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HAJ seeks NHT reconciliation

Published:Wednesday | October 15, 2014 | 12:00 AM
The Housing Agency of Jamaica. Norman Grindley/Chief Photographer

Avia Collinder, Business Reporter

The Housing Agency of Jamaica (HAJ), whose mandate is to providing low-income housing but has been doing so at a loss, is now seeking a write-off on loans from Government of about $700 million and hopes to re-engineer its relationship with long-time backer National Housing Trust (NHT).

In responses submitted through the office of Minister of State in the Ministry of Housing and Transport, Dr Morais Guy, the agency said that its principal strategies to increase income going forward include completion of Greenfield projects that are under construction and bringing 1,000-plus housing solutions to market during 2014-15.

It also aims to increase its titling programme to yield approximately 3,000 titles.

But, with its main financing partner, NHT, owed close to $3 billion in unpaid loans, and HAJ uncertain about future financing, the agency is weighing whether to approach the traditional banking sector for financing, a move they believe will result in higher unit prices.

HAJ's total indebtedness at August 2014 was J$3.6 billion. It owes the National Housing Trust $2.816 billion and National Commercial Bank Jamaica $129.8 million. Other liabilities amount to $622 million.

Very favourable terms

Traditionally, HAJ secures 100 per cent of its interim/construction financing from the NHT on terms that may be more favourable than the banking system.

But: "Going forward, in the event the NHT is unable to provide interim/construction financing, the agency will be forced to either secure funding from the banking system and pass on the additional costs to consumers like other developers do," HAJ told Wednesday Business.

"Or, the agency will seek to find development partners in the private sector who will provide project financing," it added.

The NHT, for its part, said that no funding will be forthcoming for HAJ during the current year, ending March 2015, because the agency has not made a proposal for interim financing.

Stating that loans to developers remain available at three per cent, five per cent and nine per cent, NHT said it budgets funds for interim financing based on proposals received from developers.

HAJ said in its last annual report for 2013/14 that it was relying on $385.8 million in interim/construction financing from the NHT during FY 2014/15 at interest rates of about four to five per cent.

The Housing Agency has several projects in the works. Earlier this year, Cabinet approved construction of 173 studio units at Whitehall Phase 3 in Westmoreland at a cost of $390 million, alongside construction of 604 one-bedroom units and 980 studio units, with associated infrastructure, on approximately 119.4 hectares (295 acres) at Bernard Lodge, St Catherine.

The Bernard Lodge project, which is said to be the largest to be undertaken by HAJ, will be financed and constructed by foreign investor Malphrus International. The capital outlay will be approximately $5.6 billion to be expended over three years.


Bernard Lodge is structured as a public-private partnership agreement between the Ministry of Housing, Housing Agency of Jamaica and Malphrus International IBC, HAJ told Wednesday Business.

"The agreement requires Malphrus to construct the development in accordance with designs and specifications that satisfy the relevant regulatory agencies," the agency said.

The Ministry and HAJ will provide the land and the designs, do the marketing, and be responsible for legal services.

"Funding of the project was to be done through a combination of deposits from sales and financing of the 'shortfall' - defined as the difference between the amounts from deposits and the cost of construction - up to US$10 million by Malphrus," HAJ said.

Ground was broken for Bernard Lodge in 2013 but construction was halted in last December after two model units - a studio and a two-bedroom - were built.

Earlier this year, as well, Cabinet also approved requests by the HAJ to enter into public-private partnership agreements for the delivery of 778 housing solutions in Grange Pen, St James; and 176 solutions in Hopewell, Hanover - both of which will be developed mainly for tourism-sector workers.

Another agreement was made for the development of approximately 200 starter/studio units in Colbeck, St Catherine, again targeted at public-service workers and professionals in the Spanish Town to Old Harbour areas.

Earlier in 2014, the Ministry of Housing also announced "advanced" construction works for Belle Air 3 in St Ann and said a contract for similar works at Luana Gardens in St Elizabeth would be signed later this fiscal year.

The last two projects will conclude the Jamaica Economical Housing Programme financed by the Chinese EX-IM Bank.

HAJ did not specify which projects will be brought to completion in 2014/15.

Its principal debt reduction strategies, the agency now says, will focus on closing Greenfield projects, paying down construction loans with NHT, seeking government write-offs of $527 million of loans for social housing and another $174 million of loans for previously completed projects for which there is no revenue.

The company has 11 NHT loans on its books, varying in rates from three to nine per cent. It is hoping to woo its lending partner back into its arms by paying down debt owed.

HAJ has a mortgage portfolio consisting of approximately 7,500 accounts with a principal balance of $1.44 billion. Of this amount, the Greater Portmore mortgages, comprising 3,866 accounts, perform relatively well with less than five per cent arrears.

All other accounts - 3,634 or approximately 50 per cent of the entire portfolio - are non-performing. The approximate value of the arrears is $690 million, including principal debt of $281 million or 19.5 per cent of the portfolio.

The agency said it made a loss of $609 million in its last fiscal year.