Real estate is one of the world’s oldest and most profitable investment sectors. It has practically existed from the dawn of time, as people have always recognized the value of property. The global real estate investment industry is expected to be valued approximately $9.6 trillion in 2020 (up from 2019), after increasing by nearly $1 trillion in 2018. Real estate developer loans are provided to investors to help ease the market and increase the availability of excellent property.
What Are Real Estate Developer Loans?
In the case of Nigeria, these are loans that are available to any Nigerian real estate company. It comes into play when a property developer sees a plot of land with a lot of potential but lacks the finances to buy it. In this case, the developer can simply receive a loan to purchase and develop the property. Although financing are easy to obtain for property developers, it is sometimes challenging for early developers. In truth, this is due to their lack of a track record of successful development to earn the trust of credit providers.
What Are The Requirements For Acquiring A Real Estate Developer Loan In Nigeria?
The Mass Housing Scheme (MHS), in collaboration with the Federal Mortgage Bank of Nigeria, is the governmental parastatal in charge of this financing. Furthermore, the loan operates on a double lease arrangement, with the developer obtaining government lands and titles and providing the essential infrastructure. The land is then subleased to the ultimate beneficiaries (citizens).
Eligibility Requirements For Real Estate Developer Loans In Nigeria
A developer, according to the official release, must certify specific criteria. A developer must achieve the following minimal conditions in order to qualify for any real estate loans:
- The loan is only for residential housing estate development, with an annual interest rate of 10%. It also has a maximum term of 24 months, which is subject to amendment.
- The Bank finances infrastructure (up to 70% for private developers only), whereas Housing Corporations and government-owned development projects are expected to provide 100% infrastructure. The developer is also required to provide a financial strategy and budget for the provision of infrastructure in the housing estate.
- The planned estate must have a sound title and be able to sub-lease to individual allottees/purchasers of housing units.
- Housing units under the proposed project shall be priced at no more than N5.0 million. This is done so that they are affordable to NHF contributors/buyers with low-to-medium incomes. Furthermore, these units must comply with FMBN’s type designs. Furthermore, the developer must finance units that fall outside of the target type plans.
- Buyers/allottees of the housing units must have made a binding commitment. As a result, a specified accredited Primary Mortgage Institution must be identified for this purpose in order to enable the introduction of the project to prospective buyers/allottees who must be National Housing Fund (NHF) contributors. In addition, the connected PMI must validate the relationship and submit a marketing plan for the sale of the dwelling units.
- You must give a financial prediction that corresponds to the project’s proposed financial arrangement. Furthermore, the estimate must account for the developer’s equity participation in the project at the current rate of 10% per year.
- The loan is secured by an approved bank guarantee.
What Documentation Must Be Provided To The Bank?
- Incorporation certificate.
- Photocopy of the company’s Articles of Memorandum of Association (estate developer), with certified true copies of Forms CO2 and C07 attached.
- Evidence of employer registration with the National Housing Fund and current transfer of employee contributions to the Fund.
- Payment of a non-refundable application fee of N20,000.00 (twenty thousand naira only) for applications of less than N50 million, and a multiple of N20,000.00 for each additional N50 million.
- Evidence of Real Estate Development Association of Nigeria (REDAN) membership and financial contributions.
- A suitable facility management plan and program for the projected estate’s long-term viability.
- Any other important information that could help the loan be approved quickly.
What Documents Are Needed To Apply For Real Estate Developer Loans?
To acquire a real estate developer loan, you must provide the following documents:
- List of Board of Directors (Names, Positions, and Professions in Table Form) Technical Team, if different from managerial personnel.
- Profile of Shareholdings of the Board of Directors and Others.
- Audited annual accounts for the past three (3) years, including the Auditors’ signature, seal, and certification stamp.
- Management Staff listing, including rank, designation, profession, qualification, and years of experience.
- a photocopy of the registered title deed for the proposed project’s land
- List of projects completed by the developer, with location, estate name, house type, number of housing units, and cost.
- Photocopy of the organization’s Tax Clearance Certificate for the last three years.
- Approved building and layout designs .
- Resolution of the Executive Council and motion of the State House of Assembly approving the State Housing Agency’s application for a loan from the FMB.
- Borrowing Resolution of the Company’s Board, signed by the Chairman and the Secretary.
- The company’s paid-up share capital must be at least a quarter of the loan amount requested.
- A valuation report on the proposed project signed by a registered valuer.
- Priced Bill of Quantities (BOQ) signed by a licensed Quantity Surveyor, outlining specific cost estimates for various housing types/units.
- Report on Feasibility and Viability Development.
- Flow of Cash Projection stating the loan’s current interest rate of 10% as well as the planned periodic payback.
- Work Program/Plan for the Project.
- Detailed/Budgeted Cost and funding source for estate infrastructure and amenities.
- A marketing commitment letter from a Primary Mortgage Institution (PMI). This entity would be in charge of selling the dwellings to NHF contributors/allottees.
Final Thought
You can always get real estate developer loans to assist fund your ventures if you are a licensed property developer. Also, keep in mind that all applications are routed through the Federal Mortgage Bank of Nigeria or any other licensed institution designated by the bank.