BEING SPEECH BY HIS EXCELLENCY, THE GOVERNOR OF LAGOS STATE, MR. BABATUNDE RAJI FASHOLA, SAN ON THE OCCASION OF THE LAUNCH OF THE LAGOS STATE HOME OWNERSHIP MORTGAGE SCHEME ON MONDAY, FEBRUARY 3, 2014

I welcome you all our distinguished guests to this occasion very warmly and with a lot of pride.

I am proud because this occasion affords me the opportunity to deliver on a promise made on behalf of our Party during the electioneering campaign.

I am proud because many years of grueling work, long hours and devotion by our team can now set us on a course that takes us closer to our desired prosperity.

I crave your indulgence to bear with me today because I may speak for a longer period of time than you are accustomed to. The reason is that I will need to explain the details of our Lagos HOMS Scheme which is why we are all here.

I said Lagos HOMS because that is what we decided to do. To provide people with a home instead of a house.

The difference is significant and I need to explain our view of these differences.

For many years, our people have had to acquire houses; often times being required to pay cash once and for all, as if they were buying a shirt or a pair of shoes in a shop.

This approach in part explains the reason why a large number of ordinary middle class and working people cannot afford to acquire homes on the basis of the their legitimate income derived from hard work that rewards the dignity of their labour.

In Lagos State, we have taken the view that a home is not something you buy in one day but over time, in a way that your ability to acquire it is tied to your income and continued prosperity.

Our view of a home is that it is something you pay for gradually and it is a place of safety, well built, safe and sound, to protect you and your family from the hazards of nature such as rain and heat; a place that will not flood or suddenly collapse. An asset that outlives you.

These and more are the ideals that have inspired the event that we are gathered to start today; the Lagos HOMS.

Lagos HOMS is the acronym we have created from the Lagos Home Ownership Mortgage Scheme.

It is a process by which Lagosians will be given a fair and transparent opportunity to pay for their homes over a period of not less than 10 years under a mortgage scheme.

Today as we flag off this Scheme there are 1,104 (One Thousand, One Hundred and Four) completed homes while another 3,156 (Three Thousand, One Hundred and Fifty Six units are various stages of construction, and we intend to start more.

We are starting 132 (One Hundred and Thirty Two) units in Iponri, 720 (Seven Hundred and Twenty) units in Ibeshe Ikorodu, 420 (Four Hundred and Twenty) units in Ajara Badagry, 648 (Six Hundred and Forty Eight) units in Sangotedo Phase II, 216 (Two Hundred and Sixteen) units in Obele, 36 (Thirty Six) units in Akerele Phase II, 48 (Forty Eight) units in Oyingbo, 1254 (One Thousand, Two Hundred and Fifty Four) units in Ilubirin and 1080 units in Ijora Badia.

The easiest thing to do would have been to simply sell all the houses today, collect the cash and wait for the next batch and do the same; but this is not our way.

That is the simplistic way that does not solve the problem of housing. For us, sustainability is the key and I have personally benefitted from previous initiatives by my esteemed predecessors in this regard.

I am happy that we took the decision to confront this problem and I hope that the solution we offer today will be the long term solution.

Part of the pride I have about this project is that we have not had to borrow money to fund any of these housing units. Our progress so far is the result of rigorous planning and financial discipline, savings and commitment.

These projects have been fully funded from the taxes that our people have paid as monthly internally generated revenue (IGR).

About 3 years ago, when we took the view that the Lagos State Ministry of Housing on its own cannot deliver all the houses that Lagosians require without the active support and participation of private sector developers, this Scheme was born in my mind.

The next hurdle was how to deliver it.

We started saving N200million monthly, whether the internally generated revenue increased or decreased; and today, we are now saving N500million monthly, and it is possible to increase this as more people pay their taxes.

The role of the Ministry of Housing will increasingly be that of a regulatory one, facilitating private sector housing development and enforcing housing regulations, leading research into systems building and cost saving initiatives that increase the affordability of homes and the speed of construction.

Our ultimate plan is to be the guaranteed purchasers to developers who will acquire their own land, build to our specification and to our agreed prices.

This way, many more houses can come on stream because of private sector participation, and Government will use the IGR from tax payers’ money to buy from the developers and sell to the citizens on a 10 year mortgage payment.

When I signed the Landlord and Tenant Bill into law, I explained that it was the beginning of a housing plan for Lagos. Many commentators who either did not listen to me or did not understand me reasoned that I should have provided houses first. The truth is that are empty houses. People simply cannot afford them.

While the Tenancy Law represents our moral intervention to protect citizens who earn monthly income from landlords who demand multiple year advance payments, the Lagos HOMS represents our leadership intervention to increase the stock of affordable housing on convenient payment terms.

After experimenting with a few designs of bungalows, room and parlour and block of flats, we have settled on two designs. A block of four floors, containing 12 flats of 1, 2, and 3 bedroom on each floor and a block of 12 flats of two units of 2 (two) bedroom flats; and 1 (one) unit of a 3 (three) bedroom flat.

In each case, each block will have 12 flats and in this way we can optimize the use of our limited land space.

We are still working on a design of a block of 18 flats with lifts while we are looking for ways to power the lifts without increasing the cost unreasonably.

We have also taken pains to design the flats such that they have more space than most of what is available in the open market.

For example, our one bedroom flat is 60.22 square meters while the 2 bedroom is 75.79 square meters and the 3 bedroom is 123.88 square meters.

They all contain more living area than many of the standard 1, 2, and 3 bedrooms in the market, which are ordinarily available to middle and low income bracket people who are out target under this project.

In terms of pricing, our policy is about affordability and accessibility.

This is so because we have not yet found cheap or low cost cement, neither have we found low cost iron rod or low cost labour.

The continuity and sustainability of the entire project depends on our ability to build more at break-even cost without profit, in a market where there is increasing inflation; fluctuating exchange and interest rates and a high dependence on housing inputs that are imported and priced in US Dollars against a struggling local currency.

Accordingly, we have applied an across the board discount of 25% to the total actual cost of land, infrastructure and building which is the total cost of the home.

The homes become more competitive against what is available on the open market because there is a minimum period of 10 years to pay for it and the mortgage payment will attract a maximum interest of 9.5% per annum. There is no other payment plan superior to this in the country today and this is our starting point, from where we hope to get better.

Indeed I have commissioned a study on the total number of mortgage loans in the portfolio of all banks in our country and the result is that there are approximately 200,000 (Two Hundred Thousand) mortgages for a population of about 160 million people.

The lowest interest rates are about 11% while there are higher regions of 25% or above. Similarly, there are tenures of repayment as little as 4 years to as long as 30 years, but none of them is as low as 9.5%, which is our maximum interest payment.

Therefore at the very start we have established a capacity to out strip what exists by way of mortgage funding in the open market.

I can only guess at this time that many of you will be asking the question, how do I qualify to become a home owner?

My response is that after about 27 meetings, spanning over 3 years, many debates and disagreements, we have resolved that this project will only be for first time home owners.

In other words, only those who have never owned a home whether acquired privately or brought from Government, will be eligible.

So applicants will be required to swear an affidavit to this effect, which is already part of the documents we have prepared, within a contract that entitles us to re-possess the house anytime, even in the tenth year, if we have proof that you owned another home when you applied to this Scheme.

We intend to vigorously enforce this policy and others that I will now announce.

In addition, only Lagos residents who are tax payers will benefit.

For our people, we have taken the definition of Residency applicable in the Tax Laws of the Federal Republic of Nigeria which is a continuous period of residency for a minimum period of 180 days, or about 6 months, irrespective of where your original roots are.

It will help applicants if they are able to show us their residency card under Lagos State Residents Registration exercise which is meant to register people who live in Lagos. The application forms have been designed to demand this information.

Apart from residency, applicants must show proof of payment of tax for a continuous period of 5 years preceding their application.

This must be so because, as I said all these houses have been built from taxes paid by our residents, and it seems to us only fair that those whose taxes paid for it must get the first opportunity to benefit.

While we welcome payment of tax arrears from those who owe it, I must say that we have resolved that it will not entitle such a person to qualify. He must wait and be a good citizen.

We also expect successful applicants to immediately pay a deposit of 30% of the house they choose as their equity which is global best practice, while the balance will be paid on a monthly basis over 10 years.

Accordingly, we will match house choices to applicants’ proven income sources to determine eligibility and it is only eligible applicants, whose forms will go into the ballot from which successful applicants will be picked. We already have trained mortgage counselors to deal with this process.

In the first instances, we intend to allot 200 homes per month, and increase that number to 300 per month and beyond, as the number of completed homes increases and sustainability is guaranteed.

Accordingly, from the 4^th of March when the first draws will hold in public for the first 200 homes, I expect that subject to the ability of our contractors to keep building quickly and qualitatively and that all things being equal, there should be a minimum of 200 new home owners in Lagos every month even beyond my tenure of office, with a capacity to increase the monthly number until we strike a decisive blow at the housing deficit in Lagos.

In order to help us manage the flood of applications, let me advise applicants to only bid for houses in the areas where they are prepared to live and not for every house that is put on the market.

We will not allow any successful applicant to rent out the houses. If you do not live in the house that you win, you will have violated our first home owner rule and it is a ground to re-possess the house, pay you off and offer it to those who really need a home.

As I said, we are building across Lagos and we will all do well to wait for a home to be advertised where we want to live or close to it.

For example, if you wish to live on the Island, or in Surulere, you can bid for a home in Oyingbo, but certainly not one in Ikorodu with a view to renting it out.

We will only allow you to rent it out after 10 (ten) years when you have fully paid for the house.

Let me add that prompt payment of monthly mortgages will be rigorously enforced because we have seen that default of payment and difficulty of re-possessing houses from defaulters has been a major disincentive to investment in the property sector, by the private sector developers, whose participation in housing development is critical to our ability to increase the supply of homes.

We have therefore resolved to quicken recovery by using Arbitration Rules which have been drafted into the contract of sale and the mortgage agreement and the arbitration proceedings are expected to be completed in 21 days.

We hope that we will receive the full co-operation from home owners, lawyers and judges who must refrain from seeking and granting injunctions to mortgagors who are in default, and submit to arbitration.

As for the application process itself, we have heard the fears of genuinely concerned citizens about the transparency of the process and we are not unaware of the dismissive conclusion of the cynics that we have pre-sold the houses to ourselves.

We have listened to all well intentioned concerns and our response is that we intend to make the process transparent, subject to the rules I have stated and the luck of the applicants at the monthly ballot.

Accordingly, we have opened a website, www.lagosHOMS.gov.ng where all the FORMS can be downloaded and all the housing projects are displayed with their prices, floor plan, drawings, videos of the interior and exterior and a mortgage calculator to help applicants calculate their equity contribution and their monthly mortgage payment.

What the website has presently:

Download application form

Download full application pack

Apply online

Search for properties, floor plan and prices

Track your application

Calculate your mortgage payments

Check everything about Lagos HOMS – Information sheet, draw rules, eligibility criteria, latest news, FAQs etc.

Some pictures and video

Therefore, the only time applicants will come into contact with our staff is when those who cannot complete it online come to submit their completed forms and are taken through mortgage counseling by our Lagos Mortgage Board.

Distinguished ladies and gentlemen, this is the outline of the work we have done behind the scenes to bring us to this day.

It is not finished, and we remain flexible to review the process and make modifications as you engage with the Scheme.

We also anticipate that you will have questions that my speech may not cover and we have designed and printed copies of answers to what we think will be frequently asked questions, in English, Yoruba, Igbo, Hausa and Egun.

We intend to update the range of answers as we get feedback from you.

Distinguished ladies and gentlemen, in the process of building these houses, we have created jobs on various construction sites that have benefited 134 (One Hundred and Thirty Four) construction companies, 459 (Four Hundred and Fifty Nine) sub-contractors employing over 1,168 (One Thousand, One Hundred and Sixty Eight) persons, 7 (Seven) consultancy companies, 5,442 (Five Thousand, Four Hundred and Forty Two), suppliers, artisans, labourers, and numerous citizens who are employed in the supply chain of sand, gravel, wood and fittings, as well as food vendors and transports.

We see the possibility for many more as we increase construction.

The Lagos HOMS is not about providing a home alone. It is also about a total lifestyle change. We are moving our people from a desperation for shelter, to an orderly and planned living.

Because it is a mortgage driven scheme we expect that people will take their jobs more seriously and apply themselves more diligently in order to retain the ability to pay the mortgage.

In the normal course of things, you are only likely to lose your home if you lose your job. And you are only likely to lose your job if you misconduct yourself on your job.

Our Contributory Pension Scheme in Lagos has been perhaps the most well-funded in the country. We hope that amendments to the national legislation will be sensitive to home ownership and will open a window for employees to secure their homes with some of their pension benefits in the event of retirement before full liquidation of their mortgages.

We therefore expect to see not only increased productivity which will benefit our economy at large, but we also expect to see a progressive reduction of unethical conduct in the work place.

I will now conclude by thanking all of the members of the Lagos HOMS Committee within and outside Government who have served with me to bring us to this day.

Mr. Olasupo Shasore SAN, Mr. ’Dele Onabokun, Mr. Ben Akabueze, Mr. Ade Ipaye, Mr. Tokunbo Abiru, Mr. Bosun Jeje, Mr. Olutoyin Ayinde, Mr. Jimoh Ajao, Mr. Ayo Gbeleyi, Mr. Sonnie Ayere, Mrs. Felicia Awofisayo, Arc. (Mrs.) Y.O.A Ajayi, Mr. Hakeem Muri-Okunola, Mr. Kunle Awofeso, Alhaji S. A. Yusuf, Mr. Taofeek Oki, Mr. Tunde Jinadu, Mrs. Tayo Gbajabiamila-Olamona, Mrs. Oyinkan Badejo-Okusanya, Ms. Shola Shasore, Mr. Bayowa Foresythe, Mr. Kodjo Sagoe, Mrs. Mobola Fashola, Ms. Wande Adeniyi-Williams, Mr. Bello Salihu, Dr. Yemi Isiba, Ms. Iyabode Oshodi, Mrs. ’Keji Onabolu.

It seems to me that the future is now here.

To the glory of God, towards a new home ownership culture and a new work ethic that secures the future through hard work, I inaugurate the Lagos HOMS website which opens the door today for applicants within the next few days for the first 200 (Two Hundred) homes that we are making available with the draw holding on 4^th of March 2014.

Babatunde Raji Fashola, SAN

Governor of Lagos State

 

February 3, 2014

 

 

 

 

 

 

 

 

2014-02-07