Faced with a tight credit market, the Housing Agency of Jamaica (HAJ) has turned to National Housing Trust to pony up 80 per cent of the financing for two new developments to be executed this year, under a deal that is worth about $640 million based on the estimated $800 million price tag on the projects.

The 80 per cent is the maximum NHT provides to real estate developers.

Joseph Shoucair, managing director of the HAJ, would not disclose the financing terms - both entities are state-owned - but NHT typically lends to developers at eight to 12 per cent, according to information on its website.

The monies will build 165 homes and 130 serviced lots in Portmore, St Catherine starting at the end of this summer.

"These are large investments in a tight market and how we are planning to do this is leverage our relationship with the NHT to get low-cost funding," said Shoucair.

The other 20 per cent financing will, he added, come from purchasers of the real estate, who will be required to make a downpayment of 20 per cent on their acquisitions.

"We have an understanding with the NHT, that once the project is a viable project - and all our new projects are viable projects - NHT will fund them," said Shoucair.

The NHT loan, with interest, will be repaid from the sale proceeds of the units, the HAJ boss said.

NHT, a $115 billion entity by assets, operates at three levels in the real estate market: as mortgage provider to its individual contributors, financiers of real estate developers, and as housing developer. It remains the single largest player in the housing construction and mortgage markets, but has in the past few years forged strategic alliances with private mortgage lenders and developers to build out those two sides of its operation.

Big lossmaker

This year, the company, whose profits were last estimated at $1.2 billion, has nearly doubled its project financing budget from $1.8 billion to $3.3 billion, according to figures published by the finance ministry.

The $7 billion HAJ is, by contrast, a big lossmaker with a $2.4 billion deficit that hopes to turn the corner on profitability this year, while bringing down its deficit to $900 million.

HAJ also has call on a $65 million subvention from government to push its projects through.

The Shoucair-led operation on Tuesday issued a $105 million contract to Clarendon-based Build Rite Construction Company Limited to ready the site for construction of the Portmore Villa 2B housing complex, off Dyke Road, a $405 million project to build starter studio units of 350 square feet on land space of 3,000 to 4,000 square feet.

Shoucair said the large land space was deliberate, to allow for home expansion by the purchaser.

The $300 million construction contract for 100 homes and 130 serviced lots is still to be endorsed by Cabinet.

Studio units

"We are going to sell it with expandable options," said Shoucair. "You'll get a single room, with a bathroom and kitchen and lands to expand the units."

Shoucair said the units, on which construction begins November, would cost no more than $3 million, but was yet to set the price. The lots should be on the market within months, he said, but the studio units won't be ready before next year.

HAJ has also struck a $316 million deal with Pavement and Structures Limited for the construction of 65 two-bedroom homes in a development to be called the Palms of Portmore, but is also awaiting Cabinet's sign-off to award the job.

Finance construction

"That is in the vicinity of the Country Club, across from the police station," said Shoucair, locating the development. "It will be a gated community."

The project is priced at $400 million, the majority of which will finance construction set to start in September.

The 800 square foot homes are expected on the market in 18 months.

HAJ will sell the two-bedrooms for $6.5 million to $7 million.

"It can't be higher than $7 million because we are mindful of the market we are serving. The private sector can serve the upper income market; we need to provide houses for those who can't afford those St Andrew prices," Shoucair said.

dionne.rose@gleanerjm.com

SOURCE: Financial Gleaner, Friday, July 3, 2009