After nearly two years in power, the social housing policy which the government is adopting requires some serious thought. The proposed merger of the MHC and NHDC, the 50 m2 NHDC houses and the squatting issue, amongst others necessitate some discussions.
One of the measures announced in the 2016-2017 Budget is the merger of the MHC and the NHDC. While the prime role of the NHDC is the construction and sale of houses to the lower strata of the population, the MHC is essentially a mortgage financing institution for the low to higher-medium income group of the population. The MHC is Non-Bank Financing Institution (NB- FI) regulated by the Bank of Mauritius. Amongst others, it grants loans, accepts depo- sits, offers life and housing insurance policies. The MHC is one of the rare government-owned profitable companies which regularly pays dividends to its shareholders
MHC has since its creation played an important socio-economic role in ensuring that the low to medium class people are offered the possibility of having alternate products than those offered by private banks. Reduced pricing policies (interest rates), longer tenure of loans, reduced legal fees and lower fees for house plans are some of the advantages clients benefit from the MHC. And believe it or not, this competition has made a lot of difference on the market. If the objective of the proposed merger is cross subsidisation, there are better avenues which can be explored. It is said that “when you tie the leg of high-flying bird to that of an average-flying one, both will fall down.”
Merging the MHC with the NHDC is clearly a wrong policy decision. On the contrary, government should encourage MHC to develop further the financial services sector by securitising its loan portfolio, selling it to Banks, Investment companies, Pension funds and thus create an active secondary market for these securities.
Another budgetary measure is the replacement of the 39 m2 units by 50 m2 ones. While the intention of government to offer a more decent house to the population is laudable, a few elements have to be taken into consideration. The main one is the issue of affordability. The actual cost of a 39 m2 unit is around Rs1.2 M. This includes land, onsite and offsite infrastructure and construction. By market standards, the minimum cost of the 50 m2 unit will be not less than Rs1.5 M.
According to latest reports, a backlog of over 20,000 clients who have already registered with the NHDC for years now and who have been saving their money in the Plan Epargne Logement (PEL) are waiting for a 39 m2 house. The 39 m2 NHDC unit is sold at a subsidised price of around Rs 500,000. A considerable chunk of its beneficiaries have difficulties in servicing their mortgages and fall in arrears. It is common knowledge that the finance of the NHDC is not brilliant. (There are no financial statements on its web site).
The question is: What will happen to those unfortunate households drawing up to Rs 10,000 per month, if they are allocated a house of 50 m2? It is clear that the already difficult situation will worsen. They’ll get chocked in no time, fall in arrears and the houses will be foreclosed and sold at the bar. Despite its good intention, government will do a disservice to them.
Obviously, anybody would wish to possess a 200 m2 individual house. But it is all a question of affordability. We should not forget that the philosophy behind the progressive type of house is to give the family a mini- mum and empower them to build further and improve the house as and when their situation improves.
The Minister of Housing and Lands (not the NHDC) has in a recent statement announced that once constructed, 759 housing units measuring 39 m2 each will be allocated to squatters of Vallée-Pitot and Black River, another decision which requires some reflection. The fact that the squatters need due consideration is not disputed.
It is to be reminded that with the launch of the PEL in the early 90s, the idea was to encourage potential housing beneficiaries to start saving some money so that when they later avail of a loan to acquire a house, they can service that loan. Moreover, strict conditions such as salary ceiling, etc. have to be adhered to.
As indicated earlier, there are over 20,000 clients who have already registered with the NHDC for years now, saving their money in the PEL and waiting for a 39 m2 house.
Questions: 1) What about the bona fide persons (20,000) who have registered since years and been saving their money in the expectation of having a house and repay their loans as good citizens? Are they being treated fairly? 2) What if one of them decides to challenge the decision of the Ministry of Housing and have recourse to the Equal Opportunities Commission? 3) Are we not encouraging squatting? 4) Will the NHDC, which is already in dire financial situation, not sink further? 5) As the ultimate sole shareholder of the company, government will have to dish out further and finally is it not the tax payers who’ll have to bear the brunt?