WINDHOEK – The government pension fund has rolled out a housing scheme with home loans double than what civil servants receive from commercial banks.
The scheme enables Government Institutions Pension Fund (GIPF) members to obtain a home loan by using the funded property to guarantee the loan while the member’s pension credit balance remains untouched.
Government employees, who are members of GIPF, and earning N$5 000 per month currently qualify for about N$230 000 at commercial banks. However, with the launch of the GIPF’s housing scheme the same individual can now qualify for over N$430 000.
The scheme was created to close the funding gap in the local housing market. The GIPF’s market value at March 31, 2014 stood at N$75 billion.
“Today we are celebrating the achievement of another milestone within the space of service delivery to our members. It has taken us too long to arrive at this stage but it is essential to say that it was worthwhile to sort out an avalanche of barriers in the first place to ensure smooth sailing of this major project,” remarked the GIPF’s Chief Executive Officer, David Nuyoma, at the launch of the scheme in Windhoek yesterday.
The fund’s board chairperson, Ellaine Samson, announced that First Capital Housing Fund (FCHF) would administer the scheme on behalf of GIPF.
Samson also explained that the GIPF’s intervention in mitigating the dire housing situation in the country constitutes two approaches –the housing scheme launched yesterday and pension backed housing loans, which will be launched in the near future.
Whereas housing loan repayments at commercial banks are not allowed to exceed 30 percent of an individual’s monthly income, Martin Mwinga, who heads FCHF, said they will consider going as high as 50 percent of monthly income.
Also, according to the GIPF’s spokesman, Elvis Nashilongo, the fund will also consider financing alternative building methods “provided the construction method is approved and the house is being built in proclaimed areas”.
However, the Pension Fund Act in its current form only makes provision for home loans for houses situated in urban areas and does not cover houses situated in rural or unproclaimed areas.
“In light of this limitation we shall only concentrate on proclaimed areas for now,” said Nuyoma. In this regard, Samson noted: “The pension backed housing loans await the amendment of the Pension Fund Act and Rule Amendments, currently in the process, which will pave the way for members residing in rural areas to participate.”
FCHF, which was established in 2011 with an initial investment from the GIPF, is managed by First Capital Treasury Solutions (Pty) Ltd, a local fund manager supervised by the Namibia Financial Institutions Supervisory Authority (Namfisa).
Applicants cannot borrow more than 90 percent of the market value of a property, with a minimum loan amount of N$5 000. The loan will only be granted for housing related costs and cannot be diverted for other purposes. The loan repayment period is determined by the time the loan contract was signed but the loan must be repaid before date of retirement. The interest rate on the housing loans has been set at the repo rate (5.5 percent) plus 4 percent, which means qualifying GIPF members will repay the loan at 9.5 per cent, which is below current home loan rates.
“It is important to stress that this scheme is a revolving fund and we expect that this portfolio will grow with the inflow of repayments from the participants. The size and impact of this portfolio in the housing market should therefore be construed in line with this analogy. We see this intervention as a responsible investment opportunity in the future of our members,” added Nuyoma.
By Edgar Brandt
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