Factors Affecting the Involvement of Commercial Banks in Real Estate Development in Nigeria: A Study of Awka in Anambra State

Abstract

This evaluated the factors affecting the involvement of commercial banks in real estate development in Nigeria with a view to marshal out some modalities that will enhance the performance of commercial banks in real estate development in Nigeria. Three banks were randomly selected from the study area and examined to ascertain their opinion in the subject matter. They include: United Bank for Africa (UBA) Awka, Access Bank Awka and Zenith Bank Awka. An interview recording schedule was designed and administered to obtain relevant information from the following management personnel of the banks under study who are involved in credit lending: DGM - Risk/Portfolio management, Senior Manager- Real Estate sector, Senior Manager- Credit/Marketing and Manager - Property department. It was found that Commercial Banks are constrained in lending for real estate development because of several problems they encounter, which may include: High risks associated with real estate lending, long-term tenor of real estate loan in relation to Commercial Banks short term short term deposits, inability of potential real  estate investors to meet Commercial Banks lending requirement, unduly lengthy process of conducting search/perfecting title documents used as collateral security at the Land Registry in the State Town planning ministry, non repayment of loans by borrowers and fraudulent/dishonesty in information  provided  by potential borrowers. The study thus recommends that: Government must therefore evolve other finance options/strategies that would make long term finance for real estate development readily available and accessible, Real Estate development should also be considered when setting-up such banks so that the housing needs of majority of the masses would be taken care of, 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'. Also Government should strengthen Primary Mortgage Institutions (PMI's) by reviewing current legislations on which they were established.

Keywords: Involvement of Commercial Banks, Real Estate Development.