FMBN’s Non-interest Mortgage as Alternative to Solving Housing Deficit

According to data from the Housing Market Information Portal (HMIP) of the Federal Government’s National Housing Data Steering Committee, Nigeria has a staggering housing deficit of just under 15 million units. While this manifests in multidimensional circumstances, it exposes a housing situation that requires innovation beyond conventional construction and housing finance that supports housing for all Nigerians. Nigeria’s housing challenge goes beyond the need to build more houses. It also involves addressing the existing challenges that make it difficult for ordinary Nigerians to live in decent homes. For many Nigerian households, the difficulty lies not only in finding a suitable property but also in accessing financing arrangements that align with their income, circumstances and preferences. For some Nigerians, particularly those whose religious or ethical convictions discourage interest-based transactions, conventional mortgage financing presents an additional consideration. Even where they have the financial capacity to acquire a home, they may be reluctant to participate in arrangements structured around interest-bearing loans. These realities underscore the need for a more diverse housing finance market, one that recognises that a single financing model may not adequately serve the needs of a diverse population. So when the Federal Mortgage Bank of Nigeria (FMBN) introduced the Non-Interest Mortgage Product, formally known as the Non-Interest Lease-to-Own Housing Scheme, and based on the Ijarah Muntahia Bittamleek (IMBT) model, on October 27, 2026, it sent a signal within the housing ecosystem that an agency of government was beginning to look towards inclusion and dynamism for bridging the huge housing deficit in the country. Launched by the Minister of Housing and Urban Development, Muttaqha Darma, the product introduces an alternative arrangement through which eligible National Housing Fund (NHF) contributors can access housing and eventually acquire ownership. The introduction of this product raises an important question about inclusion in Nigeria’s mortgage market, especially whether providing alternatives to conventional interest-based financing brings more people into a market where participation has historically remained limited? Addressing the Gap in Mortgage Market Nigeria’s mortgage market has long faced structural challenges, including limited access to long-term financing, high property acquisition costs and the relatively low purchasing power of many households. Beyond these constraints, the structure of available mortgage products may not appeal to everyone. The Non-Interest Mortgage Product is touted as a unique scheme meant to bridge the gap created by one-size-fits-all opportunities. It provides a financing arrangement that does not rely on the conventional interest-on-loan principle. Although the product is designed within the framework of non-interest finance, it is not restricted to any particular religious group. Any Nigerian who meets the applicable NHF eligibility requirements can potentially benefit. Its significance, therefore, extends beyond religious considerations. It introduces greater choice into the mortgage market and recognises that expanding access to homeownership requires different financing structures capable of accommodating a wider range of prospective homeowners. However, the extent to which it will improve inclusion will ultimately depend on affordability, public understanding, the availability of suitable properties and the ability of eligible contributors to access the facility. For the Bank’s Managing Director/Chief Executive, Shehu Usman Osidi, the initiative reflects the Bank’s commitment to making homeownership more accessible, inclusive and responsive to the diverse aspirations of NHF contributors. It also builds on the Bank’s recent efforts to develop additional pathways to homeownership, including the launch of the Diaspora NHF Mortgage Loan in August 2026. Why is Non-interest Mortgage Different? The distinction between FMBN’s new product, the Ijarah Muntahia Bittamleek and a conventional mortgage lies primarily in the underlying contractual and financing arrangement. Under a conventional mortgage, a financial institution provides a loan to a borrower for the purchase of a property. The borrower repays the principal amount alongside interest over an agreed period, with the property serving as security for the loan. The Non-Interest Lease-to-Own Scheme operates differently. Based on the Ijarah Muntahia Bittamleek model, it combines a lease arrangement with the eventual transfer of ownership. Under this structure, the property is acquired and owned by the financial institution, which leases it to the customer for an agreed period. The customer makes rental payments for the use of the property, while the contractual arrangement provides for the eventual transfer of ownership after the agreed obligations have been fulfilled. The underlying principle is Profit for Lease, as against Interest on Loan. Rather than advancing an interest-bearing loan for the customer to purchase a house, the arrangement is based on the leasing of an identified asset and the transfer of ownership at the end of the agreed period. This distinction is important because the non-interest character of the product is not established simply by changing the terminology used to describe payments. It is rooted in the structure of the transaction, the ownership arrangement and the contractual relationship between the parties. The facility provides access to up to N50 million, with a lease period of up to 30 years, subject to the applicable terms and approval conditions. It also provides for early repayment without additional charges, while the beneficiary’s payment obligation is assessed against income to support affordability. The product incorporates applicable insurance arrangements to provide protection against specified risks, including death, critical illness and property damage. As with any long-term housing commitment, prospective beneficiaries will need to understand the contractual obligations, payment structure, property ownership arrangements and conditions governing the eventual transfer of title. The introduction of this model does not, by itself, resolve the wider affordability challenges confronting the housing market in Nigeria. However, it broadens the range of financing options available and provides an opportunity to bring prospective homeowners who have different financing preferences into the formal mortgage system. Beyond Financing Model: Question of Housing Delivery The success of an alternative mortgage arrangement cannot be measured solely by its introduction or the number of people who express interest in it. Its real value will depend on how many Nigerians can use it to secure decent and affordable homes. This was re-echoed at the launch of the product by the Housing Minister who charged the Bank to anchor implementation on four principles of simplicity in application, speed in processing, transparency in transactions and scale of delivery across the country. His message placed the emphasis firmly on results. “The test of this product is not today’s launch but how many Nigerians become homeowners through it,” he declared, urging FMBN to extend the immediate benefits beyond Kano to other parts of the country. The commissioning of the FMBN-Ijarah-01 Estate in Bichi, Kano State, alongside the handover of keys to the pilot project’s inaugural beneficiaries, provided an initial demonstration of the arrangement in practice. The project illustrates the relationship between housing finance and actual housing supply. A financing product can only deliver meaningful benefits where there are suitable properties available at prices that prospective beneficiaries can afford. This is particularly important in a country where the cost of land, building materials, infrastructure and property development continues to influence the price of completed homes. For the initiative to achieve wider reach, there will need to be a sustained supply of qualifying properties across different locations, supported by partnerships with credible developers and efficient project delivery arrangements. There is also the question of accessibility. Information about the product, its contractual structure, eligibility requirements and application procedures must be communicated in clear and understandable terms. This will enable prospective beneficiaries to make informed decisions rather than simply viewing it as another mortgage product. Ultimately, the test will be whether the arrangement creates a practical and sustainable pathway to homeownership for Nigerians who need it. Looking Beyond Homeownership While expanding access to homeownership remains important, Nigeria’s housing challenge also requires attention to the needs of households that depend on rented accommodation. In major urban centres, rising rental costs and the substantial upfront payments demanded by landlords have made securing decent accommodation increasingly difficult for many low- and middle-income earners. A typical two-bedroom apartment in a satellite town in the Federal Capital Terrotory costs between N2.5 million and N3.5 million. The situation is a similar one in Lagos and other major cities. And this is for areas several kilometers away from the major city centres. For a N3 bedroom apartment, annual rental obligations rise as high as N3.5 to N5 million. If we’re to go by the recommendation of annual housing expenditure not exceeding a third of household income, that would require households to earn as much as N8 to N15 million every year to afford such rents. The reality is that many Nigerians have to make do with even much cheaper housing to cope, and rental payments remain a challenge. In response, the Federal Government through the FMBN is set to introduce the Rent Assistance Loan. Billed for launch in November 2026, it is designed to help eligible NHF contributors meet their rental obligations. Under the proposed arrangement, approved rent payments will be made directly to landlords, with beneficiaries expected to repay the facility over a 10-month period, subject to the approved terms. Nigerians can access up to N2 million to support rental obligations. Also in the pipeline is the Micro Home Improvement Loan intended to support eligible beneficiaries in undertaking improvements to their homes. Once introduced, these initiatives will further broaden FMBN’s housing finance offerings, extending support beyond home acquisition to other important aspects of housing affordability and improved living conditions. A Broader Housing Finance Ecosystem The introduction of alternative mortgage financing alongside plans for rental assistance and micro home improvement reflects a broader understanding of the different housing needs of Nigerians. For some households, the priority is acquiring a home through a financing arrangement that aligns with their preferences. For others, it is obtaining the financial support required to secure decent rental accommodation while they work towards greater financial stability. The NHF Mortgage Loan continues to provide a conventional interest-based route to homeownership, offering eligible contributors access to up to N50 million at an interest rate of 6 per cent per annum, with a repayment period of up to 30 years, subject to applicable conditions. Other interventions, including the existing Rent-to-Own Scheme, Home Renovation Loan, Individual Construction Loan and Cooperative Housing Development Loan, address different aspects of housing acquisition, construction and improvement. The Diaspora NHF Mortgage Loan Scheme also extends mortgage participation to eligible Nigerians living abroad. Together, these arrangements demonstrate why housing finance should not be approached from a single perspective. Homeownership, rental affordability, housing improvement and access to suitable financing are interconnected aspects of the broader housing challenge. However, the introduction of more products must be accompanied by effective implementation, adequate funding, efficient administration and continuous assessment of their impact. The number of products available is less important than the extent to which they address genuine housing needs. For the Non-Interest Mortgage Product, the critical considerations will be whether it provides a credible alternative to interest-based financing, whether its payment obligations are affordable and whether it can reach Nigerians who have previously been reluctant to participate in conventional mortgage arrangements. For emphasis, Nigeria’s housing challenge requires more than the construction of additional houses. It requires financing arrangements that recognise the diversity of the population, respond to different income realities and provide practical pathways to secure accommodation. The introduction of alternative mortgage financing is therefore, a step towards addressing these needs. Its real test will be whether it translates into greater inclusion, improved affordability and tangible homeownership opportunities for Nigerians. •Richard Imhoagene, a housing analyst and social commentator, writes from Abuja