The Role of Commercial Bank in Financing Building Projects in Nigeria
CHAPTER ONE
OBJECTIVES OF THE STUDY
The general objective of this study is to analyze the role of commercial banks in financing building projects in Nigeria and the following are the specific objectives:
- To examine the role of commercial banks in financing building projects in Nigeria.
- To identify the role of other mortgage financial institutions in financing building projects in Nigeria.
- To identify the factors limiting financing of building projects in Nigeria.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Introduction
Proper financing is all-important to successful property investment and development. Various forms of finance on varying terms from diverse investing agencies are available to the property market. The principal field where various forms of investment finance are employed is that of development where every loan has to be specially tailored for an individual scheme and the particular stages within the scheme. Since property development in particular involves huge capital expenditure, finance is therefore an essential input, the nature of which is to provide capital to enable the enterprise operate commercially. The cost and availability of finance for real estate development can influence the viability of such project. Inspite of the importance of development finance in property development, there is dearth of information on the amount of funding that takes place, by whom, or the method used. Though this is not unexpected given the general characteristics of development funding: there is no central agency or institution to co-ordinate the business of property funding. Housing accommodation has been universally recognized as one of the most essential necessities of human life and is a major economic asset in every nation. Adequate housing provides the foundation for stable communities and social inclusion (Oladapo, 2006). Gilbertson et al. (2008) have observed that there is a significant association between housing conditions and physical and mental health of an individual. People’s right to shelter is thus a basic one and the provision of decent housing to all requiring them should be the hallmark of every civilized society and one of the criteria for gauging development.
Proper financing is all-important to successful property investment and development. Various forms of finance on varying terms from diverse investing agencies are available to the property market. The principal field where various forms of investment finance are employed is that of development where every loan has to be specially tailored for an individual scheme and the particular stages within the scheme. Since property development in particular involves huge capital expenditure, finance is therefore an essential input, the nature of which is to provide capital to enable the enterprise operate commercially. The cost and availability of finance for real estate development can influence the viability of such project. In spite of the importance of development finance in property development, there is dearth of information on the amount of funding that takes place, by whom, or the method used.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
This chapter deals with the method used in collecting data required in carrying out this research work it explains the procedures that were followed and the instrument used in collecting data.
SOURCES OF DATA COLLECTION
Data were collected from two main sources namely:
Primary source and Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment, the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
INTRODUCTION
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY CONCLUSION AND RECOMMENDATIONS
INTRODUCTION
It is pertinent to note that this research was aimed at cross examining the contributions of financial institutions in housing development in Nigeria, thus the topic “examination of the role of commercial banks in financing building project in Nigeria”.
In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges associated with housing development in Nigeria.
SUMMARY
The study reveals that the interest rates being charged by the lenders (commercial banks) are usually very high. Other sources of finance for housing development apart from the equity capital include insurance companies and pension funds, Government Bonds and the various commercial, merchant and mortgage banks in Nigeria. The problems being encountered by housing and estate developers in the quest for fund include bureaucratic bottlenecks in the financial institutions thereby making funds difficult to reach the developers on time. Collateral security and certificate of occupancy as demanded by most of these commercial banks are source of problems for developers in getting finance for housing development. As a result of inflation, the real value of loan collected normally reduced making it impossible for the project to be completed with the arranged finance. The conditions under which loans are given particularly the short-term loans are usually too stringent and times developers find it difficult to meet such terms. There is always dearth of information on the amount of funding that takes place, by whom, or the methods used. This is because there is no physical focal point where the funding business can be transacted, the market is an abstract aggregation of separate, unrelated and uncoordinated funding transactions and the market is diverse and complex. The resultant effect of these is problem of getting real estate finance. There is always non-availability of fund to finance real estate development partly because of inflation and the huge capital required. Loan repayment is always very difficult due to the high cost of servicing the loan by the developers. The dwindling economic situation in the country is taking its toll on the construction industry thereby reducing the availability of loanable funds for real-estate development. As a result of long gestation period for the development of real estates, most investors and lending institutions are normally discouraged.
CONCLUSION
The study examines the role of commercial banks in housing development in Nigeria. Based on the results obtained in this research, the following conclusions were drawn.
- Funding from commercial banks is the most frequently used source of finance by housing and estate developers.
- The findings reveal that housing and estate developers only on occasional bases seek for ways to enhance their finance base, this will affect the housing sector negatively.
- On the issue of a very high Interest rate charged by commercial banks the implication is that the final cost of housing will be high.
RECOMMENDATIONS
- It is hereby recommended that record of past transactions regarding borrowing and lending of finance for real estate development should be kept so as to assist others who would want to go into such transactions in future.
- Many problems plaguing the success of real-estate financing in Nigeria can be solved if our economic problems are solved since most of these problems are due to the inflationary economy that Nigeria faces.
- Government should intervene in this financing by instructing these financial institutions to slack their stringent rules for lending loan to developers. From the foregoing discussion, it can be concluded that finance plays a vital role in real estate development hence; it should not be handled with levity by both government, financial institutions and the real estate developers.
References
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- ABIODUN A. (1999): Housing Finance under National Housing Fund: An appraisal. Paper presented at the General Meeting of the Nigeria Institute of Town Planning.
- ABIODUN A. (1999): Housing finance under National Housing Fund: An appraisal. Paper presented at the General Meeting of the Nigeria Institute of Town Planning.
- ABRAMS C. (1964): Mans struggle for shelter in an Urbanizing world, published by Massachusetts Institute of Technology Cambridge, Massachusetts, and London, England.
- AGBOOLA T. (2000): Housing, Poverty and Environment – The Nigerian situation. A seminar Paper presented at a workshop on Effective approach to Housing delivery In Nigeria. Organized by the Nigerian Institute of Building, Ibadan, Nigeria.
- AKANJI O. (1998): Informal finances sector in Nigeria, Bullion. Publication of the Central Bank of Nigeria, 1998, Volume 22 N0 3
- ANTHONIO J. (2000): Critical issues and obstacles to Housing Finance & Procurement. A Seminar Paper presented at National Workshop on Financing and Procurement of Housing and Infrastructure, Organized by Nigerian Institute of Quantity Surveyor. Abuja.
- ARILESERE D. (1997): Housing Finance in Nigeria: A paper presented during NIOB Organized workshop on Affordable Housing. Lagos.