How banks assess property titles as collaterals
One of the most common ways to secure a loan in Nigeria is to use a property title as collateral. However, not all property titles are accepted by banks, as they have to meet certain criteria and undergo rigorous verification. According to The Guardian Nigeria News, some of the factors that banks consider when assessing property titles as collaterals are:
- The validity and authenticity of the title document
- The location and value of the property
- The encumbrances and liens on the property
- The legal status and ownership history of the property
- The marketability and liquidity of the property
Banks are wary of property titles that are fraudulent, defective, disputed, or overvalued, as they pose a high risk of default and loss. Therefore, banks conduct due diligence and background checks on the property and the borrower before approving the loan.
Why property titles are problematic in Nigeria
Despite the high demand for loans in Nigeria, many borrowers face difficulties in obtaining them due to the challenges associated with property titles. Some of the reasons why property titles are problematic in Nigeria are:
- The lack of a unified and comprehensive land registry system
- The multiplicity and complexity of land tenure systems
- The prevalence of land disputes and litigations
- The inefficiency and corruption of land administration agencies
- The high cost and time involved in obtaining and registering property titles
These factors make it hard for borrowers to prove and transfer their ownership rights over their properties, and for banks to verify and enforce their security interests over the collaterals. As a result, many potential borrowers are excluded from the formal credit market, and resort to informal and alternative sources of funding.
How to improve the situation of property titles in Nigeria
In order to improve the situation of property titles in Nigeria, and enhance the access and affordability of loans, some of the possible solutions are:
- The establishment and digitization of a national land registry system
- The harmonization and simplification of land tenure systems
- The resolution and prevention of land disputes and litigations
- The reform and capacity building of land administration agencies
- The reduction and standardization of the cost and time involved in obtaining and registering property titles
These measures would help to create a transparent, efficient, and reliable system of property titling in Nigeria, and increase the confidence and trust of both borrowers and lenders. This would in turn stimulate the growth and development of the real estate sector, and the economy at large.
