Hindrances to Commercial Banks Involvement in Real Estate Development, Minna Nigeria

Abstract

The study examines hindrances to commercial banks involvement in real estate development in Minna, Nigeria. The study focuses on banks that are most reliable for financing real estate development in Nigeria namely; Fidelity Bank Plc, United Bank of Africa (UBA), Guarantee Trust Bank (GTB), and Union Bank of Nigeria (UBN). Data were collected from the head of units who are top officers from the selected banks in the study area. Information were gotten on financial products offer by commercial banks for real estate financing and challenges hindering their effectiveness. Data were analyzed using frequency distribution tables and relative importance index. The study shows that the selected commercial banks offer a range of financing products specifically for real estate development. Mortgage loan, bridge loan, and construction loan are the most effective products used by the commercial banks in facilitating real estate financing. The study further revealed that Economic uncertainty, Regulatory constraint and High risks of default which ranked 1st, 2nd 3rd with RII of 0.79, 0.66 and 0.60 respectively are the effective hindrances to real estate financing by commercial banks in the study area. While challenges such as Limited capital available, Borrower creditworthiness and Market volatility which ranked 4th, 5th and 6th with RII of 0.56, 0.55 and 0.48 respectively are considered moderately effective challenges hindering financing real estate development by the commercial banks in the study area. Addressing these challenges is crucial for enhancing the capacity of commercial banks to support real estate development and, by extension, contribute to the economic development of Nigeria. The study suggests that commercial banks should adopt innovative financing models such as Public-Private Partnerships (PPPs) and Real Estate Investment Trusts (REITs) to spread risks and increase the flow of funds into the real estate sector.