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“Gedhoruveriyaa Loan” – a debt trap?

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Last night Housing Minister Mohamed Aslam announced a housing financing scheme called “Gedhoruveriyaa Loan” for locals living outside of the Greater Malé city area. The project will be aimed at decongesting the  Greater Malé city area by providing housing financing opportunities for those residing outside of the  Greater Malé city area.

According to Minister Mohamed Aslam, the financing scheme will be conducted in collaboration with the Housing Development Finance Corporation (HDFC). Under this scheme, individuals will be entitled to applying for a housing loan of MVR 700,000.00 to be repaid in up to 20 years with an interest rate of 6%.

It is noted that the loan scheme does not require any additional processing fees, but individuals are required to invest 20% of the project cost. In addition to this, 2 applicants are required for each application along with the mortgaging of the property.

While the  loan scheme is purported to be “low interest” and an affordable housing financing scheme, it has been noted that the authorities conveniently left several important aspects of the loan when they announced it.

Low interest rate?

The reported MVR700,000.00 loan with an interest of 6% over a maximum period of 20 years would result in the interest amounting to 71.9% of the MVR 700,000.00. Meaning that over a 20 year period, an individual would be required to pay the MVR 700,000.00 along with an interest of MVR 503,604.18 making the total payable amount MVR 1,203,604.18.

Below is a table showing how this works for individuals applying for the loan ranging from 15 years to 20 years.

Duration (Years)

Loan Amount (MVR) Interest rate Interest Amount (MVR)

Total Payable (MVR)

15

700,000.00 6% 363,259.60

1,063,259.60

16

700,000.00 6% 390,572.49

1,090,572.49

17

700,000.00 6% 418,267.90

1,118,267.90

18

700,000.00 6% 446,341.43

1,146,341.43

19

700,000.00 6% 474,788.46

1,174,788.46

20

700,000.00 6% 503,604.18

1,203,604.18

And the claim that it is a “low interest” loan is also questionable as according to the “Business insider”, the average global interest rate for a 15 year housing loan is only 2.60%. At this rate, a loan of MVR 700,000.00 would only carry an interest of MVR 146,098.62 making the total payable MVR 846,098.62.

 

Is it feasible?

Based on the current construction industry rates, the idea that MVR 700,000.00 would be enough to finance a housing project is also questionable. According to industry insiders, the current rate for construction for 1sqm is MVR 12,500.00 for a medium quality construction project. For a better finishing, this would be anywhere from MVR 13,500.00 to MVR 16,000.00.

Based on this rate, under the proposed housing financing scheme, the MVR 700,000.00 would only be able to finance a housing project with an average finishing quality of a land area equal to 56m2 or 602.779 ft2. This would undeniably make the “Gedhoruveriyaa Loan” unfeasible as most land plots outside of the capital city are larger than 1,000 ft2.

Then there is this additional costs associated transportation, accommodation and set up outside of the capital city. Construction projects like this would incur a transportation cost of up to MVR 200,000.00.

This further weighs in against the “Gedhoruveriyaa Loan”, in that it is simply not enough to even finance  a single story house outside of the capital city. And while it it is unlikely that the homeowner would end up losing their homes, the “Gedhoruveriyaa Koan” is nonetheless an additional burden with very little capacity to finance a proper home, lending credence to notion of the “ Gedhoruveriyaa Loan” being a debt trap.

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Agreement to explore hydrogen-powered flights have been signed by Icelandair.

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Icelandair has signed two Letters of Intent (LOI) on exploring the possibilities for decarbonizing the company’s domestic flights.

California-based Universal Hydrogen is the first to have signed the LOI with Icelandair, which has designed a hydrogen conversion kit for regional aircraft allowing for the conversion of Icelandair’s Dash-8s to hydrogen powered aircraft.

Icelandair Group also signed an LOI  with Heart Aerospace, a Swedish company which aims to electrify regional air travel.

Before, Icelandair has worked with Heart Aerospace for some time and will now start an in-depth analysis with Universal Hydrogen.

Jens Thordarson, Icelandair Chief Operating Officer, said: “We believe we are in a good position to become one of the world’s first airlines to fully decarbonize our domestic network. Heart Aerospace and Universal Hydrogen have introduced exciting solutions for regional aviation that are expected to be available in only a few years.”

“As technology advances, we hope to be able to use the experience of decarbonizing our domestic services to accelerate the implementation of carbon neutral energy to power our international flights.”

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Decline of Gold and Silver prices on MCX for second time in a row.

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A fall in the price of gold by Rs 71 or 0.15 per cent have been observed, gold futures maturing on August 5 stand at Rs 47,575 per 10 grams on the Multi Commodity Exchange (MCX).

In the meantime, silver futures maturing on September 3 stand at Rs 67,487 per kg, observing a small dip of Rs 3. Both precious metals are trading slightly on the lower side for the second time in a row.

Yesterday, while gold futures stood at Rs 47,500 per 10 grams on the domestic market, silver was at Rs 67,037 per kg, recording a downfall of Rs 11 or 0.02 per cent.

International prices are significant in calculating gold and silver prices. The prices of gold and silver are calculated by keeping international prices as a basis, in India. Other factors like the USD to INR conversion rate, the supply and demand of gold and silver in MCX trading also play a significant role in determining the prices of gold and silver.

According to Reuters, gold prices edged lower on Friday, heading for their first weekly decline in five, as a stronger dollar made bullion more expensive for holders of other currencies and offset support from lower U.S. bond yields and weak economic data.

Spot gold was down 0.2 per cent at $1,803.33 per ounce, as of 0314 GMT. Bullion is down 0.4 per cent this week. U.S. gold futures fell 0.1 per cent to $1,803.90.

DailyFX currency strategist Ilya Spivak said, “Gold being a go to alternative for paper currency and with seeing the dollar bit higher is the catalyst that nudging gold back.”

The dollar index held close to a 3-1/2-month peak against its rival and was heading for its second straight weekly rise. Silver slipped 0.5 per cent to $25.34 per ounce and was set for its third weekly fall.

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The finalists for the Agent Achievements Awards have been unveiled.

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The final nominations for the 2021 Travel Weekly Agent Achievement Awards have been revealed.

The final qualifiers comprise of a variety of agencies across the UK and Ireland designated by almost 100 suppliers ranging from tour operators and airlines to cruise lines and tourist boards.

Four individual nominees also celebrate almost 30 travel agents, managers and support staff who were put forward by their colleagues for their outstanding efforts during the Covid-19 pandemic.

The Agent Achievement Awards will take place at London’s Park Plaza Westminster hotel on September 16, in association with headline sponsor Virgin Atlantic.

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