IMPACT OF VALUATION APPRAISAL ON THE MORTGAGE PROCESS IN REDUCING HOUSING DEFICIT IN LAGOS, NIGERIA

By ESV Alex Igbori, MNIVS

Lagos has an estimated housing deficit of 2.5m+ units. Mortgages are supposed to be the bridge, but less than 5% of housing in Nigeria is mortgage-financed. Valuation appraisal is the “gatekeeper” in that process.

Valuation appraisal impacts the mortgage process in Lagos by determining loan amounts and mitigating lender risk. However, valuation inaccuracies such as overvaluation or undervaluation can restrict mortgage availability, hindering efforts to reduce the millions-strong housing deficit.

Positive Impacts on Mortgage and Housing Access
❖ Collateral Verification: Provides lenders with a reliable estimate of market and forced sale values, enabling formal credit approval.
❖ Risk Mitigation: Protects banking assets from non-performing loans, keeping mortgage institutions solvent. Also in confirming that the property exists, has good title, is in a developable area and can be sold to recover loan if borrower default.
❖ Standardization: Aligns financing with regulatory frameworks inspiring investor and buyer confidence.

Challenges causing Inaccuracies and Housing Bottlenecks
➢ Overvaluation Risk: Exposes financial institutions to higher default exposure, prompting tighter, restrictive lending rules that shut out average homebuyers.
➢ Undervaluation Constraints: Denies qualified borrowers the full loan amount needed to purchase or complete residential units.
➢ Data Scarcity: Lack of a centralized transaction data bank in Lagos leads to inconsistent valuation metrics among professionals.
➢ Title Issues: 70% + of Lagos land is unregistered/ C of O pending. Valuers can’t give “marketable title” opinion and Banks reject.
➢ Time & Cost: Takes 2 – 6 weeks and N200,000 – N1,000,000.00. Slows down mortgage approval.

Recommendations/Solutions to Make Valuation Drive more Mortgage
To actually reduce the deficit, we need;
❖ Digitize Land Registry and GIS Mapping: Lagos GIS and automated C of O process. Clear title is equal to bankable valuation and more loans.
❖ Valuation Data Bank: NIESV and Estate Agents to create a central database of sold prices in Lekki, Ikeja, Ogudu, etc makes valuation faster and more credible.
❖ Standardised Valuation for Mass Housing: For FMBN/NHFL estates, use “model valuations” instead of valuing each N15m house individually. Cuts cost and time.
❖ Regulate and Penalise Fake Valuers: NIESV should blacklist valuers who collude to inflate values. Banks should only accept NIESV-registered firms.
❖ Technology: Use drones, AI and property tech to do “drive-by” and desktop valuations for low-risk NHF loans under N20m.

Conclusion
Valuation appraisal in itself is the bottleneck and the unlock for mortgages in Lagos; without it, banks won’t lend. With credible, fast and reliable valuation reports, banks will lend more. Hence, more mortgages = more people can buy instead of rent = developers build more = housing deficit reduces.

Alex, a registered Estate Surveyor and Valuer, is the Head of Practice at Alexander Igbori Consulting, a leading firm of Estate Surveyors and Valuers.