The state-owned Construction and Housing Development Bank (CHDB) is pushing the government to provide a K30 billion loan that would allow it to build more low-cost housing. But senior officials at the lender also said they would consider an industry proposal under which the bank purchases and resells private sector-built housing through its instalment system.
CHDB director U Tin Aung Myint said the bank, which is part of the Ministry of Construction, had made the loan request several months ago and that the government had promised the funds would be made available.
“There is a promise to provide the financing but we’ve not received it yet,” he told The Myanmar Times on November 8. “It’s been three months. The government needs to make sure the money reaches the bank.”
The funds would help the bank construct more low-cost housing, which the bank sells using an instalment system, he added. Low-cost housing built by the private sector is not available for purchase on instalment.
U Min Htein, director general of the construction ministry’s Department of Urban Housing and Development (DUHD), said the K30 billion would also help the lender issue more home loans to individuals.
CHDB was set up in 2013 by the DUHD with K100 billion in capital. At a press conference in October, bank officials said that since starting operations it had lent K90 billion to around 200 construction firms and businesses, and K7 billion across 500 individual home loans. The state-owned lender has bolstered its capital over the years, but U Min Htein declined to comment on how much capital CHDB currently has.
Part of the bank’s remit is to build low-cost housing, but building enough to meet demand has proved difficult. The lender is hoping to scale up construction by raising funding from three main sources – the government, foreign lenders and savers.
“Low-cost housing could be constructed across the country if financing came from all three,” said U Tin Aung Myint.
To help encourage savers to contribute the bank has started a Housing Saving Account program, which promises customers that accumulate enough for a down payment priority when allocating low-cost housing. People purchasing DUHD-built low-cost housing have to submit a 30pc down payment, and pay the remaining 70pc over 10 years.
CHDB has also courted foreign lenders in search of low-interest loans that would allow it to reduce interest rates for customers, although so far foreign funding has not been forthcoming.
People in the construction industry argue that it would be more sensible for the government to purchase unoccupied low-cost housing constructed by private firms rather than focus on new government-funded projects.
U Kyaw Kyaw Soe, joint general secretary from the Myanmar Construction Entrepreneurs Association, said it would benefit public and private construction firms and the government if it adopted this system.
Government-built low-cost projects are typically on the outskirts of the city where transport links are poor, whereas private sector projects are closer to the centre, he said. In price terms there can be little difference: Apartments in private sector developments can be found for around K10 million, the same price as upper floor apartments in government-built housing, U Kyaw Kyaw Soe said.
The key reason that people purchase the government-built apartments is that they can be bought using an instalment system, he said. Mortgages are available from commercial banks, but onerous documentation and collateral requirements put them out of reach of the average low-cost housing customer. Without access to an instalment plan, a K10 million apartment is a challenging purchase.
U Kyaw Kyaw Soe’s answer is for CHDB to buy housing built by private firms and sell it to customers through its instalment system. The government would receive more tax revenue, and customers would gain access to better-located affordable housing.
U Tin Aung Myint said that the bank intends to adopt that system, but that it would require more funding to make it possible. “There are lots of [low-cost] apartments that private firms built and want to sell,” he said. “If we can use the instalment system that will be good for developers.”
The MCEA estimates there are 150,000 unsold apartments priced between K10 million and K20 million, which developers are struggling to sell because the average buyer lacks access to an instalment system.
In the meantime, the DUHD will sell 650 out of more than 2000 low-cost apartments in the Yuzana, Kanaung and Shwe Lin Ban developments this month, according to a department announcement in October. The price is set K12 million for ground floor apartments and just under K10 million for those on higher floors.
Source: The Myanmar Times
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