Business

“Gedhoruveriyaa Loan” – a debt trap?

Published

3 years ago

15/06/2021

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.

Business

Economy thrives, projects speed ahead despite challenges

Published

2 days ago

18/04/2024

Before President Dr. Mohamed Muizzu assumed office, the economic condition of the Maldives was significantly deteriorating. Experts attribute the primary reason for the depreciation of the Maldivian currency to the excessive printing of money by the previous administration.

According to statistics from the Maldives Monetary Authority (MMA), more than USD 518.04 million was printed over the last three consecutive years, marking a historic high compared to USD 388.53 million printed over 40 years.

Additionally, upon assuming office, President Muizzu inherited a heavy debt burden. The total debt amounted to over USD 7.71 billion, with a significant portion owed to companies for upcoming parliamentary elections and previously initiated projects, totaling USD 584.88 million.

Despite these challenges, President Muizzu has been proactive in rejuvenating the Maldives’ economic status. Within three months of his tenure, USD 35 million has been deposited into the sovereign development fund. The President estimates that more than USD 100 million will be deposited into the fund by the end of the year.

discontinuation of printing money has been regarded as a pivotal step towards economic progression for the Maldives

President Muizzu’s commitment to revitalizing the Maldivian economy without resorting to the printing of money is indeed a significant pledge. By discontinuing the practice of printing money, the government aims to address economic challenges while ensuring fiscal responsibility and long-term sustainability.

The decision to immediately halt the printing of money upon assuming office underscores President Muizzu’s determination to prioritize sound monetary policy. This move reflects an acknowledgment of the risks associated with excessive money printing, including inflation and currency devaluation, and signals a commitment to addressing these challenges through prudent financial management.

Furthermore, President Muizzu’s plans to boost the country’s prosperity and income by reducing reliance on loans and settling debts owed to both foreign and domestic entities demonstrate a holistic approach to economic revitalization.

attracting a vast pool of investors

The efforts of the present administration to attract a wide range of investors reflect a strategic approach to addressing the significant development needs of the Maldives. By engaging in investment forums both domestically and abroad, the government has been successful in showcasing the diverse investment opportunities available in the country.

The decision to host investment forums in countries like China and the UAE demonstrates a proactive approach to international investment promotion. These forums serve as platforms for highlighting the potential for investment in key sectors such as infrastructure, tourism, and hospitality. By creating awareness about these opportunities, the government aims to attract investors who are interested in contributing to the development of critical projects, including the establishment of bridges, domestic airports, and resorts.

Over 500 projects underway

The continuation of 527 projects, including those that faced interruptions due to non-payment to companies during the government transition, underscores the commitment of President Muizzu’s administration to ensure continuity and progress in ongoing initiatives. Despite the challenges encountered, efforts have been made to address issues such as delayed payments and optimize project expenses to keep important projects on track.

It’s notable that the current year’s budget, initially approved by the prior administration, may not have fully aligned with President Muizzu’s priorities and rules for project implementation. This misalignment may have resulted in some projects not receiving adequate budget allocations or not being included in the budget at all. However, the administration has taken steps to optimize expenses and prioritize projects that align with President Muizzu’s vision for development

Initiatives to enhance economic growth and foster sustainable growth

The International Monetary Fund (IMF) has recognized President Muizzu’s initiatives as some of the strongest implementations seen among world leaders, emphasizing their potential for substantial progression. The IMF applauded the government’s decision not to overdraw the government’s account and expressed its readiness to provide any assistance needed. This endorsement from the IMF underscores the effectiveness of President Muizzu’s economic policies and strategies.

Additionally, the Maldives National Chamber of Commerce and Industries has voiced support for the government’s initiatives, recognizing them as favorable for the Maldivian future as a growing economy. Despite challenges such as a shortage of dollars for small businesses, the Chamber remains optimistic that the government’s decisive actions will lead to economic growth and stability in the value of the dollar.

The government has projected a 5.5 percent economic growth rate for this year, indicating confidence in the trajectory of the economy under President Muizzu’s leadership. Furthermore, President Muizzu revealed a significant reduction in the country’s primary debt balance, from USD 103.61 billion last year to USD 8.68 million in the current year. This reduction in debt, achieved within just four months, demonstrates the government’s commitment to fiscal responsibility and its ability to effectively manage the country’s finances.

Overall, these developments indicate that the government’s economic rejuvenation efforts have been successful, earning the confidence of global financial institutions in the Maldives’ future economic prospects.

Source(s): PsmNews

Business

Council to issue 14 plots in Hanimaadhoo for tourism development

Published

5 days ago

15/04/2024

Haa Dhaalu atoll Hanimaadhoo island council has announced a 50-year lease on 14 plots from the island for tourism development purposes.

In the announcement put on gazette by the council, it has opened bid opportunity for interested bidders to lease the plots from Hanimaadhoo’s tourism zone.

The council has announced lease of 5,000 square feet plots for a 50-year lease period, for which interested proponents are required to register for the bids before 13:00hrs on April 30th, 2024.

For proponents wishing to mail the bid registration form, they can mail it to info@hanimaadhoo.gov.mv.

Proponents must furnish a bid registration, non-refundable, fee of MVR 1,000 for the 5,000 square feet plots. If proponents wish to acquire more than one plot, then they must pay MVR 1,000 per plot.

If the council annuls the announcement, it said the registration fees will be refunded to the proponents, and added the proponents will receive bid books upon registration.

Bid acceptance and opening are scheduled for April 30th, 2024 as well.

While the Hanimaadhoo International Airport is under an expansion project, the island has been putting efforts to increase its local tourism activities as well.

During his last month visit to Hanimaadhoo, President Dr. Mohamed Muizzu said the airport’s expansion will contribute towards increased tourism activity in the island.

He also said sustainable development cannot be achieved without individual development of key regions which include Hanimaadhoo as well.

Source(s): sun.mv

Business

Maldives signs with Chinese firm for Laamu Integrated Maritime Hub Project

Published

1 week ago

12/04/2024

Agreements pertaining to the Laamu Integrated Maritime Hub Project have been signed with a Chinese company, aiming to accomplish the commitments made by President Dr. Mohamed Muizzu. The contract laying groundworks for this transformative endeavor was signed by the Chief Executive Officer (CEO) of Maldives Ports Limited (MPL) Mohamed Wajeeh and the General Manager of CAMC Engineering Li Wei Wei.

Outlined within the agreement are details of six subprojects:

Launching offshore bunkering services
Developing a cruise terminal
Establishing a super yacht marina
Developing Gaadhoo as an Eco-resort
Establishing a facility to store regionally produced food items
Building a transshipment port

Providing insight into the developmental project, CEO Wajeeh underscored MPL’s ongoing efforts to secure a relevant market. He envisioned attracting international shipping lines to the transshipment port, anticipating a significant economic boost from even a single shipping line. Discussions are also underway with cruise operators to initiate cruise terminal operations.

MPL disclosed proposals from two companies to assist in providing bunkering services. While Vitol Bunkering, currently involved in developing bunkering facilities in Haa Alif Atoll, is one of them, the second company expressing interest hails from Dubai.

The establishment of a commercial port and a harbor including logistics is a commitment outlined in the governments’ manifesto.

Source(s): PsmNews