HomeBusiness DigestLow exchange rate threatens Homelink

Low exchange rate threatens Homelink

Eric Chiriga

THE central bank’s Homelink initiative faces a bleak future unless the RBZ drastically reviews the exchange rate.

“>John Robertson, an economic analyst, said the exchange rates being offered on the black market were too attractive to compete with foreign currency auction rates offered by Homelink.

“People living in the diaspora will lose confidence in Homelink because of the poor exchange rate,” Robertson said.

He said the viability of Homelink was based mainly on the exchange rate.

The Zimbabwe dollar is trading at about US$1 to $12 000 and the pound sterling at 1:$22 000 on the parallel market while on the foreign currency auction, US$1 is trading at $6 082 and GBP1 at $11 369.

On the other hand, property analysts say devaluation of the Zimbabwe dollar will disadvantage local home-seekers.

According to Boysen Mutembwa, a director at Bard Real Estate, devaluation of the dollar will lure more Zimbabweans living in the diaspora to buy houses through Homelink but it will push property prices beyond the reach of local Zimbabweans.

“Devaluation of the Zimbabwe dollar will attract more diasporans but the increased demand will push property prices up — particularly houses,” Mutembwa said.

He said the increase in demand would be difficult to meet considering that there is no significant property development taking place in the country.

Mutembwa however said Homelink remained the best option for Zimbabweans abroad to purchase houses back home.

He said 99% of their clients looking for houses were Zimbabweans living in the diaspora.

The Homelink Housing Development Scheme (HHDS) has been accused of benefiting Zimbabweans living in the diaspora at the expense of Zimbabwe-based home-seekers.

Analysts say the scheme is pushing the prices of houses beyond the reach of many local home-seekers.

They say for HHDS to be effective, the money borrowed under the scheme should be used to build new houses so that locals benefit from downstream activities.

Government and the Reserve Bank of Zimbabwe (RBZ) launched the Homelink housing project on May 1 last year as a way of increasing foreign currency inflows by encouraging Zimbabweans in the diaspora to invest in property.

To consolidate this initiative, the RBZ then introduced other foreign currency generating products like Foreign Currency Bonds (FCB) and investment incentives for non-resident Zimbabweans.

Homelink was recently transformed into a subsidiary company of the RBZ called Homelink (Pvt) Ltd through a statutory instrument.

In its monetary policy review for the third quarter 2004, the RBZ set aside $750 billion under the HHDS.

This was meant to finance the purchase of residential stands, completed houses and construction of residential properties.

The RBZ will licence project promoters who include real estate agents, building societies and foreign-based companies owned by Zimbabwean promoters.

Participating non-resident Zimbabweans will draw on a structured diaspora housing facility, which will be converted into foreign exchange at the ruling auction rate on the date of transaction.

The loan is repayable in foreign currency over a period of up to five years.

In the event that the mortgage holder cannot continue to participate in the scheme, the RBZ will take over the property.

Proceeds from the transaction will be reimbursed in foreign currency up to the maximum amount contributed by the individual and will also be fully remittable.

All disbursements on the loan will be in Zimbabwe dollars through the project promoter’s nominated building society.

First, mortgage bonds will be registered in favour of the RBZ over residential properties to be financed under the scheme. Project promoters will also be required to surrender to the RBZ, personal guarantees as security to protect non-resident Zimbabweans participating in the scheme.

RBZ governor Gideon Gono said regular on-site and off-site inspections of the use of the disbursed funds and the general management of the project would be carried out.

“Heavy penalties will be levied against abuse of this scheme,” Gono said. In the two months to December 31, 2004 a total of 239 applications for the HHDS valued at about $100 billion (US$16 million) had been received.

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