CDB provides $159 million loan for Phase 3 of 1530 Housing Units Project (Linked to Record ID#53832)

Project narrative

On July 17, 2017, China Development Bank (CDB) signed a $159,000,000 term facility (loan) agreement with the Housing Development Corporation (HDC) — a state-owned enterprise in the Maldives — for Phase 3 of the 1530 Housing Units Project. The loan carries the following borrowing terms: a 14-year maturity, a 2-year grace period, and an annual interest rate of 6-month LIBOR plus a 3% margin. It is backed by a sovereign guarantee from the Ministry of Finance and Treasury of the Government of Maldives. The borrower was expected to use the proceeds of the loan to finance 84.8% of the cost of a $187.5 million commercial (EPC) contract between China Machinery Engineering Corporation (CMEC) and the Maldivian Ministry of Housing and Infrastructure, which was signed on November 9, 2015. HDC contracted a $14.25 million loan from Sri Lankan commercial bank Seylan Bank PLC to finance the other 15.2% of the commercial contract cost. The first CDB loan disbursement took place on March 1, 2018, and the CDB loan had achieved a 26.4% disbursement rate ($42 million out of $159 million) as of December 31, 2018. The lender made additional loan disbursements to HDC worth $19,791,185 during calendar year 2020, $45,577,809 during calendar year 2021, and $33,172,678 during calendar year 2022. As of December 31, 2021, the loan had achieved a 67.5% disbursement rate ($107,368,994 out of $159,000,000). The borrower (HDC) made loan (principal) repayments to CDB worth $18,600,000 during calendar year 2020, $9,670,000 during calendar year 2021, $12,673,000 during calendar year 2022, and $13,219,000 during calendar year 2023. The loan’s amount outstanding was $42,000,000 as of December 31, 2018, $60,458,328 as of December 31, 2019, $61,649,513 as of December 31, 2020, $97,557,322 as of December 31, 2021, $118,057,000 as of December 31, 2022, and $104,838,000 as of December 31, 2023. The purpose of Phase 3 (also known as the Vinares housing project) was to build somewhere between 1,344 and 1,530 housing units (apartments) across 10 towers in Hulhumalé. The Vinares apartments (‘flats’) were developed in four concepts; 172 marina view flats, 372 outer view flats, 352 inner view flats, and 448 standard view flats. The marina view apartments have a view of the yacht marina and cruise terminal, while inner view apartments have a view of the main roads. The outside view is of the city, and standard apartments are in the middle of the towers. Each tower consists of a parking space, security, CCTV, fire and safety, a garbage shoot, and four elevators. The ground and first floor of each tower are allocated for commercial uses. One convenience store, five meat/fish shops, one retail shop, on tailor shop, two pharmacies, and a clinic were to be opened in the towers. The project, in conjunction with an ICBC-funded project (captured via Record ID#53832), sought to increase public housing by 8,500 units on Hulhumalé, the second largest island of the Maldives, and improve the crowded living conditions in the country. China Machinery Engineering Corporation (CMEC) is the contractor responsible for Phase 3 implementation. CMEC began work on the project on November 18, 2017, after a groundbreaking ceremony attended by Maldives President Abdulla Yameen. The project was originally expected to last for approximately 24 months upon the commencement of the construction (November 18, 2019). However, the first building was not completed until June 18, 2020. Then, on July 20, 2022, CMEC officially handed over two additional towers to HDC, which marked the official completion and handover date of the project. HDC then opened applications for the Vinares apartments from July 18, 2022 until September 15, 2022. HDC revealed that 1,413 applications were received for the sale of apartments by September 15, 2022. Eligible tenants will be selected by the Ministry of National Planning, Housing and Infrastructure. HDC noted the score list will be arranged after surveying the living conditions of the applicants. HDC will then conduct the unit selection on a list order basis before handing over the apartments to tenants who are financially eligible and those applicants who do not meet the requirements will be cancelled and opened for the waitlist. As of September 2022, the project as a whole was expected to reach completion by the end of the first quarter of 2023 (at which point the apartments will be handed over to the eligible tenants). There are some indications that the CDB loan for Phase 3 of the 1530 Housing Units Project has underperformed financially and that the borrower (HDC) had difficulty meeting its repayment obligations to the lender. On September 18, 2019, HDC entered into a short-term loan agreement with the Maldives Ministry of Finance and Treasury amounting to MVR 27,979,480 for the purpose of refinancing the interest payment obligation falling due in the month of September 2019 under the CDB loan agreement for Phase 3 of the 1530 Housing Units Project. The disbursement of the loan was made on September 18, 2019. The loan was obtained for a duration of 12 months, and it was repayable in monthly installments from the date of disbursement; interest was charged and payable on a monthly basis at a rate of 10% per annum. Additionally, borrower repayments to CDB declined from $18,600,000 during calendar year 2020 to $9,670,000 during calendar year 2021.