Examination Of The Role Of Commercial Banks In Housing Development In Nigeria
The relevance of real estate to our economics and social development cannot be over-emphasized not at least in the housing sector, which has a critical impact on Individual and National Welfare. Firstly finance plays a key role in the housing development project and process and this provides the most important element that is been taken into consideration. The objective of this study is to find a suitable source of finance for housing development project. To provide affordable house to household, viability for commercial bank and developers and recourses mobilization for expansion of the sector. This research focuses on Portharcourt metropolis capital of River State. The source in which data was collected and gathered is through primary and secondary source. This has contributed immensely in producing relevant information that gives extensive investigation on the examination of the role of commercial banks in Port-Harcourt metropolis. Areas are as follow Iworfre is 45, Rumasen area are 49, Rumokor area are 35, Rumador area are 51, so total are now 200. The techniques stratified random sampling. The technique used for questions. It has equally collected and carefully analyzed data from both primary and secondary sources using percentages.
1.1 Background of the Study
Right from the time, food, clothing and shelter have been the three most basic requirements of man, of all these three requirements food and clothing are the two, which influence man’s life more than housing in which they seek shelter, security, comfort and dignity. It is infact where man start and ends his daily activities.
Housing is mainly the most important factor, which determine the nature and from of urban settlements and the quality of human existence is directly related to it. housing is defined by Oyeyipo (1980) to mean the provision of any form of structure, erection of building which is man made for the purpose of accommodating a person or persons by taking housing to mean only shelter, the definition appears deflective as it ignores all these infrastructural facility, which housing brings along with it. the World Health Organization Committee on Housing define it as “the physical structure then use for shelter including equipment and devices needed for physical and social well being of occupants” such equipment and devices includes utilities and services like electricity, water supply, and good access roads, sewage and refuse dump facilities.
The fact remains that Port-Harcourt metropolis is occupies mainly by government workers with low income. These positions make it difficult for them to afford the cost of developing housing for their use. They therefore resort to borrowing from the commercial banks in other to find money for housing development and also Port-Harcourt metropolis is made up of river line areas, swamp ground.
The Questions then “is the existing commercial banks in Port-Harcourt metropolis enough to satisfy the demands for residential housing? Are loans of these low income earners residing in Port-Harcourt metropolis? If not, how can the bank be improved.
This research work therefore intends to existing commercial banks of Port-Harcourt metropolis with a view to find out how efficient it has been performing and proposing how the system could improved.
Housing development is a fundamental and essential features in the urban environment. Adequate provision of housing development have a great deal of positive impact on both the economic and social life of the urban citizens and its inadequacy has reverse effect.
The shortage of housing development is one of the major problem facing urban centres especially in the developing countries. Housing development involves large amount of money, which is usually not within the capability of most urban dwellers particularly the medium and low income groups, the rate of housing construction often tend to be small and generally depends on financial resources. This situation of finance scarcity is made worse by the rigid attitude of commercial banks towards lending for housing development. Their system of granting loans make it very difficult for the medium and low income groups to benefit the available facility. The bulk of the mortgage loans goes to the upper class.
This research work intend to look into existing commercial banks in River State urban, to find out if it is adequate to satisfy the housing needs of inhabitants of Port-Harcourt.
1.2 Statement of the Problem
One problem facing the inhabitants of Port-Harcourt metropolis is the issue of housing supply. This is as a result of government little interest in housing development in the area. The attitude of some financial institutions in the insurance of finance to real estate developers and the building societies also mitigate the pace of housing development in the area.
The difficulties encountered by housing developers in obtaining loans from the Federal Mortgage Bank of Nigeria (FMBN) in turn discourages interested developers from investing in housing development as most of them would not want to hang their money on incomplete housing project. This however, create low supply of housing to accommodate the incessant population of the metropolis and lead to congestion.
As a result of the present economic crunch where equity capital has become inadequate and insufficient for finance housing development, it has been observed that only commercial banks that can help in providing loans with low interest rate to at least encourage developers into the business again. On this note, we want to undertake an examination of the role of commercial banks in housing development in project of Port-Harcourt metropolis.
1.3 Objectives of the Study
The major objectives of this study is to examine the roles of commercial banks in housing development project of Port-Harcourt metropolis. The objectives include:-
- To assess the existing commercial banks
- To find ways of improving them on their major functions.
- To identify the role of commercial banks in funding housing development projects with particular focus on Port-Harcourt metropolis
- To make recommendations based on findings.
1.4 Research Questions
Considering these issues, the study set out to seek answers to the following Questions.
- What roles can the commercial banks play in the development of housing project?
- What are the policies, laws or decrees affecting the operations of the commercial banks involvement.
- What are the likely solutions that can enhance their roles?
- What are the likely impacts of their effective participation in housing development finance?
1.5 Significance of the Study
The essence of the study is to enlighten the government, students and researchers on the importance of housing development finance. The general result obtained from the study is educative, informative and broader the awareness of the public on current sources of housing development finance in the estate.
Estate surveyors and valuers could apply the result of this research work in their future housing development finance planning and their advisory role to the general public.
Also, it is hoped that the project would be a reference point of the academic sector from where ideal information/fact could be easily sourced for knowledge and equally to the commercial banks as a guide in taking investment decision.
1.6 Scope and Limitation of the Study
The research work covers most of the roles commercial banks in Port Harcourt metropolis capital of River State plays in assisting housing development in the state. The study equally looks into some of the problem encountered by commercial banks in granting of loans for housing developments.
In the cause of the study, the researcher encounters some limitations which limited the scope of the study;
In most cases the staffs of the selected commercial banks in Port Harcourt metropolis capital of River State often feels reluctance over providing required information required by the researcher. This result in finding information where the structured questionnaires could not point out.
The researcher, being of full time student spent most of her time on other academic activities such as test, class work, assignment, examination etc which takes average focus from this study.
Scarcity of material is also another hindrance. The researcher finds it difficult to long hands in several required material which could contribute immensely to the success of this research work.
Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
1.8 Definition of Terms
(a) Housing development
Can be defined as a residential area of similar dwellings built by property developers and usually under a single management.
(b) Metropolis examines
Contemporary life through design-architecture, interior design, product design, graphic design, crafts, planning, and preservation.
It could also be seen as a large and densely populated urban area; may include several independent administrative districts; “Ancient Troy was a great city”.
1.8 Organization of the Study
This research work is organized in five chapters, for easy understanding, as follows
- Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study.
- Chapter two highlight the theoretical framework on which the study is based, thus the review of related literature.
- Chapter three deals on the research design and methodology adopted in the study.
- Chapter four concentrate on the data collection and analysis and presentation of finding.
- Chapter five gives summary, conclusion, and recommendations made of the study.
Summary Conclusion and Recommendations
It is pertinent to note that this research was aimed at cross examining the contributions of financial institutions in housing development in Nigeria, thus the topic “examination of the role of commercial banks in housing development in Nigeria”.
In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges associated with housing development in Nigeria.
The study reveals that the interest rates being charged by the lenders (commercial banks) are usually very high. Other sources of finance for housing development apart from the equity capital include insurance companies and pension funds, Government Bonds and the various commercial, merchant and mortgage banks in Nigeria. The problems being encountered by housing and estate developers in the quest for fund include bureaucratic bottlenecks in the financial institutions thereby making funds difficult to reach the developers on time. Collateral security and certificate of occupancy as demanded by most of these commercial banks are source of problems for developers in getting finance for housing development. As a result of inflation, the real value of loan collected normally reduced making it impossible for the project to be completed with the arranged finance. The conditions under which loans are given particularly the short-term loans are usually too stringent and times developers find it difficult to meet such terms. There is always dearth of information on the amount of funding that takes place, by whom, or the methods used. This is because there is no physical focal point where the funding business can be transacted, the market is an abstract aggregation of separate, unrelated and uncoordinated funding transactions and the market is diverse and complex. The resultant effect of these is problem of getting real estatefinance.There is always non-availability of fund to finance real estate development partly because of inflation and the huge capital required. Loan repayment is always very difficult due to the high cost of servicing the loan by the developers. The dwindling economic situation in the country is taking its toll on the construction industry thereby reducing the availability of loanable funds for real-estate development. As a result of long gestation period for the development of real estates, most investors and lending institutions are normally discouraged.
The study examines the role of commercial banks in housing development in Nigeria. Based on the results obtained in this research, the following conclusions were drawn.
- Funding from commercial banks is the most frequently used source of finance by housing and estate developers.
- The findings reveal that housing and estate developers only on occasional bases seek for ways to enhance their finance base, this will affect the housing sector negatively.
- On the issue of a very high Interest rate charged by commercial banks the implication is that the final cost of housing will be high.
- Most of the respondents affirmed that they are not granted more than sixty percent of their total loan applications; this means that little funds will only be available for housing development.
- With regards to the duration of processing loans, the implication is that only few applications for loans can only be processed, meaning few numbers of private estate developers will be granted loan.
- Finance and land are least available housing construction inputs available to private estate developers in Port Harcourt, Nigeria.
- The militating factors against fund availability will affect the level of progress of work on housing development negatively.
The study concludes that finance is not readily available to private estate developers in Abuja, Nigeria. Funding and land are the major challenges in the Nigerian housing market. The high interest rate, not granting the total amount of loans requested are the characteristics of the market, which are a reflection of the source of funds which is predominantly short tenured. The inadequate capital base of most primary lenders limits their ability to provide needed finance to meet market demand. For asustainable development to be achieved there is the need for a responsive housing financing policy which must therefore concur with the existing national and socio-economic realities of the country. For this, relevant urban and housing development strategies should be formulated and integrated to form part of existing housing policy.
- It is hereby recommended that record of past transactions regarding borrowing and lending of finance for real estate development should be kept so as to assist others who would want to go into such transactions in future.
- Many problems plaguing the success of real-estate financing in Nigeria can be solved if our economic problems are solved since most of theseproblems are due to the inflationary economy that Nigeria faces.
- Government should intervene in this financingby instructing these financial institutions to slacktheir stringent rules for lending loan to developers.From the foregoing discussion, it can be concluded that finance plays a vital role in real estatedevelopment hence; it should not be handled withlevity by both government, financial institutionsand the real estate developers.
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