The People’s Majlis voted unanimously Tuesday to amend the Pension Act to allow members of the Maldives Retirement Pension Scheme to collateralise their savings in home ownership programmes.
According to the amendments submitted on behalf of the government by MP Ibrahim Falah, an employees’ retirement savings account can be collateralised to make down-payments for housing loans to pay for newly built or old homes. But it cannot be used to pay interest on loans or for any other purposes.
In cases of default, a members’ balance will be released to the finance provider.
A chapter was added to the 2009 law authorising the Maldives Pension Administration Office’s board to formulate regulations outlining the down-payment collaterisation procedure. The rules must be enacted within three months after the president ratifies the amendments.
The regulations must also specify criteria for measuring the ability of MRPS members to repay housing loans.
Presenting the legislation to the parliament earlier this week, Falah of the ruling Progressive Party of Maldives said the changes will allow workers who are unable to secure loans to participate in social housing programmes.
The MP for the constituency of Raa Atoll Inguraidhoo stressed that pensioners will not lose their savings as the pension fund would only be offering a guarantee to banks.
“Once the loan is repaid, the money will be returned to the [pension fund members’] account,” he said.
The Maldives Retirement Pension Scheme, the country’s first defined contributory pension scheme, was introduced in 2010. The Pension Act mandates a contribution of seven percent of the pensionable wage from both employee and employer. It also allows voluntary contributions.
Participants are required to draw down on their pension plan upon reaching pensionable age of 65 years.
At the end of 2014, some 114,606 employees were contributing to the retirement pension scheme, 85 percent of whom were below 45 years of age. The pension fund now exceeds MVR5 billion (US$324 million).
The government-sponsored amendments to the Pension Act were introduced to parliament last Monday following a public outcry after some 300 families awarded flats under an affordable housing scheme were asked to pay MVR2 million (US$129,701) in five years.
The housing ministry told successful applicants that the pricing of flats in Gaakoshi and Arabiyya “do not fit the category of social housing,” blaming the price hike on delays in construction and claiming that the Indian developer was demanding full payment before transferring the flats to the government.
Apex Realty Pvt Ltd – a joint venture between TATA Housing Development and SG 18 Realty – handed over the 198 flats in Gaakoshi and 90 flats in the old Arabiyya School plot to the housing ministry on Tuesday night.
Contracts were meanwhile signed at a ceremony Tuesday night with five foreign companies to construct 15,000 two-bedroom apartments in the capital’s suburb Hulhumalé.
Housing Minister Dr Mohamed Muiz said the flats will be completed by August 2018.
The government had invited proposals for 7,120 social housing units and 3,000 medium-end housing units in Hulhumalé in September last year. A contract was meanwhile signed with the China Machinery Engineering Corporation last November for the construction of 1,500 medium-end housing units
The government expects to provide housing for a population between 150,000 to 187,000 in the area reclaimed under phase two of Hulhumalé urban development project.
Muiz said today that the entire population of small islands will have the opportunity to move to the new flats.
Developing a ‘Youth City’ in Hulhumalé is a key campaign pledge of the current administration.
Yameen has previously said that the government hopes to increase Hulhumalé’s population to 220,000 and urged residents of islands with small populations to migrate to the new city.
According to the 2014 census, the population of the Maldives stands at 338,434 people, of which 38 percent reside in Malé and the rest are scattered across more than 180 islands.
Speaking at the ceremony, President Abdulla Yameen said the opportunity to utilise pension savings will pave the way for securing housing loans from banks and increasing home ownership.
Yameen said up to 23 percent of the Maldivian population or at least 65,000 people can take up residence at the new 15,000 flats to be built in Hulhumalé.
He also acknowledged that many residents of the capital live in small spaces in slum conditions.
The current administration’s housing policy is aimed at providing housing for youth, he said.
“I don’t intend to go into details, I don’t know how many young people are unable to get married because they don’t have a home. What I know for sure is that the number is not low. We often hear about such people facing many obstacles to start a married life,“ he said.
“People who have money, but have to live their whole life while paying rent from their income, that’s not easy. That does not bring any satisfaction. You could spend a big part of your life paying rent. But in our standards, we believe that you have to try and do something for your children too. It is not easy for a mother and a father who spent their life paying rent to make their five children live their life on rent either. So at a certain point, you have to have a home.”