written by Tunde Alao

FOLLOWING the clamour for the introduction of best practices in mortgage finance, Lagos authorities have unfolded guidelines for residents who want to own houses through its home ownership scheme.

Under the initiative tagged Lagos State Home Ownership and Mortgage Scheme (LSHOMS), the state plans to provide funds for the mortgage facility, apart from providing the pool of houses.

The scheme affords the first time homebuyers, who are resident in Lagos, the opportunity to own their homes. Features of the scheme include a tenor minimum of 10 years and maximum of 20 years, while the Facility Amount will be subject to the 70 per cent balance of the cost of the type of houses purchased.

The scheme, promoted by the state’s Ministry of Housing, allows the applicant who must be first time buyers to provide an equity contribution, which is a minimum equity contribution of 30 per cent value of the property he/she intends to buy with interest rate of six per cent. For instance, the beneficiaries of the pilot scheme – civil servants, are expected to pay an initial fee of N10,000, and administrative charges N25,000.

According to an official of the ministry, Mr. Shina Odugbemi, the scheme tends to provide a standardisation for administering the LSHOMS to all residents of Lagos State. “Though priority will be given to civil servants in Lagos State ministries and parastatals, with the overall target being residents of the state irrespective of tribe or language”.

The purpose of the scheme, according to ministry officials, is to encourage first time homebuyers with verifiable source of income to own their own houses.   “Affordability implies that for low and medium income earners to be able to buy houses, there must be in place a mortgage finance system and one of the major challenges that impedes home ownership in Nigeria is the inadequacy of the mortgage sector.

“There is provision for equal periodic principal repayment, with interest to be paid on reducing balance or equal monthly installment of both principal and interest.

The Guardian learnt that already, three banks, namely First Bank of Nigeria Mortgages, Skye Mortgages and Zenith Bank Plc are to administer the scheme.

In fact, successful applicants who have submitted their application forms will be directed to any of these banks for pre-qualification bid.

“All applicants pre-qualified and recommended by any of the receiving banks will be issued with letter of offer while such applicants are expected to pay the 30 per cent equity contribution to any of the three collaborating banks”, he said, adding that applicants would submit proof of payment and an acceptance letter to Ministry of Housing.

Similarly, to ensure that the legal aspects are duly followed, the Ministry of Housing would refer all documents to Ministry of Justice to prepare and execute “Contract of Sales and Deed of Mortgage Agreements”, after which the Housing Ministry releases letter of confirmation of allocation to the successful applicants for possession.

Condition and eligibility for qualification for the scheme are that applicant must reside in Lagos and must be under 60 years of age. He or she must have a verifiable means of income and “should be credit worthy”.

“Successful applicants are expected to pay 30 per cent of the value of the house they intend to purchase and it should be noted that houses purchased under the scheme must be occupied by the beneficiary and cannot be transferred or rented out until all obligations have been fulfilled.”

Apart from the above, beneficiaries are to pay six per cent interest rate on the mortgage loan and must have been working for current employer for at least six months, which must be confirmed.

According to the ministry’s document – “Global Term Sheet for Lagos Ownership and Mortgage Scheme”, objectivity of the scheme, the state government will first pre-qualify the intending beneficiary who must be a first time home owner in Lagos and the claim of first time home ownership must be administered under an oath.

Other criteria include the pre-qualified individual must open an individual current account with the bank. The account will serve for both the purpose of paying the 30 per cent equity contribution and also for monthly repayment.

Secondly, the beneficiary will submit his/her allocation paper from LASG to the bank along with request letter and apply for a mortgage scheme under Lagos State Home Ownership Mortgage Scheme. Upon meeting the Risk Acceptance Criteria (RAC), approval will be conveyed via an offer letter and monthly repayment schedule communicated to the beneficiary.

Thirdly, for proof of affordability, salary earners are to submit pay slips for the past six months and salary account statement for the past one year while self-employed would submit company profile, three years audited account statement and business/personal account statement for the past 12 months.Lastly, monthly repayment as stated in the repayment schedule commences as soon as offer is accepted and condition precedent to commencement of monthly repayment is met. Thereafter, the bank will communicate acceptance and approval to LASG for release of keys to the beneficiary to take possession.   Update on monthly repayment will be given to LASG on monthly basis while a dedicated account will be opened, which will warehouse all monthly payment from the buyers, which would have joint signatories from the Ministry of Housing and Ministry of Finance.

“Event of default may occur if the beneficiary fails to make repayments for three consecutive times and if repayment has not been regular, which in the opinion of the banker has raised doubt on the ability of the beneficiary to continue with the repayment. In such situation, such issues will be reported to the government who will take steps towards foreclosure,” according to the document.

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The company which was specifically created to undertake the development said the city which will be divided into six districts, will offer multiple investment and development opportunities through its strategic plan to reclaim nine million square metres of land from the ocean Speaking during a familiarisation tour of the site, Lagos State Governor, Mr. Babatunde Fashola, said, it is the states vision  to build a self contained city that provides the quality of infrastructure and services required to make the state the financial capital of Africa.

According to him, “we are reclaiming and restoring the geographical territory of Lagos State and by extension the Federal Republic of Nigeria. We are reclaiming the land that has been lost to the Atlantic ocean and uncontrollable erosion that has now been brought under control.

“For many who might not know during the rains of 2007 there were waves here as high as 70 metres and was buffeting this coast line. For the great wall of Lagos, the wall in front of us here today protected Victoria Island and Ikoyi and the residence in Lagos from being submerged by flood, that wall is still a work in progress.

This  will be the wall that will ultimately defend this Island from the Atlantic ocean. We will work this stock with our partners. The future is clear to us as it should. This will be a new city on the coast .The city will run and operate like any other city in the world, 24 hour electricity, new business centre, housing accommodation, very efficient and reliable transportation.

The future that Lagos promised is now within touch, it is real, and I am told that in the next 24 months we will begin to see the emergence of one of the apartment blocks.

In a statement, David Frame, Managing Director of South Energyx Nigeria said, “Eko Atlantic’s Business District will become a home to numerous financial institutions, legal and accounting firms, insurance companies, stockbrokers, oil and gas corporate headquarters, advertising and marketing companies, as well as major retailers. It aims to host a new stock exchange, shopping malls, conference centres and hotels. It will truly be a vibrant addition to the Mega City that is Lagos,” he said.

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