Hiyaa flat rent cut won’t affect company's stability, Urbanco says

The second phase of Hulhumale was reclaimed and the project to build high towers on the site was initiated to solve the housing problem. Maldives took a loan of USD 434 million (MVR 6.6 billion) from China's Exim Bank to carry out the project in the name of Housing Development Corporation (HDC), or, as of now Urbanco, the land owner of Hulhumale.

The construction of the flats began during former President Abdulla Yameen's administration, but people who won the flats were allowed to live there during the next government. Former President Ibrahim Mohamed Solih's administration had fixed the rent for the flats at MVR 8,500 along with maintenance fee. One of the main complaints of the public was that when the finishing work was not completed and the space was given at a hefty price, they had to shell out a huge amount to live there.

The government said the project was planned to be handed over without finishing.

In May this year, Urbanco offered a rent concession following public complaints. They include:

At the time, the company’s managing director, Ahmed Athif, said the rent concession was based on an average of MVR 130,000 for the finishing work of the Hiyaa, after considering the costs. The decision was taken to facilitate the repayment of loans taken by the public for the finishing work, he had said.

Athif said that when the project was announced after completion, the rent was initially decided to be MVR 10,000 per month. It included the cost of construction, land value, project cost and other administrative expenses, but to relieve the flat recipients, only the construction cost was included and a small rent was fixed, he said.

The rent was subsidised by MVR 555,000 per apartment, he said. The entire project had already been subsidised at MVR 3.7 billion.

President Mohamed Muizzu was the housing minister when the Hiyaa project was started. Since the rent of the Hiyaa was announced by the former President Solih's government, President Muizzu has been saying that the flats cost should be coerced by charging the people MVR 5,600 per month as rent. 

He repeated that during his campaign for power. The cost of finishing averaged MVR 200,000. He promised everyone who received the flat will be given a discount on the price of the flat as compensation.

Urbanco's new Managing Director Ibrahim Fazul Rasheed said on Tuesday that the decision would not affect the company. The company in itself sometimes does not work for profit, but for the benefit of the people, he said.

"Hopefully the company will not be affected. That is to say, we will work with the government to determine a relief for the people," Fazul said.

He said Urbanco had taken a commercial loan for a project and even if it decided to give a discount to the consumer or the flat recipient, the company would not be affected.

"The president does not want to push people between the state and us [Urbanco]. We will continue to improve the communication between the government and the company, address all concerns. So, the company will not be affected by it," he said.

The purpose of President Muizzu's 'Pro Maldives' policy is to solve the problems faced by the people, he said.

"This is a work done for the people. We have no intention of passing this burden on to the people," he said.

The Privatisation and Corporatisation Board (PCB), which oversees state-owned companies, has released its 2021 financial statements, which show that the Hiyaa project cost the company MVR 175 million that year.

As President Muizzu said when he was the Mayor of the city and promised during the presidential election campaign, the rent of the Hiyaa flats will be MVR 5,600 or MVR 6,600 with maintenance. However, Urbanco will lose MVR 1.1 million from each flat, according to a report released after an audit conducted by the Audit Office.

According to the report, the Hiyaa flat project will not suffer losses if the rent is increased to MVR 11,000. If the properties are given at a lower price, the state will have to subsidise Urbanco, the report said.

The proposed state budget for next year also provides MVR 177 million to Urbanco to compensate Urbanco for the financial loss caused by the seven-year reduction in rent of the Hiyaa flats and delayed payments.

Urbanco did not respond directly to questions about the financial impact of the discount. The company's Managing Director Fazul said on Tuesday that the burden would not be placed on the people.

According to the company's financial statements for 2022, the company has borrowed MVR 10.7 billion from the government and other financial institutions.

Fazul said on Tuesday that there are other ways to compensate the company. Urbanco owns a large amount of land and the value of land is not decreasing, he said.

"Our capacity will increase. You know, the value of land increases day by day. It is not a depreciating value. So the value of land will increase day by day," Fazul said.

He said he would work with the government to increase the land and if so, the amount of land in the name of the company would increase.

"So with that land, we can improve our books [financial accounts]. That means we can go to financial institutions to maintain this sustainability and get investment," Fazul said, noting that the company is stable.

Despite Fazul's comments on the price of the land, it was clear that the price offered by Urbanco for the 55 plots announced recently for sale from the beach side of Hulhumale Phase II has come down drastically and the value of the land in other parts of the second phase has come down as well. In the deal, which took place in October last year, the maximum price was MVR 6,060 per sq ft. This is much lower than the price offered for the plots announced for sale on the beach side earlier this year.