.(3)
Social housing schemes mitigate the constraints associated with lack of access to affordable housing. The Family Homes Fund, to be operated as a public-private partnership (PPP) aims to facilitate and supply 500,000 homes and 1.5 million jobs for low income earners by 2023. The PPP has an expected fund target of NGN 1 trillion.(2)
Gender & Marginalisation
Poor infrastructure can exacerbate the gender gap. In low income countries, women are responsible for over 70% of water and fuel wood collection. The time spent on water collection adds up to 200 million hours every day. Unsafe and low security transport also disadvantages women, by exposing them to violence. This affects their wellbeing and workforce participation.(8)
Expected Development Outcome
Investments help increase access to housing for the people and ultimately improve lives and livelihoods, decreasing infrastructural and housing gaps.
Gender & Marginalisation
Investments in affordable housing can help increase the number of women and rural communities living in a safe and clean environment.
Primary SDGs addressed
11.1.1 Proportion of urban population living in informal, informal settlements or inadequate housing
N/A
Nigeria’s 2017 Programmatic Objectives includes establishing a Social Housing Fund to deepen the mortgage system and expand its availability across all States of the Federation.(9)
Secondary SDGs addressed
Directly impacted stakeholders
People
Outcome Risks
Investments may drive environmental pollution and over-population.
Impact Risks
Stakeholder participation risk depending on the selection of regions to expand affordable housing (risks of excluding certain regions/communities)
Unexpected impact risk given the negative environmental effects of construction activities
Efficiency risk given the heavy involvement of public bodies (with higher costs) in the housing sector
Execution risk if activities are not delivered as planned and do not result in the desired outcomes
Impact Classification
What
Positive impact through provision of affordable mass housing for the population.
Risk
Change in government policy
Impact Thesis
Ensure households with limited income have access to clean and safe living environments
Enabling Environment
Policy Environment
Economic Recovery and Growth Plan: The Central Bank of Nigeria (CBN) continues to support Nigeria's mortgage market with the proposed creation of the Nigerian Mortgage Guarantee Company (NMGC) and Mortgage Interest Draw Back Fund.
The Central Bank of Nigeria is also working to develop a framework that will enable banks to securitize mortgage loans, which can then be sold in capital markets.(6)
Financial Environment
Financial incentives: The Central Bank of Nigeria's 5-year policy thrust aims to reduce the cost of obtaining mortgages. It also aims to support growth of the real estate sector by allowing banks to securitize mortgage loans and sell them in capital markets.(6)
Other incentives: The Central Bank of Nigeria has also disclosed its intention to create a fund for real estate developers.
Regulatory Environment
Land Use Act No. 6 of 1978: This Act guides policy in the land market.(4)
Marketplace Participants
Private Sector
Shelter Afrique, Africa Reinsurance Corporation, Mbvoni, Nigeria Integrated Social Housing
Government
Development Bank of Nigeria, Federal Ministry of Finance, Nigeria Sovereign Investment Authority, Federal Mortgage Bank of Nigeria
Public-Private Partnership
Family Homes Funds
Target Locations
Nigeria: Countrywide
References
- (1) National Planning Commission (2015). National Integrated Infrastructure Master Plan.
- (2) Federal Republic of Nigeria (2017). Economic Recovery and Growth Plan 2017 - 2020. Abuja: Ministry of Budget and National Planning.
- (3) Centre for Affordable Housing (2019). Housing finance in Africa. http://housingfinanceafrica.org/app/uploads/2019_yearbook-20.12.2019-compressed.pdf
- (4) Nigerian Bureau of Statistics (2015). Nigerian real estate sector summary report 2010-2012.
- (5) Bertha Centre for Social Innovation and Entrepreneurship (2015). Investment theme: Access to housing. https://www.sbs.ox.ac.uk/sites/default/files/2019-01/Impact-theme-Acess-to-Housing.pdf
- (6) Securities and Exchange Commission (2019). CBN 5-year policy thrust: implications for the capital market. https://sec.gov.ng/wp-content/uploads/2019/10/OCE-Policy-Brief-07.pdf
- (7) Countrywide Housing Company (2021). Countywide Housing Company. http://chclimited.com/index.php
- (8) OECD (2019). Gender Equality and Sustainable Infrastructure. https://www.oecd.org/governance/gender-equality-and-sustainable-infrastructure-paris-march-2019.htm
- (9) Federal Republic of Nigeria (2017). Implementation of the SDGs: a national voluntary review. https://sustainabledevelopment.un.org/content/documents/16029Nigeria.pdf