Banks to invest $2.4B in Govt housing plan

A consortium of local banks would be putting up over $2.4 billion over the next two years to provide funds for the construction and purchase of homes built under Government’s housing programme. Announcing this “major revolution” in the funding arrangement for the national housing programme was Housing Minister Dr Keith Rowley at a post-Cabinet news conference at Whitehall yesterday. Rowley said the consortium, which is led by Republic Finance and Merchant Bank Ltd, (but includes RBTT, Scotiabank and First Citizen’s Bank,) has structured a proposal to support the three main planks of the housing programme:

a) Construction funding for contractors under the joint venture programme of the NHA.
b) Mortgage financing for purchases of houses produced under the joint venture programme.
c) Provision of mortgages for houses under the $150,000 mark under the IDB subsidised loan programme.

He said the consortium would put up $1.2 billion for funding contractors involved in building Government houses over the next two years. This would be done through a resolving facility of up to $500 million in 2004 and $700 million in 2005, with the opportunity to resolve the facility for a third year on the advice of the NHA. Rowley said the banks would also make available $1.2 billion in take-out mortgage financing which would be required for the first two years for the joint venture programme. In each of the two years — 2004 and 2005 — $850 million would be provided for successful applicants seeking to buy homes. $500 would come from TTMF while $350 million would be put up by the consortium. He added that there was a commitment to extend this facility to 2006 if the NHA makes such a request.

The consortium has also agreed to make available supplementary financing to complete the purchase of homes by beneficiaries provided with subsidies under the IDB-assisted programme, Rowley stated. He said pooling of the funds among the consortium would allow for the spreading of risks among the financial institutions. He said under the programme, NHA would select both the contractors for each housing project as well as screen the mortgage applicants for pre-qualification, forwarding both lists to the consortium. He said approved contractors, in addition to the funding from the banks, would also procure an  advanced payment, equal to ten percent of the contract price to cover the mobilisation effort. This advance would be provided by the Government through the NHA. He added that Cabinet had agreed to provide funding of $50 million in the first year and $70 million in the second year to cover this 10 percent mobilisation outflow.

Consortium funds would be pooled and payment administered from a central held location managed by Fincor, which would act as the agent bank for the facility, Rowley said. He added that construction oversight and construction administration would be done by NHA for all the projects. He said consortium representatives would be allowed to visit the site for the purpose of monitoring and reporting to their stakeholders.

He said applicants would qualify for a special mortgage rates. Rowley stated that the programme which was “moving full speed ahead” was a very important development in terms of public policy. Rowley said Government was aiming to construct 5,000 units this year, though it was having some difficulty with the “pace of the approvals.” He said next year it was hoping to build 6,000 and planned to keep increasing the numbers until it reaches an average of 10,000 a year. “Remember, we started from scratch,” he said, pointing out that up to last year contractors were having difficulty getting support from the local banking sector.