Despite some degree of improvement in mortgage revitalisation, millions of citizens cannot afford to buy a home, and most developers remain reluctant to build for buyers who rely on mortgages, as property developers still prefer to sell properties directly to willing buyers on a ‘cash and carry’ basis or adopt the ‘off-plan’ sale option, VICTOR GBONEGUN reports.
Many property developers in Nigeria are increasingly shying away from adopting mortgage-backed home ownership, a trend that has led to a persistent mismatch between housing supply and demand. The result is a glut of expensive, cash-based housing units and a shortfall of affordable homes accessible through mortgage financing.
Globally, home ownership depends largely on long-term mortgage financing. In countries such as the United States, South Africa, and Kenya, developers routinely sell homes to buyers through mortgage institutions, receiving payments from banks or housing finance companies. In Nigeria, however, this model has failed to take root.
Most private developers prefer to sell completed units to cash buyers, often investors, diaspora Nigerians, or upper-income earners, rather than engage with buyers who depend on mortgage loans. The reason lies in the inefficiency of Nigeria’s mortgage system, high interest rates, and weak policy coordination between housing finance institutions and real estate operators.
Developers’ dilemma
According to the Real Estate Developers Association of Nigeria (REDAN), the country’s mortgage-to-GDP ratio is less than one per cent, one of the lowest in Africa and by contrast, South Africa’s stands at around 20 per cent. The near absence of effective mortgage financing means developers cannot easily recover their capital once homes are completed.
“Developers build to make a quick turnover,” explained a senior REDAN member who requested anonymity. “If you have to wait five to ten years for buyers to complete payments through mortgages, your capital is trapped. In our environment, that’s not sustainable because of inflation and high borrowing costs.”
Many developers fund projects through commercial loans with interest rates ranging from 20 to 30 per cent. Such financing pressures make it nearly impossible to tie up capital in long-term mortgage-backed transactions.
High interest rates, low trust
For homebuyers, the situation is equally discouraging. Mortgage interest rates in Nigeria average between 18 and 25 per cent per annum, far beyond the reach of most middle-income households. Even the National Housing Fund (NHF) mortgage scheme, which offers loans at six per cent, has limited coverage and long processing times.
Moreover, Nigerian mortgage tenures are relatively short, typically 15 to 25 years, compared to 30 or 35 years in more advanced economies. Industry experts noted that shorter loan tenures increase monthly repayments, further eroding affordability.
Developers also complain about the uncertainty surrounding mortgage disbursements, that banks are not willing to release funds promptly to developers after prequalification, while sometimes, they change terms midway, which makes planning difficult under such conditions.
This lack of trust has created a vicious cycle, making developers avoid mortgage buyers, while banks hesitate to finance developers because few projects are structured around mortgage repayment streams.
The Nigerian Mortgage Refinance Company (NMRC), established in 2014 to provide liquidity to mortgage lenders by refinancing their portfolios, was expected to strengthen the secondary mortgage market. However, its impact has been limited due to small capitalisation, low volume of mortgage originations, and the dominance of informal financing in the housing sector.
Without a vibrant secondary market, mortgage institutions cannot easily offload loans to investors or raise fresh funds. Consequently, developers rely on self-financing or private equity, both of which favour high-end and luxury housing targeted at wealthier buyers.
Land and legal bottlenecks
Beyond financial constraints, land administration remains another significant barrier. The lengthy and costly process of obtaining land titles and building approvals discourages developers from engaging with formal financing institutions.
Mortgage transactions require verifiable titles and proper documentation, but much of the country’s urban land is under customary tenure or lacks registered titles. The result is that many developers continue to operate within a largely informal, cash-based market.
Nigeria’s housing market has thus maintained a rental-heavy and “cash-and-carry” model, where most developers focus on outright sales or short-term installment plans rather than mortgage-compliant homes.
With a value of about N41.3 trillion as of 2024, Nigeria’s real estate sector is contributing significantly to the Gross Domestic Product (GDP), making it the nation’s third-largest sector after trade and crop production, according to the National Bureau of Statistics (NBS). The industry is buoyed by rapid urbanisation, rising demand for both residential and commercial properties, growing appetite for smart homes, and investments in infrastructure such as roads and power.
Despite this, the number of active mortgage banks remains limited. Nigeria has about 32 primary mortgage banks (PMBs), including the Federal Mortgage Bank of Nigeria (FMBN) and commercial banks that dabble in mortgage financing.
Data from the FMBN show that between January and July 2025, a total of N60.46 billion in mortgages was approved across different product categories, enabling more Nigerians to become homeowners through single-digit loans. However, this remains a drop in the ocean for a country grappling with an affordable housing deficit of over 22 million units.
Barriers for borrowers
Many Nigerians lack sufficient credit history or collateral to qualify for mortgage loans. The situation is worsened by the informal nature of employment, where a significant portion of the workforce earns irregular income and lacks documentation required by banks.
The shortage of affordable housing units compounds the problem, pushing homeownership further out of reach for low- and middle-income earners. Most developments in cities like Lagos, Abuja, and Port Harcourt are priced far above what many Nigerians can afford.
Despite these challenges, stakeholders in the housing sector are optimistic about ongoing initiatives like the Ministry of Finance Incorporated Real Estate Investment Fund (MREIF), a public-private scheme introduced by the Federal Government to make mortgage-backed homeownership more accessible.
With a fixed mortgage rate as low as 9.75 per cent, the MREIF offers flexible payment plans of up to 20 years.
Managing Director/Chief Executive Officer of Noble Ground, a property development firm, Olajide Dosunmu, said accessing mortgages in Nigeria has been “quite a challenge over the years,” compared to advanced economies.
He explained that developers shy away from mortgage-backed projects because most prospective buyers earn incomes far below what is required to own a home, especially given the high cost of construction relative to disposable income.
“While the NHF offers single-digit rates, the process of prequalifying prospective buyers is so tedious,” Dosunmu said.
He described the MREIF as “a strong move by the Federal Government” toward mortgage-driven homeownership. “They’re giving out mortgage loans at 9.75 per cent and processing within two months, which is very good; you don’t even have to be a civil servant.
“Once you can pay 10 per cent upfront and earn about three times your repayment, you can access the loan. For the first time, we’re seeing a real shift toward mortgage-backed housing. The only challenge is affordability, as many people are still priced out.”
To address affordability, Dosunmu urged the adoption of alternative building materials to reduce construction costs. “Government should look into using mud or hydrofoam, as done in South Africa, where clay is formed into bricks without heavy cement use. As long as it’s safe and comfortable, people can live in them,” he added.
Structural reforms still needed
Founder and Managing Director of Realty Point Limited, Gbadebo Adejana, emphasised that mortgage-backed developments should ideally be integrated into projects from conception.
“Mortgage-linked housing must be planned from the design stage,” he said. “Unfortunately, most projects in Nigeria are developed before buyers show up, and only later do some need a mortgage. The problem is, mortgages are still too expensive, and few people can afford them.”
Adejana agreed that the mortgage market remains shallow, calling for deeper reforms to make it both workable and affordable.
Similarly, former Chairman of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Dotun Bamigbola, noted that while some developers embrace mortgage schemes, most prefer cash-based transactions for quicker returns.
“Developers want to recoup their investments quickly,” he explained. “They know that most prospective buyers can’t access mortgages easily, so they don’t prioritise that option. If a mortgage bank isn’t financing the project, there’s little incentive to include mortgage sales.”
He added that the rise of the off-plan sales model, where buyers pay over a period during construction, has replaced the role that mortgages should play. “Off-plan sales emerged because people weren’t enjoying the true benefit of mortgages. With off-plan, they can pay over one or two years, often at a lower rate, before prices rise at completion.”
Experts agreed that deepening Nigeria’s mortgage system is crucial for expanding homeownership and enhancing affordability. This will require policy alignment across federal and state agencies, recapitalisation of mortgage banks, digital credit scoring, and reforms to land titling systems.
Until these issues are addressed, developers will continue to prefer cash-based models, leaving millions of Nigerians locked out of formal home ownership, and the dream of affordable, mortgage-driven housing will remain largely elusive.
