Regional land bill passed
There is concern about the potential for corruption involving trust funds to be set up for property developments.
29 December 2017 | Government
The newly passed Urban and Regional Planning Bill could be a blow to new and emerging construction companies as developers are now required to finance property developments from their own pockets or a loan.
The bill, which was passed in the National Council last week, prohibits developers from using the proceeds from sales of plots until after construction is completed.
Instead section 72(1) of the bill requires payment for erven and houses that are part of development projects to be first invested in a trust fund until construction has been completed and the local authority or minister proclaimed it as a settlement in the Government Gazette.
The owner of the land who intends to establish a township will pay the lawyers who will administer the trust fund.
The bill defines a township as a group of portions of land or subdivisions of a portion of land which are combined with public places and are used or intended to be used for residential, business, industrial or similar purposes.
The money will only be paid out once development is completed, the owner becomes insolvent or if the township cannot be completed. However the money will then be returned to the buyers.
Developers will under no circumstances be able to use this money as collateral for loans at local banks.
The bill states that if a developer violates the stipulations and receives money from a buyer without the money being paid into the trust fund; such a person will be fined with a fine not exceeding N$100 000 or imprisoned for not more than 10 years.
Local economist Dr Omu Kakujaha-Matundu believes this is another setback for the already ailing construction industry.
He emphasises that even the bigger players in the industry may be wary to put their money into something that is not guaranteed to work out.
“This new law will make the entire deal very unattractive. It may look like a risky business for some companies. There may be a fear that the trust funds can be abused unless there are some watertight safeguarding mechanisms in place,” he argues.
He also pointed out that some small and medium enterprises that have been hitchhiking on the backside of government projects such as the failing Mass Housing scheme may be completely thrown off the bus.
Meanwhile the ministry indicated that new law will save up to 60% of the time needed to process planning applications.
The permanent secretary of the ministry of urban and rural development, Daniel Nghidinua, stated that this would be done by giving planning powers to local authorities with capable administrations such as the City of Windhoek and Walvis Bay municipality.
“Through productive planning introduced through the drafting of spatial plans, approval is readily available from the start only in exceptional circumstances where planning permission is sought outside existing structure plans,” he said.
The bill also proposes a single urban and regional planning board which will advise the minister on all land issues, compared to the previous two boards.
Furthermore capable local authorities with structure plans and staff need to be investigated and recommended to the minister for planning authority status.
According to Nghidinua these powers will provide local authorities with another revenue stream.
“The fast execution of decisions and developments will no longer wait for the central government for six months. Hence, accumulatively over time infrastructures are put in place faster and therefore the collection of revenues from stimulated developing industry such as local plans.”
This comes at a time when the construction industry which largely depends on government tenders is going bent under heavy budget cuts.
In September this year leading economist Klaus Schade predicted that the construction sector will feel the full impact of the government's budgetary alignments this year.
Namibia slipped into recession this year and the country has seen a string of job losses as a result.
The construction sector has shown negative growth for the sixth consecutive quarter and the retail and wholesale sectors have shown decline in growth for the third consecutive quarter.
For construction, growth in the last quarter stood at -51.9%, the worst figure since the sector's decline began in 2016. In the first quarter of 2017, it registered growth of -45% while growth was recorded at -32.2% in the first quarter of 2016.