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The delivery system of housing in the country is a combination of many integrated components which include land, building materials, infrastructure, policies, building regulations and more importantly finance. The priority accorded the issue of housing is immense; to most governments, the availability of sufficient but basic housing for all is often stated as a priority for enhancing the social needs of the society. In Nigeria alone there is a shortage of 150,000 units annually (National housing policy, 2004), the government alone with its public housing initiatives cannot curb this problem hence the need for private investors in the real estate market.
Habitable housing contributes to the health, efficiency, social behavior and general welfare of the population. Apart from providing man with shelter and security, housing plays a major role serving as an asset. For any typical home-owner, the house is a major asset that adds onto his portfolio and for many households; the purchase of a house represents a lifelong investment and a store of wealth. Provision of housing services depends mostly upon a wellfunctioning housing finance system. The consideration of constructing or acquiring a house is influenced by the cost and various government economic policies which could be fiscal or monetary (Giussani and Hadjimatheou, 1991) and even depends on the economic system adopted in a country.
Housing is a major purchase requiring long-term financing, and the factors that are associated with well-functioning housing finance systems are those that enable the provision of longterm finance. It is evident that countries with stronger legal rights for borrowers and lenders through collateral and bankruptcy laws, credit information systems that are well informed, and a stable macroeconomic environment have more developed housing finance systems (Warnock 2008). These factors also help explain the variation in housing finance across emerging market economies.
1.1 Statement of the Problem
In line with the government’s effort in achieving Vision 2020 and the overall development of the economy, provision of housing is essential. With an acute shortage of 150000 units annually and the ever-increasing population, a housing problem arises and consequently social and economic problems. Housing here is not the only problem, but adequate housing that can allow for the comfort ability levels sort by mankind. . The importance attached to housing problems by the government has resulted in the adoption of the housing policy; its implementation and effectiveness has not been adequate as is depicted by the current state of housing in Nigeria.
Fallis (1994) noted that housing problem might be focused on the causes, for example; the housing problem might be described as being caused by an underdeveloped mortgage market which leads to the loss of simple rental housing. There were various reasons deduced as causes of housing problems. The most important reason has been the variation between the price of habitable and decent accommodation and the number of individuals that can afford it. In the long term, market forces and government intervention determine the specific size of each of the housing tenures (Warnock 2008)
A large gap exists between the demand and supply of housing finance. Critical analysis and clear understanding of the money market and the current financial system in the country is required to effectively relate housing finance and house delivery. The purchase or construction of housing in many countries is inhibited because individuals cannot borrow funds. The available loans are channeled to high and middle-income families. The problem is how do we avail the loanable funds to the low income earners? Finding measures to address this problem and subsequent implementation will provide for adequate affordable housing for the low-income earners.
The lack of finance has been caused by the intermittent sources of income and low income from the informal employment. UN Habitat (2003) puts forward that the informal sector, which provides for the bulk of employment to the low income group, has not been generating regular and enough income to undertake the expensive housing construction and improvement. Consequent to this, those in the low income group need to save for many years if ever they are to realize a dream of living in an adequate house.
The problem again is how do we avail funds to the low income earners who have no collateral to act as security and not risk bursting the real estate bubble? Can the available financial models allow it? If so, how do we avoid a scenario like that in the USA in 2007.Too much borrowing and an assumption that the prices of homes would only go up led to the mortgage crisis. According to Dean Baker (2008), before the mortgage crisis, banks offered easy access to money. One could qualify for mortgages with little or no documentation. Even individuals with bad credit could qualify as subprime borrowers. Stringent measures on Mortgage applications were not applied to check for accuracy as well as it should have been. When the mortgage crisis began, home prices stopped rising, borrowers who bought more houses than they could afford stopped paying the mortgage, monthly payments increased on adjustable rate mortgages as interest rates rose. This led to the banks repossessing the houses leaving most in a state of homelessness.
Critical evaluation of the factors that influence financing for housing in the country could lead to the formulation of models that if well assimilated into the existing financial system could yield effective and efficient results.
1.2 Research Hypothesis
The supply of housing delivery is influenced by factors other than demand, hence inaccessible by the low-income earner.
1.3 Research Objectives
1. To identify the factors that influence housing delivery.
2. To establish their impact to the provision of housing.
3. To analyze housing supply characteristics in developing economies.
4. To identify direct and indirect sources of housing finance and the avenues that can avail funds for the low-income earner.
1.4 Research Questions
1. What are the main factors that influence the supply and demand for loanable funds for property development in Kebbi State, Nigeria?
2. What is the impact of socio-economic and financial factors and government policies in housing development/real estate investment?
3. What are the main sources of housing finance for households and what strategies can avail the funds to low income households?
1.5 Area and Scope of Study
This study focuses on Nigeria, a developing country; the development of its built environment has been described as vibrant. This research will aim at both rural and urban areas, real estate development takes place in all parts of the country, and this research will be able to find out whether the factors that affect housing finance in one part of the country are uniform or vary with that in another part.
Nigeria offers both a macro and microeconomic platform enabling critical evaluation of all factors available in both economic environments. The impact on the country’s money market due to macroeconomic shocks for example, volatility of interest rates consequent to inflation, unemployment rate vs. employment rate among other factors. The microeconomic environment attempts to depict the attitude of households in the demand and supply of housing finance.
The scope of this study will be restricted to conventional financial institutions and households that attempt to access funds for housing development. The study will examine how different factors affect the supply of funds by lenders and the demand of the funds by households. The research will also highlight the housing finance system employed in the country, its characteristics and role in housing delivery.
1.6 Significance of the Study
The findings on the study will be useful to the stakeholders and players in the real estate industry. It will reveal that the availability of housing finance is not determined only by the interplay of supply and demand but also other factors such as socio-economic factors, financial factors and the government policies play a part as to this. The study will assist individuals in decision making processes and assessing the different avenues that can avail funds for housing development.
The supply of housing is governed by supply and demand factors. Real estate development requires time to plan, permit and build hence supply is very inelastic. Housing demand is fairly predictable as it varies with income level. The level of income correlates to the availability of mortgage finance. Mortgage finance is an important factor in generating housing demand. Boleat (2008) postulated that there is a strong connection between economic development and the size of the mortgage market. It is also important for one to identify the various financial options available and assess the costs of such finance.
Over the years, different policies and strategies have been used in Nigeria to improve the housing delivery system and quality of housing to the low-income group. However, most of the policies developed have been slow and ineffective; this could be attributed to the limited resources to fund the low- income group and their access to housing finance. The study is therefore important to the Nigerian housing policy formulation process as it will identify the major issues in housing finance. The study will also provide useful background information for those institutions involved in housing finance initiatives to understand the types and characteristic of housing finance loan products required in the market.
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