An Assessment Of The Performance Of Mortgage Institute Of Real Estate Development (A Case Of Federal Mortgage Bank Of Nigeria Ibadan Branch)
Real properly development is the application of capital managerial skill and entrepreneurial activities to the economy of land resources development whose form is subordinate to the constraint imposed on it by nature.
The research carried out during project work revealed some of the problems facing the financial institutions in real property development which are problems arising from the mortgagor side which include non-repayment of borrowed loan by the mortgagor. Secondly the problem arising from the mortgage sides are financial problem and government policy.
The major role of financial institution is to examined based on the provision of home construction loan to individual and estate developers. Recommendations were given in order to alleviate some of the mentioned problems which include the enlighten of the public of function of financial institutions, the enforcement of government regulation, monitoring of mortgage loan and lastly good human relationship should be encouraged.
1.1 Background of the Study
As it generally known that shelter is as important as food and it is one of the basic necessities of life for human being. As this result, the main motive of man is therefore to own a house on earth where he and his family will be secured and protected against any external forces.
To secure a house, it requires lump amount of capital which is not easily available to the investors no property and as a result, made the dream to be realized by just few people, they therefore rely on external source of finance to carry out such project since the personal savings and income are not enough to execute the development. Hence, the purpose of this study is to asses the roles and problem f financial institution in the provision of capital needed by the investors in real property development.
Real property development is the application of capital managerial skills, and entrepreneurial activities to the economy of land resources development whose form is subordinate to the constraint imposed on it by nature. Illinois (2001) define it.
In Nigeria today, the demand and supply of real property in case of land and building are inelastic relative to price changes. Some of the factors resulted to these are:-
- General growth and development of the community
- Change in taste, fashion and general standard of living.
The institutional frame work for housing is very rudimentarily developed to carter for the dare need oof individual and groups. In the past, few decades, the federal government has direct it effort toward encouraging every Nigerian to own a decent and affordable house. Also, in alleviating this problem, government has come out with an enactment and launching some decrees on construction policy etc. All these need stern implementation in real property market. The financial institution is the last resort to remove the friction by provoking mortgage finance.
This is used to finance real property that can be offered as a security for the loan. Such as owner occupied houses, commercial properties, industrial outlet, agricultural building and undeveloped land.
It is therefore, important to emphazise that this study is concerned with critical analysis of the activities of federal mortgage. Bank of Nigeria with a view to examine the activities of the bank as well as their problems. Identifying their problems with regard to granting of mortgage loan and making recommendation.
1.2 Statement of the Problem
From the point of view of the significant event of the oil boom in 19770 and Udoji award of 1976, investment in real property increases greatly due to availability of capital for development. The promulgation of land use Decree No.6 of 1978 caused a turning in the segment of property market. From the early 80’s landed properties vested in each state of land and making and supply relatively scarce. This resulted into a great problem in properly development.
This study is meant to look into how these problems can be reducing by examining the roles of such financial institution in property development.
1.3 Aims and Objectives
The aim of this study is to asses the roles and problems of financial institution in real property development with special focus on federal mortgage Bank of Nigeria.
To achieve the above aim the following objectives are included:-
- To examine the roles and functions of federal mortgage bank of Nigeria.
- To find out their sources of fund.
- To examine the procedure in giving out loan to the applicant
- To appraise their performance over the years
- To examine the problems facing by the institution and the applicants
- To prefer useful recommendations to the identified problems.
1.4 Significance to the Study
The federal mortgage Bank performs the functions mentioned below:-
- To provide social loan to individual for purposes of individual homes.
- To dictate the level and pace of growth industry and minimize avoidable fraudulent.
- To provide commercial loan to corporate bodies that want to build house for sell or to let.
- To provide equitable distribution of mortgage landing activities all over the country.
The scope of the study cover Federal mortgage Bank Ibadan in Oyo state.
1.5 Limitation of the Study
The limitation of the study in the course of research is that the various department with the responsibility of collecting, analyzing and keeping statistical records in the establishment are not always in the office due to the official duties, therefore making it difficult to see them. The cost of visiting federal mortgage institution at their location is very high. Most banks workers do not attend to investigators until after their tenth hour which makes every things boring to investigators. Also, bankers they believe it is confidential and in most cases top secrets.
1.6 Study Area
Geographical setting of Ibadan is located in South Nigeria. It is the capital of Oyo State, and it is the second largest city in Africa; parts of the city’s ancient protective walls still stand still today and its population is estimated to be about 3,800,000 according to 2006 census.
1.6.1 Historical Background
Ibadan was surrounded with seven hills, is also the second largest city in Nigeria. Ibadan grew into an impressive and sprawling urban center so much that by the en of 1829, Ibadan dominate the Yoruba region militarily, politically and economically. The colonizer develop commercial activities and also develop academic infrastructure the city. That is the first University to be set up in Nigeria was University of Ibadan 1962. And there is museum in the building of its Institute of African Studies, which exhibits several remarkable prehistoric bronze carvings and statues. Other note worthy institutions in the city include the University College Hospital and Institute of Tropical Agriculture Ibadan has several well stock libraries, a zoological garden and several botanical gardens. Nestled inside (IITA) is the best golf course in Nigeria and the grounds of the Ibadan Polo club is not too far away. Ibadan is home to the first television station in Africa. There are hotels with hot stops access, decent restaurants, couples of radio stations. Government secretariat is at Agodi and The Government Reservation Area (GRAs) at Agodi, Jericho and Onireke are relice of that era. The grid pattern of the residential layout of Oke – Bola and Oke – Ado is also associated with its activities. Their commercial economy are cassava, cocoa, cotton, timber, rubber, flour milling, leather working, furniture making and palm oil. Dugbe market is the nerve center of Ibadan’s transport and trading network. Another prominent landmark is Cocoa House, the first sky scraper in Nigeria, other attraction Mapo hall, Trans-amusement parks, the cultural centre mokola, and liberty stadium with a seating capacity of 35,000. The traditional market are Oja’ba, Ayeye and Oranyan and modern markets, Gbagi titun, Ageni, Bodija, Alesinloye, gate etc. They trade foodstuffs, textile goods, Aso-Oke, utensils, electronics and pharmaceuticals. They also operate transportation system with eleven local governments in Ibadan. Ibadan is an exception educational centre which has numerous primary and post primary institutions, etc. Their official language in Ibadan is Yoruba.
1.6.2 Historical Background of Federal Mortgage Bank Nigeria Ibadan Branch
The Federal Mortgage Bank of Nigeria formally known as Nigeria Building Society (NBS) has been in operation since 1956 as a building society. The Decree No. 7 of 29th January, 1977 abrogated the Nigeria Building Society for the Federal Mortgage Bank of Nigeria.
In 1933, the federal mortgage bank was deconsolidated into federal mortgage bank and federal mortgage finance. Federal mortgage bank remain the apex bank to license and control all the primary mortgage institutions before the central bank of Nigeria book over this function recently. The bank also administers the national housing. It collects the fund from the source and redistributes it to the primary mortgage institution for onward transmission to own builders. Capital foundation of federal mortgage bank in 60% for federal government of Nigeria and 40% for Central Bank of Nigeria.
The federal government of Nigeria promulgated another decree known as mortgage bank of Nigeria Decree 82 of 1993 to empower the mortgage institution to administer the National Housing Fund by collecting same and disturbing it to primary mortgage institutions. The law provided the following functions to the bank which are: –
- To supervise and control the activities of mortgage institutions in Nigeria.
- To encourage and promote development of mortgage institution at rural, local, state and federal levels.
1.7 Definition of Terms
An assessment can be defined evaluating or estimating of a nature, quality or ability of someone or something. It is also the process of designing, defining, selecting, collecting, analyzing, interpretation and using information to increase student’s learning and development by Erwin 1991.
A mortgage is a form of security for money lent. An interest will be reconvened when the loan is repaid. A mortgage deed usually provides for repayment at a fixed date, often six months after the date of the deed.
As oxford dictionary defined it as a stare of gradual growth of new building on land it is also a process of using an area of land to make profit by building on it. Also according to the british town and country planning acts of 1971 in section 22(1) describe development as the construction carried out such as building engineering, minning, or other operation in ,on over or under land or the making of any materials change in the use of any building or land.
iv. Real Estates:
Real estate means property that actually exists, genue and immovable i.e. such as land, buildings, structures claims and all types of developments on land.
Can be defined as any structure or mechanism of social order and cooperation governing the behavior of a set of individual with a given community.
Is an organization person that lend money to people to buy property like land and buildings.
Is a person that borrow money from the bank or similar organization to buy a property.
5.0 Summary of Finding, Conclusion and Recommendation
5.1 Summary of Findings
The study has shown that real property development is a specialized form of investment and normally, requires the highest skill involving the highest risk because of the large capital requirement, which is mostly granted by the Federal Mortgage Bank, Insurance company, merchants banks and commercial banks. Each of them is structured to fully participate in mortgage financing.
The study revealed hat within Nigeria money the interest rate structure is very low and this has serious implication on housing finance. They always emphasize role of interest rate as a means of regulating the cost of credit to encourage investment.
It is also discovered that individual borrowers has a misconception of government intentions fdue to lack of adequate information. Borrowers felt that government was rendering unlimited housing assistance in monetary terms. They failed to realize that financial institutions were in business: hence, the need ofr regular monthly repayment of both loan and interest was neglected therein, borrowers were of the opinion that the lenders would not foreclose the property until the term of the mortgage is terminated.
More so, borrower’s belief that except the final installment of an approved loan is received, they cannot be put on prepayment.
Politics is also another factor to consider in the establishment since the bank is owned by the federal government, it belongs to the ruling party. Thus , if you are not from the ruling party, you cannot be considered , since the loan consideration is purely not on merit. Though, the project may be unviable, but so far you are from the ruling party one will be considered qualify. This is closely related to favourism and corruption. The person may also be strongly connected to people at the top , through this connection he or she will be considered qualify for the loan.
A lot of improvement has been recorded in the rate of real property development generally, over the years the current economic recession notwithstanding, much has to be done to the increase in the prices of building materials overtime. Also , the real estate financial also contributed, it could not be actually ascertained as most financial institution fails to given the minimum and maximum loan, they give out as it was claimed to be confidential information. But basically, it can be inferred that there is no room for improvement on their part as most of them are still operating below the full capacity of the federal government approved guidelines.
Investment in real property is done of the foundation upon which the economy of the nation is built . in view of this adequate attention should be given to it. It is on these factor that following recommendations are made :
i. Public Enlightment:
The lender should educate and enlighten the borrows on the financial implication of borrowing money for building houses for owner occupation or for commercial purpose. Financial implication set in from the beginning with awareness for recovery of the loan borrowed and variation in repayment of loan monthly in case of increase in interest should be explained. They should orientate borrower on the involvement of government policy directly in real property development , because it is very important. All future contingencies tht may arise in the future should be staed such as inflation and all the remedies that may take place on case of default.
Finally, the understanding of what mortgage borrowing entails should be revealed to the borrowers
ii. Enforcement of Government Regulations:
Real estate financial institution should agree with government government regulation on financing because, the financial institutions are only engaging in real estate financing at their own discretion. The government should not enforce their regulation that would not favour the borrowers or mortgagor.
iii. Good Human Relation:
It has been note that the good human relation from both mortgagor and mortgagee is one of the major factors that determines the success of the business practices. There must be mutual trust and respect for each party.
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