Housing Development Finance Corporation (HDFC) Limited was incorporated as a state owned enterprise on 28 January 2004 by a Presidential Decree under the Companies Act, Law No: 10/96. The commercial operations commenced on March 29, 2004. HDFC was established with technical assistance from the World Bank, and initially all shares were held by the Government of Maldives (GOM). HDFC Plc. was registered as a public company on the 9th of February 2006.
The HDFC Plc. was privatized with the signing of a shareholders’ agreement for privatization between the GOM, IFC, ADB and HDFC-Investments Ltd.-India on July 23, 2008. This Public Private Partnership has a joint foreign investment in 51% shares by International Finance Corporation (IFC) of the World Bank Group, Asian Development Bank (ADB) and HDFC Investments Ltd of India. The structure of the shareholding in the privatized HDFC Plc.is as follows:
- Government of the Maldives 49%
- International Finance Corporation 18%
- Asian Development Bank 18%
- HDFC Investments Ltd. (India) 15%
The July 2008 initiative to restructure the capital and recommence the business of HDFC Plc. became effective on February 10, 2009 with the first equity disbursement by the International Shareholders. IFC and ADB’s commitment extended to a multilateral funding facility with seven-year tenure. HDFC Ltd of India, with over thirty years of experience in mortgage finance, is the technical partner of HDFC Plc. With assistance from IFC’s Advisory Service Performance Based Grant (ASPBG).
Having restructured its capital, and with new lines of long-term credit, Housing Development Finance Corporation Plc., Maldives (HDFC) re-entered the market for mortgage loans for housing needs of individuals and families. HDFC is unique as the only specialized housing finance institution in the Maldives. With six commercial banks operating in the mortgage housing loan market, HDFC’s competitive long repayment terms and income-pooled home loans enabled the achievement of a 30% market share by the end of 2010 when the industry loan portfolio stood at Rf. 1 billion. The demand for home loans continue at a rate of growth that outstrips the supply of matching funds, and long-term bonds denominated in MVR is seen as the way forward to create sustainable housing finance in the Maldives.
The GOM’s policy of improving the infrastructure in focus islands to facilitate economic development through zonal investment opportunities for Public, Private, Partnership (PPP) ventures is viewed as a positive factor in going forward with the development of housing finance. Such an approach would assist sustainable growth in home ownership based on mortgage security over properties that will appreciate in value to satisfy the fair value criterion in debt provisioning and managing credit risk. This is very important as a market characteristic, especially in the light of the financial crisis faced by developed economies of the world.