MOFI Real Estate Investment Fund Distributes N22.5bn to Banks For On-Lending to Home Buyers

The Ministry of Finance Incorporated (MOFI) Real Estate Investment Fund (MREIF) has disbursed a moderate 9% of the aggregate fund’s NAV or N22.5 billion to five Eligible Financial Institutions (EFIs) (commercial banks and primary mortgage banks) for on-lending to 398 qualified home buyers at a predetermined annual interest rate as of 12 August 2025.

The mortgage loans to home buyers will have a maximum tenor of 20 years, with both interest and principal repayments amortised over the loan period.

In October 2024, ARM Investment Managers Limited secured approval from the Securities and Exchange Commission to establish the MREIF NGN1 trillion fund issuance programme.

Under the programme, the pilot phase of the N250 billion fund was launched in March 2025, comprising N150 billion in Series 1 and N100 billion in Series 2. The N150 billion Series 1 was wholly subscribed to by MOFI as a concessionary investor in January 2025.

On the other hand, the N100 billion Series 2 was raised from commercially focused investors (qualifying institutional investors) in March 2025 through a public offer and was fully subscribed.

MREIF is sponsored by MOFI (the investment vehicle of the Federal Government of Nigeria) and operates as a closed-ended real estate investment fund designed to address Nigeria’s severe housing deficit of approximately 28 million units.

The fund aims to provide affordable long-term real estate mortgage financing at scale while delivering competitive risk-adjusted returns to the Series 2 unitholders.

At inception, the fund targeted a blended interest rate of 12% for mortgage loans extended to qualified Nigerians. However, in July 2025, the interest rate was reduced to 9.75% to enhance mortgage affordability and encourage greater participation.

With the reduced rates, MOFI has agreed to a lower return to support the delivery of the targeted returns for the Series 2 unitholders. Additionally, the minimum equity contribution by home buyers was reduced to 10% from 20% previously. The revised interest rate and minimum equity contribution took effect on 01 August 2025.

The fund will also strengthen eligible property developers’ ability to secure funding by providing off-take guarantees, which will serve as credit enhancements.

However, if the property developers are unable to sell the housing units within the 18-month presale period and the 3-month sales period, the fund will step in to purchase up to 40% of the unsold units.

This will be facilitated through the liquidation of liquid assets reserved as provisions for the off-take guarantees, ensuring developers can meet their debt obligations to creditors.

As of August 2025, no off-take guarantees have been issued to any property developers, as they remain at various stages of onboarding and negotiations with their creditors. The fund manager has also put in place a digital platform (MREIF platform) for listing properties, designed to facilitate seamless interactions among home buyers, EFIs, and property developers.

MREIF primarily generates revenue from three stable, annuity-like sources: interest income from on-lending to EFIs, investment income from short-term liquid investments, and guarantee fees from off-take guarantees provided to property developers. After covering operating expenses, which are capped at 3.5% of the fund’s NAV, MREIF will distribute the net income to unitholders.

Dividend payouts will also be capped at 90% of net income and distributed semi-annually to qualified investors.

Given the senior status of the Series 2 unitholders, they will be prioritised in dividend distribution, which is benchmarked against the prevailing yield on the Federal Government of Nigeria (FGN) 10-year bond + 75bps on the first day of every semi-annual distribution cycle, while the Series 1 unitholder will be entitled to a minimum return of 1%.

In July 2025, MREIF distributed its first dividend at an annualised return of 19.27% to Series 2 unitholders in line with the prevailing benchmark. Also, an investment return of 4.32% was paid to MOFI.

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