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Housing Development Finance Corporation Plc. - Maldives
Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number 26089
Sector1Primary Mortgage Institutions
Environmental categoryC
Date SPI disclosedMay 4, 2007
Projected board dateJune 7, 2007
Previous EventsInvested: February 9, 2009
Signed: July 23, 2008
Approved: April 29, 2008
  Overview     Sponsor/Cost/Location     Development Impact     Contacts     Attachments  

Project description
The project entails the privatization of Housing Development Finance Corporation Limited (HDFCL or the company) in the Republic of Maldives, which is currently 100% owned by the Government of Maldives (GoM). IFC intend to invest up to $1.8 million as equity of up to 15% stake, in, along with up to $10 million of long term debt to support the growth of the privatized company. After privatization, the government ownership in the company would be reduced to 40% or below. The investment would be supplemented by an IFC Advisory Services package to assist HDFCL’s smooth transition from a government owned company to a private-sector firm. Housing Development Finance company of India (HDFC) and Asian Development Bank (ADB) are also invited to participate in this privatization project. As part of the privatization program, the GoM has also planned to list the company on the Maldives stock exchange.

The Maldives, with a population of about 300,000, is an island nation consisting of 20 atolls which encompass a territory of about 1200 islands stretching over of an area of 90,000 sq km in the Indian Ocean. About 200 islands are inhabited by local communities. After the 2004 December tsunami, the population on Male, the Capital island with a land area of 1.9 sq km, has surged from below 80,000 to over 110,000, putting an immense pressure on the existing 8,000 housing units. With 58,000 inhabitants per sq km on the Island and an average of 14 inhabitants per dwelling unit, Male is undoubtedly one of the most densely populated and congested places on earth.

To ease the housing shortage and reduce the congestion in Male, the GoM has reclaimed an island, Hulhumale, about 2 km from Male, and planned to build as many as 8,000 new housing units and commercial facilities there. HDFCL, the first and only housing finance company, was established by the GoM in 2004 to provide long-term loans to residents who are eager to migrate to the new island. However, despite the demand for housing finance, the company has not been able to extend any new loans over the last year due to funding constraints. The company had run out of the initial equity funding invested by the government, and had not been able to borrow from commercial sources without the full government guarantee. The GoM, for prudent fiscal reasons, has decided not to continue the practices of providing credit guarantees to the company. After a period of hiatus, the GoM has invited IFC, ADB, and HDFC of India, to help privatize the company, and to list the company on the local stock exchange.

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