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FACTORS
AFFECTING HOUSING DELIVERY
CHAPTER ONE
INTRODUCTION
1.0
Introduction
The delivery
system of housing in the country is a combination of many integrated components
which include land, building materials, infrastructure, policies, building
regulations and more importantly finance. The priority accorded the issue of
housing is immense; to most governments, the availability of sufficient but
basic housing for all is often stated as a priority for enhancing the social
needs of the society. In Nigeriaalone there is a shortage of 150,000 units
annually (National housing policy, 2004), the government alone with its public
housing initiatives cannot curb this problem hence the need for private
investors in the real estate market.
Habitable
housing contributes to the health, efficiency, social behavior and general
welfare of the population. Apart from providing man with shelter and security,
housing plays a major role serving as an asset. For any typical home-owner, the
house is a major asset that adds onto his portfolio and for many households;
the purchase of a house represents a lifelong investment and a store of wealth.
Provision of housing services depends mostly upon a wellfunctioning housing
finance system. The consideration of constructing or acquiring a house is
influenced by the cost and various government economic policies which could be
fiscal or monetary (Giussani and Hadjimatheou, 1991) and even depends on the
economic system adopted in a country.
Housing is a
major purchase requiring long-term financing, and the factors that are
associated with well-functioning housing finance systems are those that enable
the provision of longterm finance. It is evident that countries with stronger
legal rights for borrowers and lenders through collateral and bankruptcy laws,
credit information systems that are well informed, and a stable macroeconomic
environment have more developed housing finance systems (Warnock 2008). These
factors also help explain the variation in housing finance across emerging
market economies.
1.1
Statement of the Problem
In line with
the government’s effort in achieving Vision 2020 and the overall development of
the economy, provision of housing is essential. With an acute shortage of 150000
units annually and the ever-increasing population, a housing problem arises and
consequently social and economic problems. Housing here is not the only
problem, but adequate housing that can allow for the comfort ability levels
sort by mankind. . The importance attached to housing problems by the
government has resulted in the adoption of the housing policy; its
implementation and effectiveness has not been adequate as is depicted by the
current state of housing in Nigeria.
Fallis
(1994) noted that housing problem might be focused on the causes, for example;
the housing problem might be described as being caused by an underdeveloped
mortgage market which leads to the loss of simple rental housing. There were
various reasons deduced as causes of housing problems. The most important
reason has been the variation between the price of habitable and decent
accommodation and the number of individuals that can afford it. In the long
term, market forces and government intervention determine the specific size of
each of the housing tenures (Warnock 2008)
A large gap
exists between the demand and supply of housing finance. Critical analysis and
clear understanding of the money market and the current financial system in the
country is required to effectively relate housing finance and house delivery.
The purchase or construction of housing in many countries is inhibited because
individuals cannot borrow funds. The available loans are channeled to high and
middle-income families. The problem is how do we avail the loanable funds to
the low income earners? Finding measures to address this problem and subsequent
implementation will provide for adequate affordable housing for the low-income
earners.
The lack of
finance has been caused by the intermittent sources of income and low income
from the informal employment. UN Habitat (2003) puts forward that the informal
sector, which provides for the bulk of employment to the low income group, has
not been generating regular and enough income to undertake the expensive housing
construction and improvement. Consequent to this, those in the low income group
need to save for many years if ever they are to realize a dream of living in an
adequate house.
The problem
again is how do we avail funds to the low income earners who have no collateral
to act as security and not risk bursting the real estate bubble? Can the
available financial models allow it? If so, how do we avoid a scenario like
that in the USA in 2007.Too much borrowing and an assumption that the prices of
homes would only go up led to the mortgage crisis. According to Dean Baker
(2008), before the mortgage crisis, banks offered easy access to money. One could qualify for mortgages with little
or no documentation. Even individuals with bad credit could qualify as subprime
borrowers. Stringent measures on Mortgage applications were not applied to
check for accuracy as well as it should have been. When the mortgage crisis
began, home prices stopped rising, borrowers who bought more houses than they
could afford stopped paying the mortgage, monthly payments increased on
adjustable rate mortgages as interest rates rose. This led to the banks
repossessing the houses leaving most in a state of homelessness.
Critical
evaluation of the factors that influence financing for housing in the country
could lead to the formulation of models that if well assimilated into the
existing financial system could yield effective and efficient results.
1.2 Research
Hypothesis
The supply
of housing delivery is influenced by factors other than demand, hence
inaccessible by the low-income earner.
1.3 Research
Objectives
To identify
the factors that influence housing delivery.
To establish
their impact to the provision of housing.
To analyze
housing supply characteristics in developing economies.
To identify
direct and indirect sources of housing finance and the avenues that can avail
funds for the low-income earner.
1.4 Research
Questions
What are the
main factors that influence the supply and demand for loanable funds for
property development in Kebbi State, Nigeria?
What is the
impact of socio-economic and financial factors and government policies in
housing development/real estate investment?
What are the
main sources of housing finance for households and what strategies can avail
the funds to low income households?
1.5 Area and
Scope of Study
This study
focuses on Nigeria, a developing country; the development of its built
environment has been described as vibrant. This research will aim at both rural
and urban areas, real estate development takes place in all parts of the
country, and this research will be able to find out whether the factors that
affect housing finance in one part of the country are uniform or vary with that
in another part.
Nigeria
offers both a macro and microeconomic platform enabling critical evaluation of
all factors available in both economic environments. The impact on the
country’s money market due to macroeconomic shocks for example, volatility of
interest rates consequent to inflation, unemployment rate vs. employment rate
among other factors. The microeconomic environment attempts to depict the
attitude of households in the demand and supply of housing finance.
The scope of
this study will be restricted to conventional financial institutions and
households that attempt to access funds for housing development. The study will
examine how different factors affect the supply of funds by lenders and the
demand of the funds by households. The research will also highlight the housing
finance system employed in the country, its characteristics and role in housing
delivery.
1.6
Significance of the Study
The findings
on the study will be useful to the stakeholders and players in the real estate
industry. It will reveal that the availability of housing finance is not
determined only by the interplay of supply and demand but also other factors
such as socio-economic factors, financial factors and the government policies
play a part as to this. The study will assist individuals in decision making
processes and assessing the different avenues that can avail funds for housing
development.
The supply
of housing is governed by supply and demand factors. Real estate development
requires time to plan, permit and build hence supply is very inelastic. Housing
demand is fairly predictable as it varies with income level. The level of
income correlates to the availability of mortgage finance. Mortgage finance is
an important factor in generating housing demand. Boleat (2008) postulated that
there is a strong connection between economic development and the size of the
mortgage market. It is also important for one to identify the various financial
options available and assess the costs of such finance.
Over the
years, different policies and strategies have been used in Nigeria to improve
the housing delivery system and quality of housing to the low-income group.
However, most of the policies developed have been slow and ineffective; this
could be attributed to the limited resources to fund the low- income group and
their access to housing finance. The study is therefore important to the
Nigerian housing policy formulation process as it will identify the major
issues in housing finance. The study will also provide useful background
information for those institutions involved in housing finance initiatives to
understand the types and characteristic of housing finance loan products
required in the market.
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delivery process, what is housing delivery, what is housing delivery system,
housing delivery in nigeria pdf, housing delivery definition, housing delivery
strategies, nigerian housing policy between 1990 and 2013, literature review
housing quality
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