Over 2,300 Hiyaa flat owners default on rent, World Bank report says
According to the World Bank, the weaknesses in the Hiyaa project design and implementation have led to the project not completing to a satisfactory standard.
By
Ahmed Naaif
Monthly rental payments for 2,345 flats from the Hiyaa social housing units developed in Hulhumale Phase II during former President Abdulla Yameen Abdul Gayoom's administrationIt are not being paid by the tenants with the financial burden passed onto the state-owned Housing Development Corporation (HDC), a World Bank report has said.
Information included in the Maldives Development Update report released by the World Bank on October 6 shows:
-
Out of the 6,720 Hiyaa flats developed, 6,338 flats have been inhabited so far
-
Rental payments are not being paid for 2,345 flats or 37% of the inhabited units
-
While 2,469 flats leased in the first phase are inhabited, rental payments are not paid for 816 flats or 33% of the first phase flats
-
Even if those who do not pay the rent are given the opportunity to pay the rent, it has not made much progress
-
Even though HDC has the option to seize flats from defaulters, it is not exercised
-
People do not consider paying rent important because non-payment of rent does not affect their credit score
-
HDC's financial position has been adversely affected due to the large portion of defaulters from social housing schemes
"HDC has faced cash flow shortfalls that endanger the long-term financial sustainability of the Hulhumale Phase 2 project. In 2019, HDC took four loans totalling $40 million to refinance the Hiyaa project’s interest and principal repayment obligations. The pandemic has added to HDC’s financial hardship, and its cash ratio has been severely constrained due to the shortfall in revenues," the report read.
"The company is also at risk due to the long delays in project lease up, as HDC absorbs all risks once units are built (developers are paid upon project completion and pre-lease up)."
According to the World Bank, the weaknesses in the Hiyaa project design and implementation have led to the project not completing to a satisfactory standard and further costs being incurred for the government and the people. The design weaknesses identified by the World Bank include
-
the 25-story high-rises are an unusual building typology in Maldives, where households typically live in low-rises or single-family homes
-
each of the 16 housing towers has four small elevators within narrow lobby areas to serve more than 400 units, leading to congestion during peak hours and requiring HDC to incur additional costs to extend the lift lobby areas in several towers
-
units have been left unfinished, with beneficiaries expected to complete the remaining work at their own cost; BML provided home improvement loans up to MVR 150,000 ($9,740) to enable households to finish and furnish their new flats, but it is unlikely that all beneficiaries will be able to afford the additional expense.
According to the report, the total cost of the Hiyaa Project was MVR 10.5 billion.
World Bank estimates that the:
-
government provides a subsidy of approximately $31,800 for each Hiyaa unit
-
given the low monthly Rent-to-Own payments of MVR 7,500 ($487), the per unit economic cost of the Hiyaa is MVR 489,000 ($31,800), accounting for 39% of the total combined cost of construction, infrastructure, and refinancing
-
if land were to be included in the total cost, the subsidy would be 69% of the unit cost.
