Finding home, far from home

Greater Malé encompasses in its hold a diverse multi-island society. Citizens from every and any corner of the country now call Malé, home. A vast majority of this demographic span their migration back over multiple generations. Assimilated and seasoned as Malé citizens, many in this category are looking to put their roots down in the place they now call home, Malé, seeking graduation from permanent tenants to independent home owners. 

The families on the hunt for their own homes have a variety of housing finance options to make the decision. A few of the banks that offer loans solely for the purpose of housing ownership are the Bank of Maldives, Housing Development Finance Corporation, Maldives Islamic Bank and Commercial Bank of Maldives.

Housing finance is any instrument offered to a borrower with the specific intention of lent funds being used to obtain a means of housing. Whether it be the construction, development or purchase of such. The article discusses the options available for housing finance in the Maldives. 

Bank of Maldives, setting the bar for housing finance options, offers both conventional and Islamic financing options. The BML website also has a loan calculator to help potential borrowers see their prospects.

Bank of Maldives has two types of housing finance loans, one of which can be utilized to purchase housing - home loans. It offers facilities up to MVR20 million with a repayment period of up to 20 years and a grace period of 24 months. The loan is attached with an annual interest rate of 10% and an equity of 20%. In addition, this loan’s equity can be arranged with the borrower's pension funds. In order to be an eligible applicant, this loan requires the borrower to be between the ages of 18 to 60 at the end of loan maturity, an earner of sufficient income to cover the monthly repayments, and been a BML customer with an account at the bank operational for at least 12 months. At a minimum, one month's income must be routed to the borrowers BML account.

Under the Islamic finance option of BML, it offers a Home Financing facility to purchase housing. It offers facilities of between MVR50,000 and MVR15 million, with a repayment period of up to 20 years and a grace period of 18 months. The loan is attached with a yearly lease rate of 10% and an equity contribution of 20%. In addition, equity can be arranged through the borrower's pension fund. The eligibility criteria is similar to the conventional facility discussed above. 

HDFC offers four types of loans that can be used for finance housing, with one option specific for youth intending to purchase housing in the youth city, Hulhumalé. Youth loans offer up to MVR1 million with a repayment period of 20 years. The loan is attached with a yearly interest rate 10.50% and an equity of 20%.  Loan equity can also be arranged through the borrower's pension fund. Eligibility depends on the borrower’s income and repayment capacity. The age, financial position, credit history, credit score, and other financial liabilities are factors that are considered as well.

MIB's offer of housing finance has the bank financing up to 80% of the total cost, with the remaining 20% to be matched by the customer, which can be contributed with cash, from pension funds or a combination of both. Pension funds can only be tapped into as security if the project is publicly announced and for the financing duration. If the 20% equity contribution can be fully covered by pension funds, it requires 1% to be financed in cash while 19% is pooled from pension funds. The financing duration is 20 years, with a grace period of one year. The loan is attached with a yearly profit rate of 10.5% and an arrangement fee of 0.5% of the loan amount. Only immediate family members of the main applicant can be added as co-applicants.

This option is offered for both first-time home owners as well as second-time owners, with the profit rates of 11% and 12%, respectively. A processing fee of 0.5% of the facility amount is charged upon approval. Takaful (insurance) contributions must be paid in full for the entire financing tenure before disbursement of the facility. The customer is also required to submit an undertaking confirming that all their income will be routed to their account at the bank, after the approval of the facility.

In order to be an eligible applicant, this loan requires the borrower to be between 18 to 60 years, a permanent employee for the previous 36 months at a minimum, with a gross income greater than 50% of the facility. 

CMB’s Home Improvement Loan offers up to MVR500,000 with a repayment period of 10 years and a grace period of one year. The loan is attached with a yearly interest rate 10.5% and an arrangement fee of 0.5% of the loan amount. In addition, this loan’s equity can be arranged with the borrowers pension fund. The CMB website also has a loan calculator to help potential borrowers see their prospects.

There is a dire need for secure housing in Male, with up to 60% of Malé residents living in rentals. Among this group are individuals actively seeking to be homeowners. Growing families and dual incomes are some of the push factors encouraging residents to seek a more permanent form of housing rather than spend the rest of their lives as permanent tenants. However, the wants turning to needs, in economic terms, is not reflected in the supply of housing on the market. People are seeking lower tier starter homes while the market continues to churn out housing that is far out of the reach of those most in need.

In light of the number of applications made for social housing, it can be safely assumed that over 25,000  families are seeking a permanent residence. A number of these applicants are unable to spend more than MVR 5,600 per month for monthly facility repayments while balancing other costs of living, at the current monthly income of the average income earner at MVR 14,150 (HIES survey, 2019).  

These circumstances have left those seeking sustainable and affordable shelter, in the one main hub offering opportunities, to balance it all on incomes barely supporting a quality life.