How Pencom’s Mortgage Initiative Will Unlock Affordable Housing For Nigerians

Some finance experts have said that the new 25 per cent equity contribution for residential mortgage introduced by the National Pensions Commission is the easiest way Nigerians can own their own homes.


They also suggested that developers may adopt rent to own policy, where they would collect rent as part of equity contribution after the initial 25 per cent down payment by the RSA holder.

This was reached during a discussion on the topic ‘Buying a Home In Nigeria With Your Retirement Savings Account,’ organised by financial analyst and educator, Kalu Aja.

Nigeria’s pension reforms have grown assets to N14trn as of June 2014.

PenCom last week approved the payment of residential mortgages from Retirement Savings Account of policy holders.

To qualify for the mortgage, interested RSA holders (applicants) must have an Offer Letter for the property duly signed by the property owner and verified by the Mortgage Lender.

Also, the RSA of the applicant will have both employer and employee’s mandatory contributions for a cumulative minimum period of 60 months (five years).

The regulator said a Contributor under the Micro Pension Plan (MPP) who have made contributions for at least 60 months (five years) prior to the date of his/her application are also eligible.

The maximum withdrawal to fund the mortgage is 25 per cent of the RSA balance. If the initial equity contribution is above the 25 per cent of the RSA balance, the applicant can make a contingency deposit into the RSA.

“This is the biggest news to come out of Nigeria. This is the biggest news to come out of Nigeria in 20 years,” said Kalu Aja.

Aja said Nigeria’s inflation has risen to 20.52 per cent which calls for RSA holders to hold more assets than the naira.

“That house is not going to be depreciated because the value of the house all things being equal should keep pace with inflation.

“We are not guaranteeing but should keep pace. You are not holding naira which is a currency that is going to depreciate by at least 25 per cent on an annual basis.

“On a planning equation, you as an RSA holder, this plan is perfect plan for you. You go away from renting; you go away from holding cash into building equity. When you own a house, the equity can be yours if you complete the payment.”

For the developers, the new policy would help them get capital to develop their properties. Particularly, the educator said young people who have an RSA should be the prime target.

He said, “PenCom will only publish your name as a list of qualified or approved developer if you have a certificate of compliance with PenCom.”


Aja advised eligible developers to adopt a rent to own policy because most Nigerians may not have the cash to pay a huge sum.

Aja said, “If the guy can pay 25 per cent down for the house, then lock him on the same plan and then every month, he pays rent, but that rent is equity and interest. He pays the equity, both of them comes down to you. He is paying down what he owes on that home.

“Many Nigeria’s will not have the cash 100 per cent even after the 25 per cent, but you can lock them in on a rent to own where they are paying you over say 10 to 15 years and you are giving that home to them.

“The jobs this will create are immense- valuers, bankers, real estate developers. This will create a brand-new industry around just this act. In 10 years from now, it is going to be the only easy way you are going to buy a house.”

He believes that if the policy is properly executed, it would add 25 per cent to Nigeria’s Gross Domestic Product.

“If you are 30 years old, you are married, you have N2.5m in your account, your wife has N2.5m in her account, what this law is saying is you can take 25 per cent of the N5m and go to a developer and say I want to buy this house.

“If you can structure with that developer and say every month, I get paid N100,000, my wife gets N100,00, we are going to give you 25 per cent of our pay check every month to a mortgage.

“Give us the house and we will pay this loan for 20 years and that house is our own, the developer walks away.”

Tunji Andrews, Chief Executive Officer and Co-founder, AWABAH, said the development in the pension industry could unlock over N2.5trn into the real estate industry and other critical sectors.

Andrews said, “What the Pensions Commission has done has automatically unlocked 25 per cent of the current retirement saving in the economy right now. If you do a rough mathematics, we have about N11trn. If we do a rough mathematics of that, we are talking about N2.5trn for the real estate industry.

“This is huge for the economy. For people like us who know the history of this, I will say that this is the beginning of many steps.

He said there is a strong disconnect between the RSAs of Nigerians and their lives.

“Everybody just sees their retirement savings as this thing that they just put somewhere and they can’t get access to. For people trying to set up a situation where they can buy a home, you save N1, if you are going to save it in your bank account and save it up to 25 per cent of your equity contribution, it is still going to be N25.

“But you save it into your RSA and definitely what it does is two things: it gives you interest that will multiply on your saving, secondly it gives you a multipliers effect,” said Andrews.

He said it is the right time for Nigerians who do not have micro pensions to open an RSA.

He said, “You start saving for your future and you can also use it to get a 25 per cent down payment for your mortgage. In the future, we are talking about possibility using it as equity contribution for leases, loans and even also a test case where it can be invested into your business.”


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