Investigating the Problem of Real Estate Financing in Nigeria: A Study of United Bank of Africa, Awka

Abstract

This study investigated the problem of real estate financing in Nigeria, using the United Bank of Africa, Awka as a case study. The study adopted the questionnaire survey and interview methods in obtaining data from the bank. The findings of the results of the analysis carried out showed that Commercial   Banks    are   not   an   ideal   or   suitable medium for financing real estate development because whereas Commercial Banks deposits are short term in nature, real estate is for long term which is usually vulnerable to vagaries in the economy like: changes    in    economic    variables, interest    rates, exchange rates and the rate of inflation; Commercial Banks are constrained in lending for real estate development because of several problems they encounter, like: high risks associated with real estate lending, the long-term tenor of real estate loan in relation to commercial  banks  short term short  term deposits, the inability of  potential  real   estate  investors  to meet commercial banks lending requirement, non repayment of loans by borrowers and fraudulent / dishonesty   in   information   provided   by potential borrowers. In the light of the foregoing, the following recommendations were put forth: 1. Government should establish a specialized bank to be known as 'Real Estate Development Bank' (REDB) like the Bank of Industry (BOI) whose function will be the sourcing of funds and on-lending such funds to real estate investors who must be registered with the National Association of Real Estate Developers, 2.  Government should encourage the establishment of micro credit financial institutions for mobilizing of funds and lending to small-time real estate developers, and 3. Government should provide Commercial Banks guarantee for loans obtained by real estate developers who are duly registered and approved by the National Association of Real Estate Developers and the Nigerian Institution of Estate Surveyors and Valuers'. This way Commercial Banks will be encouraged to lend to the real estate sector.