Yangphel CEO confident of a turnaround with improved approach road
In 2011 the National Pension and Provident Fund (NPPF) and Yangphel Housing partnered together on a ‘Home Ownership Project’ designed especially for NPPF members by starting the construction of 136 apartments in a three acre land in Kabesa, Thimphu.
However, even though the booking for apartments was opened not along after the construction started in 2011 , as of today only 12 apartments have been bought with another 124 apartments not sold. The construction of the apartment complex was completed in April 2015.
Given that NPPF money was involved, the Royal Audit Authority (RAA) in its latest 2014 Annual report has reflected it as lapses against the NPPF.
The RAA says that given that only 12 apartments have been sold so far it raises concerns over loan defaulting due to lack of takers. The RAA has fixed direct accountability on the former NPPF CEO Dubthob Wangchug and supervisory accountability on the NPPF board.
Of the Nu 554 mn spent on the project, NPPF’s share is Nu 236 mn, Yangphel came up with Nu 214 mn and Nu 98 mn was taken as credit from Bank of Bhutan. The original share of the project was 60 percent Yangphel and 40 percent NPPF.
The NPPF originally backed the idea as it would allow it to use its large reserves of cash to invest in a project that was expected to both make money and also allow its members to own homes. The NPPF offered a special 10 percent loan rate only for its members who consist of civil servants, armed forces and government corporations.
Yangphel CEO Karma Lotay said that the project is now fully owned by Yangphel as NPPF has converted its shares into a 25 year long term housing loan.
“We kept our part of the bargain and finished the construction of the building but since there were no takers we had a series of discussions and felt it proper to convert NPPFs shares into loan,” said Karma Lotay.
He said that Yangphel decided that it would wait for a few years for the economy to recover and in the meantime hold onto the property and service the loan.
However, the Yangphel CEO said that the situation is now turning around as the site has been inundated with visits from potential buyers during the weekends. He said the turnaround was due to the fact that the approach roach which had been damaged by the construction process was now complete and blacktopped making for a smooth ride to the property.
He also said that the apartment complex was being constructed at a time when the country faced the rupee crisis and credit crunch from 2012 to 2013 and banks were not giving housing loans. With the economy now improving he said he is hopeful that the apartments will sell well.
Karma is also confident that the property will have its niche market of people who want to stay away from the hustle and bustle of a city with the privacy of its own compound. He said the property has a basketball court and is developing a football field and also a running track.
The CEO ruled out any possibility of default by the project as he said that it was a long term project and would reap benefits in the long term. He said that the NPPF, BoB and government had valued the property and the loan component was already covered by Yangphel’s portion of the property.
The project is also looking at various options of which one is becoming service apartments. He said the apartment was built with high quality construction materials and also enjoyed a good supply of water tapped from a menchu.
The property sells 2 bedroom and two bathroom studio apartments for Nu 2.4 mn, 3 bedroom and 3 bathroom standard apartments for Nu 3.45 mn, 4 bedroom deluxe apartments for Nu 4.5 mn and luxury apartments which are double the size of deluxe apartments at Nu 9 mn.
He said the deal was that customers can walk in put the complete cash down and then walk away with the keys as all the apartments had been completed.
He said in addition to NPPF, others like BoB, Druk Punjab and Bhutan Insurance Limited would provide financing options.