The N3Trillion Affordable Mass Housing Provision Pension Boost

The 2014 Pension Reform Act includes the option for home ownership. According to Section 89(2) of the Act, “notwithstanding the provision of sub-section (1)(c) of this section, a Pension Fund Administrator may, subject to guidelines issued by the Commission, apply a percentage of the pension assets in the retirement savings account towards the payment of an equity contribution for the payment of residential mortgage by the holder of the retirement savings account.” The introduction of the long-awaited rules in the latter days of September 2022 sparked a bullish market swing.

According to my analysis, a suitable combination of these recommendations with the current National Housing Fund Scheme of the Federal Mortgage Bank of Nigeria (FMBN) will provide a significant boost to the affordable housing industry on both the supply and demand sides.

In terms of eligibility, the Guidelines apply to pension contributors who are in active work, either as a paid employee or as a self-employed individual, as well as major pension contributors and micro pension contributors. The applicants, Pension Fund Administrators (PFAs), and housing unit suppliers are the parties involved. Interested applicants must have an RSA and must satisfy the following requirements:

Have an offer letter for the property signed by the property owner/developer and validated by the Mortgage Lender. This demands some collaborative execution; otherwise, neither developer or property seller will wait for the lengthy procedure to be completed if the property can be sold elsewhere.

The applicant’s RSA must include both the employer and employee obligatory payments for a minimum of 60 months (five years). Contributors to the Micro Pension Plan (MPP) are also eligible if they have made contributions for at least 60 months (five years) previous to the date of their application. Since the mini pension system began in 2019, the first MPP recipient will be in 2024.

RSA holders who have fewer than three years to retire are not eligible.

Married couples who are RSA holders are eligible to make a joint application, provided that each individual meets the eligibility requirements.

RSA holders who enrolled before July 1, 2019, must have their records updated through the RSA data recapture operation; and

The application for equity contribution for a residential mortgage must be made in person, not via proxy.

Maximum Withdrawal Percentage: The maximum amount that can be withdrawn is 25% of the entire obligatory RSA balance as of the date of application, regardless of the amount of equity contribution needed by the mortgage lender. If 25% of a contributor’s RSA balance is insufficient for payment as an equity contribution, RSA holders may use the contingency part of their voluntary contributions (if any).

The absence of response times and timetables for confirmations, reviews, and fund disbursement is a key criticism. I believe that when potential beneficiaries begin to contact the PFAs, aspects like turnaround time and so on will become obvious and better decided.

I am especially pleased that financial professionals, in collaboration with developers and important agencies such as FMBN, Family Homes Fund (FHF), Nigeria Mortgage Refinance Commission (NMRC), and others, are actively investigating the possibilities. Initiatives such as the yet-to-be-established Mortgage Warehouse, a review of our foreclosure laws in the remaining states of the Federation that have yet to take it seriously, and a slew of other initiatives that are already underway or have been pushed will help ensure we have the hydra-headed solution our affordable housing crisis requires at this critical juncture. We just need to begin testing the waters in order to fast get over the rough edges that are often seen when launching a new plan and into autopilot mode.

The potential for about N3 trillion, or 25% of the over N14 trillion Naira under pension administration, to be poured into housing is enormous. Without a doubt, this is a really beneficial and welcome development in the construction business. We should be conducting an industry evaluation in twelve (12) months to see where all of this has led us.

Until then, keep your fingers crossed.

Engineer ‘Debo Adejana

Realty Point Limited’s MD/CEO

Founder of the Estate & Business School

Chairman, REDAN Southwest Zone