Real Estate Developer Loans in Nigeria

One of the oldest, fastest growing and highly profitable investment sectors in the world today is the real estate industry. It is one business that is as old as man, as humans have always seen the importance of owning properties. Just last year (2020), the global real estate investment market was worth about $9.6 trillion, growing by almost $1 trillion in 2018. To make the market easier and quality property more available to people, there are real estate developer loans that investors can obtain, which they can use to acquire their own properties. Check out How to Get Federal Mortgage Bank Loan.

Real Estate Developer Loans in NigeriaWhat are real estate developer loans?

Real estate loan is one that can be obtain by property developers. Thus, when a property developer sights a portion of land with substantial prospect but is short of monies to acquire it, the loan issue comes into play.

When found in such a scenario, the developer can simply obtain a loan to acquire and develop the property. While it is true that property developers find it easy to obtain loans, it is sometimes difficult for early developers. This is because, they do not have a record of successful development to earn the trust of loan providers.

Real estate developer loan conditions in Nigeria

The Mass Housing Scheme (MHS) is the governmental body in charge of this kind of loan. They partner with the Federal Mortgage Bank of Nigeria and the loan works like a double lease system, where the developer obtains lands and titles from the government and provide the necessary infrastructure. The developer then sub-lease this property to the ultimate beneficiaries.

Requirement for real estate developer loans in Nigeria

Based on official release, a developer must meet certain criteria. For a developer to qualify for any real estate loans, the developer must meet the following minimum requirements:

  • The loan is for residential housing estate development only. And at an interest rate of 10% per annum, it has a maximum tenor of 24 months subject to revision.
  • Bank finance Infrastructural facilities (up to 70% for private developer only), while Housing Corporations and government owned development projects are to provide 100% infrastructure.
  • Developer must submit a financial plan and budget for the provision of infrastructure in the housing estate.
  • The proposed estate must have a good title that can be sub-leased to individual purchasers of the housing units.
  •  Housing units under the proposed project must fall within the target price not more than N5.0 million. This is ensure that they can be affordable to NHF contributor/buyers within the range of low-to medium-income earners.
  •  There must have been a firm commitment from buyers/allottees of the housing units. Therefore, for this purpose, a named accredited Primary Mortgage Institution is to be identified in order to facilitate the introduction of the project to prospective buyers/allottees who must be contributors to the National Housing Fund (NHF). Also, the associated PMI must confirm the relationship and forward a marketing plan for the disposal of the housing units.
  • You must provide a financial projection to suit the proposed financial arrangement on the project. In addition, the projection must include developer’s equity participation on the project at the present rate of 10% per annum.

What are the list of documents to be submitted to the bank?

  1. Certificate of incorporation.

  2. Photocopy of Articles of Memorandum of Association of the company (estate developer) with certified true copies of Forms CO2 and C07 attached.

  3. Evidence of registration with the National Housing Fund as an employer and up to date remittance of employees’ contribution to the Fund.

  4. Payment of a non-refundable application fee of N20,000.00 (Twenty thousand naira only) for applications for amounts below N50 million and a multiple of N20,000.00 on every further N50 million.

  5. Evidence of the membership of Real Estate Development Association of Nigeria (REDAN) and financial contributions.

  6. A viable facility management for the proposed Estate and Programme for its sustainability.

  7. Any other relevant information that may facilitate quick consideration of the loan.

What documents are required to obtain real estate developer loans?

The following are the documents you must submit to access real estate loan:

  1. List of Board of Directors (Names, Position and Profession in Table form)

  2. Technical Team if different from management staff.

  3. List of Shareholding profile of the Board of Directors and Others.

  4. Audited Annual Accounts with the signature, seal and certification stamp of the Auditors, for the previous three (3) years.

  5. List of Management Staff including rank, designation, profession, qualification and years of experience.

  6. Photocopy of registered title document on the land for the proposed project

  7. List of Projects Executed by the developer indicating Location, Name of Estate, House Type, number of housing units and cost.

  8. Photocopy of Tax Clearance Certificate of the organization for recent three years.

  9. Approved building and layout plans.

  10. Resolution of the Executive Council as well as a motion of the State House of Assembly approving the application for a loan from FMB for State Housing Agency.

  11. The Company’s Board Resolution to borrow, signed by the chairman and company’s Secretary.

  12. The paid up share capital of the company shall not be less than a quarter of the loan amount applied for.

  13. Valuation Report signed by a registered Valuer on the proposed project.

  14. Priced Bill of Quantities (BOQ), signed by a registered Quantity Surveyor, giving detailed cost estimate on the various housing types/units.

  15. Feasibility and Viability Development Report.

  16. Cash Flow Projection stating the current interest rate of 10% for the loan as well as proposed periodic repayment.

  17. Project Work Program/Plan.

  18. Detailed/Budgeted Cost and source of fund for the Estate Infrastructure and Amenity facilities.

  19. Letter of marketing commitment from a Primary Mortgage Institution (PMI). This institution would be responsible for the disposal of the houses to the NHF contributions/allottees.

Once you are a registered property developer, you have the opportunity obtain real estate developer loan to help finance your real estate investments. Kindly note, however, that applications are to be sent to the federal mortgage bank, or any other certified institution it outs in charge.

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