among property developers, mortgage operators and professionals. among property developers, mortgage operators and professionals. The operatives are seeking government’s intervention in the housing and mortgage sectors of the economy to maintain affordable rates for citizens, writes CHINEDUM UWAEGBULAM.
The current lending rate is between 27.07- 30 per cent, while the inflation rate is 31.7 per cent as at February 2024, according to the Nigeria Bureau of Statistics. Before the hike in Monetary Policy Rate to 22.75 per cent, banks’ lending rate had already reached 27 per cent per year. Specifically, the rising interest rates have impacted residential rent rates more than commercial rent rates. An increase in interest rates discourages demand for buying homes, leading to more people choosing or being forced to rent. The increase in demand for rental properties results in higher residential rent rates.
“Higher borrowing costs deter some potential buyers from entering the real estate market or prompt others to delay their purchase decisions. Consequently, a decrease in demand can put downward pressure on property prices or result in stagnation of market activity.” He also advised that they should build a financial safety net, create a financial buffer, such as setting aside a portion of rental income, which can provide security against unforeseen circumstances, like interest rate hikes or periods of vacancy.
“Lenders are also not thrilled by rising interest rates, as demand for their credit products reduce, and incidents of bad loans tend to rise, while commercial landlords with debt servicing will have tough situations on their hands as high finance costs can be destabilising.” Another property developer and Managing Director/Chief Executive Officer, NISH Affordable Housing Ltd, Dr Yemi Adelakun, said the rising interest rate has compounded the existing precarious situation created by the high cost of building materials.
Adelakun said government incentives for developers will be desirable, which include price interventions with manufacturers of building materials, special lending rates for the affordable housing sector and easy access to affordable mortgages. “The government, in turn, will reap the benefits of multiplier effects of housing on the economy,” he added.