Banks required to contribute 10% of total loan portfolio towards affordable housing fund

Commercial banks operating in the Maldives are required to contribute at least 10 percent of their total loan portfolio towards the affordable housing fund – established under the government’s the inclusive national affordable housing scheme.

The scheme is one which will enable individuals to access affordable financing from banks to purchase housing in the greater Male’ area. The regulations on this scheme were published by the Maldives Monetary Authority (MMA) on the Government Gazette on Thursday.

Key provisions:

• All commercial banks are required to contribute 10-15 percent of their total loan and debt portfolio towards the fund
• Fund will provide loans to none-homeowners, first-time homebuyers, and other individuals who meet criteria set by the MMA
• Loans issued through the fund will have a minimum repayment period of 25 years
• Housing projects eligible for financing and other eligibility criteria will be decided by the MMA
• Scheme will run for five years
• Both the scheme and the fund will be managed by a financial institution designated by the MMA

According to the regulations, the fund will be issued to issue two types of financing facilities; lease ending with ownership and end-user financing.

Type A: Lease ending with ownership facility

• Annual interest rate fixed at 5 percent of principal amount
• No equity requirement
• A security deposit may be required as determined by the MMA

Type B: End-user financing facility

• Annual interest rate fixed at 6 percent of principal amount
• Equity requirement of 5 percent of facility amount
• No mortgage or security other than the property being purchased

The regulation states that banks that participated in the scheme will benefits determined by the MMA as an incentive.