Recent media reports have been published about the City of Windhoek receiving applications from individuals and closed corporations to purchase land for high density residential property development. These applications are often accompanied by Development Bank of Namibia (DBN) financing approval as supporting document(s), while the land being vied for is often not valuated. New Era Weekend’s Desie Heita talked to the Chief Executive Officer of the DBN, Martin Inkumbi, on criteria DBN uses in approving applications for the financing of residential unit development in the country.
DESIE HEITA (DH): What are DBN’s assessment criteria for the financing of high-density residential property developments in the country? What does the bank look at when considering whether or not to approve the application for financing?
MARTIN INKUMBI (MI): DBN has, as one of its key mandates, the responsibility to finance national infrastructure, including the provision of finance for land development. This is done in line with the necessary appraisal requirements of business viability. High density residential property developments, like any property development, be it industrial, commercial or residential, will be subjected to some degree of scrutiny during the appraisal process.
DH: Given the high buying and rental prices in residential areas, are there any social elements that DBN takes into consideration when funding high-density residential property developments in the country?
MI: DBN uses board-approved policy guidelines, which determine the price ranges of residential properties that would qualify as either middle or low-income residential properties. The DBN does not finance the development of residential properties that, according to its guidelines, are considered as high-income residential properties. The DBN guidelines make a distinction among tier one, tier two and tier three local authorities. Windhoek being the only local authority in tier one, Swakomund and Walvis Bay are in tier two and the rest of the towns and villages are classified as tier three. Residential property price classifications, whether low or middle-income, would vary depending on the classification of the local authority. Low-income residential property in Windhoek may well fall in the high income residential property classification in a tier three local authority. DBN will however not finance a residential property development if the selling prices of such houses results in the development being classified as high-income properties for that particular local authority. Therefore, affordability of residential properties is certainly taken into consideration by the bank, when financing residential property development.
DH: Is it possible for DBN to grant financing approval to a property developer who has not yet secured land or has not yet ascertained the actual price of land with the concerned municipality?
MI: I want to stress again that DBN does not give approval letters to would-be bidders for land. The bank cannot approve a loan before the whole development has been planned, costed by a quantity surveyor and the financial viability of the development correctly established. What those would-be developers have obtained from DBN are letters of intent. These letters simply say DBN will consider financing such residential property developments, provided the developer has secured the land and the development, once planned and costed, falls within the middle and or low-income residential classifications as per the DBN classifications. Loan approval for land development or business projects for that matter are only approved once the Bank has conducted full due diligence on the projects.
DH: Given the high properties prices, are we likely to see DBN calling for new innovative concepts on residential development for funding?
MI: As a development agent, DBN would want to see more Namibians housed in quality and affordable homes. Any innovation to achieve that end goal will be highly welcomed by the bank. DBN however only provides development loans, and not mortgage loans, and that is where the challenge could possibly lie. Mortgage financiers need to consent to the construction technology used in building the houses, else they may not be willing to provide mortgage finance to home buyers.