Republic gets US$75m loan to tackle affordable housing

Republic Bank Ltd,  Independence Square, POS. Photo by Jeff Mayers
Republic Bank Ltd, Independence Square, POS. Photo by Jeff Mayers

The International Finance Corporation (IFC), a member of the World Bank Group has approved a US$75 million loan to Republic Bank to help address TT’s affordable housing deficit. In a release today, Republic said the money will support its plans to help thousands of middle-income families become homeowners and increasing its residential mortgage portfolio from 20 percent to 25 percent.

“Owning a home is a dream for many families and Republic Bank continues to look at innovative ways to provide affordable housing in TT, as this partnership with IFC demonstrates,” said Nigel Baptiste, Republic’s managing director. Baptiste said IFC’s confidence in Republic comes at an opportune time as the group embarks on a wider expansion in the region.

Republic estimates the affordable housing gap in TT is 100,000 units. The bank’s partnership with the IFC is expected to improve the country’s relatively low mortgage finance penetration rate, which is one of the most critical factors contributing to the housing gap, Republic said.

The initiative will support the Government’s efforts to manage its subsidised housing costs as well as encourage job creation as part of the construction sector. One of the largest expenditures incurred by the country is the sale of subsidised housing, Republic said, so to reduce these costs, the government is adopting new incentives such as land grants, tax exemptions and cash bonuses to developers who build homes for lower income families.

Luc Grillet, IFC senior manager for Central America and the Caribbean said the private sector has a key role in providing financing for affordable housing, especially in the tightening fiscal context of TT. “Private financing for affordable housing saves public resources and benefits families and the economy as a whole—long after the homes are built and occupied, the ripple effect from residents support jobs in a wide array of industries, including retail, healthcare and hospitality.”

The seven-year subordinated loan will qualify as Tier II capital (less secure secondary capital) under local regulations, and will therefore strengthen Republic Bank’s capital base. As part of the transaction, the IFC is offering technical assistance in key areas such as reporting, monitoring and risk management of the residential mortgage portfolio.

A subordinated loan ranks below other loans or securities with regard to claims on assets or earnings. The bank welcomed the IFC’s confidence in Republic’s operations by providing Tier II capital to further strengthen the bank’s already robust capital level. Republic has a total asset base of TT$70.5 billion.

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