Homebase Mortgage

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CEO Q & A with Homebase Mortgage Limited
Posted Wednesday, November 19, 2008

Homebase seek to explore secondary mortgage market


- To raise funds in Q2 of 2009


“We are a primary mortgage institution (PMI) set up to provide first class mortgage financial services to professionals, public service workers, corporate bodies/institutions as well as cooperative societies and its members, and other interested individuals or groups. We provide mortgages that empower/ enable our customers have residences and investments that create social stability, thus ensuring capacity development, under terms that would meet world best standards. Ten years from now, our brand will be the clear brand of choice in terms of mortgages and housing provision in Nigeria. Our core purpose is to increase the housing stock through the provision of properties, and to provide mortgages that would enable our customers acquire these properties. We are set out to redefine the concept, system and mechanism of mortgage operation in the Nigeria banking industry.
(Source: official website of Homebase Mortgage Limited)

Proshare NI sought to find out more about newly established Primary Mortgage Institution (PMI), Homebase Mortgage Limited and its operations as regards the provision of mortgages in Nigeria.

In this interview with PETER OBIORA of Proshare NI, Femi Johnson, Managing Director/Chief Executive Officer (MD/CEO) of Homebase Mortagage Limited discusses issues relating to the company’s recapitalisation, its plans to raise fresh funds via Private Placement (PP) to the tune of N5.0 billion and listing of its shares on the Floors of the Nigerian Stock Exchange (NSE).

Other issues discussed include the current world financial crisis as regards the Mortgage industry of the Nigerian economy; Homebase Mortgage plans to expand its branch network to so many parts of the nation amongst other issues. Excerpts:


Homebase Mortgage Limited

Homebase Mortgage is a PMI licensed by the Central Bank of Nigeria (CBN). The company had commenced operations in 1992 as Positive Mortgage Finance Limited.

In the last three years, we have not been in operation due to the fact that they were not able to recapitalise.

Thus, the CBN approved a restructuring for the company and we came in July 2007 to takeover. We have been behind the scene since then in terms of taking over the company.


We opened services to customers in Victoria Island as Homebase Mortgage Limited. We had to go through the change of Directors, name of company, registered address, recapitalisation and so on to now have what we now call Homebase Mortgage Limited.

We commenced operations on February 01, 2009; we are about nine months old in the market today. We all know that the housing deficit in the country is about 16 million units.


In effect if you are to meet the target of 16 million, we probably would use our annual budget every year over the next 20 years. This may not even be enough, based on statistics, what we do yearly in terms of housing is not enough.


On a yearly basis, it looks as if there are so many properties being developed, in the real sense of it; we are not building up to a 100,000 units of housing per year. If we are doing 100,000 houses per year, it would take us 10 years to do one million units of housing.


There is still the wide gap existing, however, despite the situation, how much of it is in effective demand. How many people can actually afford houses? If today, we meet our 16 million housing target, how many people can afford to buy these houses.


When you look at effective demand, it is not actually that much; however, there is still a huge demand and potential for supplying real estate. You can play at any end of the market either by supplying materials, building the houses, granting mortgages for individuals to buy and so on.


The beauty of our license is that we are allowed to play either directly or by setting up a subsidiary in all of the value chain of housing delivery which is the reason we decided to come up at this particular point in time.


Another thing you find out is that mortgage is not structured in Nigeria.


We all keep talking about the secondary mortgage market, take for instance, if we have N1.0 billion today as capital and we embark on two or three projects, the fund would be exhausted.


And if there is nobody to buy these houses and I get my N1.0 billion back and recreate more houses; then I am out of business.

We need to go the secondary mortgage market route; there are lots of potentials wasting in Nigeria. Take for example an estate like Victoria Garden City (VGC), 90 percent of the houses in VGC are self financed.

VGC has about 10,000 houses, if on the average, a unit of house in the estate cost N50 million, multiply it by 10,000 houses, it will give us about N500 billion put in an estate.


This is the fund that could be channelled to other usages that would benefit the individuals and the economy.


In Nigeria, the houses that are in the mortgage sector are just about 12 percent of the total houses and initially it was six percent; meaning that mortgage is gaining ground in Nigeria.


If you can take all these houses and bring them into the mortgage sector, it means that for VGC alone, those that own homes there are sitting on N500 billion that could be released as capital for other businesses.







Rather than taking N50 million to buy a house, I can go for a mortgage and use the money to do other things that are beneficial. This is the thing we are advocating in Homebase Mortgage, we want to bring in people into the mortgage sector, then create a secondary market; so that if these mortgages come, we can offload same either to Pension Fund Administrators (PFA’s), offshore investors and so on. This will enable people invest in it.







Core investors in Homebase Mortgage






We have two companies and three individuals; these are Assetwise Capital Limited, Cowry Assets Management Limited, (Member of the Nigerian Stock Exchange) and three other individuals that are core investors in Homebase Mortgage.







However, that is a start-up investment, Homebase Mortgage started with N300 million capital, but we intend to take it immediately to about N5.0 billion, therefore, we expect other investors to come and acquire stakes in the company via Placement.







The above named investors are the core group that started the business, it doesn’t mean that these are the people that are going to own it or control it, others are still expected to join.







Apart from these, the CBN had after the recapitalisation of the banking industry, opted for the recapitalisation of mortgage banks to the tune of N5.0 billion.







There was a lot of lobbying by operators in the industry for CBN to scale it down to N2.0 billion, grudgingly they brought it down to N2.0 billion, but players in the industry were not satisfied and wanted less.







The CBN from reports reaching us has now gone back to N5.0 billion, but our sources at the apex bank has confirmed that by January 01, 2009, CBN would announce a N10 billion capital base for players in the mortgage industry.







Our initial plan in Homebase was to go up to N5.0 billion, so that when the recapitalisation is eventually announced, we would not find it difficult to scale through.







Subsequently, we hope to raise our capital base in Homebase Mortgage to about N15 to N25 billion, but with the reports reaching us from the CBN, we would no longer stop at N5.0 billion at this initial stage; but raise our stake to N10 billion.







Homebase Mortgage and proposed Placement



We intend coming up with the Placement first or second quarter of year 2009. We just started this company and barely nine months in operations as I affirmed earlier.







Homebase Mortgage cannot go for a Placement without showing its financial results. We are waiting to have our first year results out and subsequently raise the funds through Placement.







Thereafter, we would now apply to list our shares on the Floors of the NSE. We don’t intend to remain a private company; we wish to go public by listing on the Nations Stock Exchange.







Also, the joy of any investors is to be able to trade its shares; by exiting or coming in anything he or she chooses. If Homebase Mortgage does not go to the Floors of the Exchange; then they deny these investors of such privilege.







EDITOR’s NOTE: As at the time of filling in this interview, Proshare NI could not get the financial results for the nine months period the company has been in operations.







Plans to reward investors






We have a policy in-house that whatever investment we are going into at Homebase Mortgage, if it won’t give us 50 percent return, we would not go into such investment.







Thus, the pressure is constantly on us to remain ingenious, proactive, innovative and to ensure that we only go for businesses that would give us up 50 percent returns.







We are not confirming that if we make the 50 percent returns, we would payout everything as dividend. Some of these would come by way of bonus.

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