Housing Development Corporation (HDC) estimated the rent for the flats developed under the Hiya housing project after considering the loan and other factors, and lowering it will result in a considerable loss, the Auditor General’s Office said.
According to an audit report on Hiya flats provided in response to HDC’s request, imposing the MVR 6,600 rent determined in 2018 would result in a loss of MVR 1.2 million on each unit. In addition, the report said if the 2018 rent was maintained for the next 25 years, HDC’s net cash flow would result in an MVR 9.2 billion loss.
The audit also noted that even with the existing rent, HDC would have a net cash flow shortfall of MVR 138.6 million.
According to the audit report, Male City Council estimated a rent of MVR 5,548 for Hiya units while Libor, an international standard for calculating the benchmark of a loan’s interest rate, was low.
It further said Male City Council estimated rent while Libor was at 0.6 percent owing to the COVID-19 outbreak, even though Libor is generally more than 3.3 percent and that loan repayments were made this year when Libor was at 1.74 percent.
The monthly rent of MVR 6,600 set for Hiya units in 2018 did not consider the interest rate on loans obtained for the project and refinancing, nor did it take into consideration the cash flow impact on HDC, the report said.
The audit report, which was delivered to the President’s Office and the People’s Majlis, suggested that the rent be calculated by considering the cost of capital to cover the loan’s financing cost. It also recommended that HDC be assisted by subsidised additional expenditures not included in the project’s cost. Land charges, building management fees, and supplemental development expenditures are not included in the project cost.