Monday, April 22, 2024

Pension fund members to climb property ladder

Property prices are set for a spike next year as government is planning to review the pension fund Act to ensure that plan holders can use future benefits as collateral to enter the home-ownership market.

Speaking at Botswana Pension Society Conference on Thursday, Paul Masie, head of Alexander Forbes Botswana, which is also the administrator of Botswana Public Officers Fund (BPOPF) said they were working on legislative review which would see members being able to use part of their pension as “collateral towards housing loans” as from the end of next year.

The move was ignited by members of the fund who clamoured to enter the property market as part of their long investment.
“If that is successful, then it could lead to a spike in property prices including land. But the whole thing would depend on how many people would be buying,” Letsweletse Tumelo of Capital Securities said.

The announcement came as a great number of people were turning to home-ownership as a long term investment. The major beneficiaries were Botswana Building Society (BBS) and First National Bank of Botswana- the two leading banks in property finance.

An Associate Director at Alexander Forbes, Batlhafi Phale, said the model is aimed at helping those members who can not afford to raise a housing loan through their salaries even though their pension benefits show that they qualify. The scheme had worked well in other countries, including South Africa, where it was able to move a good number of people up the property ladder.
The move would see the pension fund industry working hand in hand with the banks while the future benefits would act as a guarantee.

“I think this is an innovative move aimed at getting people affordable housing,” Alphonse Ndzinge, of Investec Asset Management said. “The reform would benefit the property market and the home ÔÇôownership is the main driver of credit growth in the country.” He added that of late the sector had been the main driver of banking sector profit outside the Bank of Botswana Certificates (Bobcs).
However, analysts cautioned that the success of the scheme would largely depend on how the banking sector would accept the new initiative and the kind of property people would be looking for.

“It will largely depend on how the banks would accept it. It might lead to big shift towards property buying,” Tumelo said.

“I do think it is a good idea,” said Tapologo Motshubi of Allan Gray. “Pension should be left for retirement. What we should be doing is to look it at another angle and find out whether the banks are being overly difficult when it comes to housing loans.

“I believe that security for purchasing property is the property itself because it appreciates in value. And if someone fails to service the debt they can repossess the asset and sell it.”
Under the new arrangement, pension funds will automatically give guarantee on the loan.


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