The municipality of Walvis Bay has been doing a better job in providing direct sale of land to the public. Previously one could not really buy land directly from the municipality, they either had to buy through NHE or through private property developers. This always turned out to be a lengthy process or costly when private property developers are involved.
Sometimes last year, the municipality sold plots directly to individuals. One was required to pay a 10% deposit on the land value and the reminder was to be settled within 21 days. For most people that are in the housing market, the 21 days was not really a challenge because if you can provide them with a qualification amount letter from the bank, they were willing to take that as a means of securing payment.
Last Friday, they released an advert about a few other plots that are available for sale. This time, one is required to pay 10% deposit on the signing, and the reminder is to be either paid within 21 days or over a period of 36 months at a 5% interest rate. So what that means is that they are now opening up a financing scheme at affordable interest rate.
But what does the 36 period at 5% interest rate mean? Does that make acquiring land affordable when compared to prime plus or minus that the bank will offer you? I explored this with my fiancé on Saturday when we saw the advert to work out an affordability assessment on how much it will work out should you opt to use the finance scheme municipality is providing you.
Going with the municipality finance scheme might work out best if you can afford to pay the rental cost of your current place of dwelling together with the monthly payment of buying the land. Majority of the plots in Kuisebmund are sold for about N$135 000 and when financed over the period of 3 years will mean that the monthly installment will be roughly N$4000. This is likely to fixed over a 3 year term as unlike the bank rates that are linked to prime, interest rate will remain at 5%.
To work out which option you can afford:
- You need to work out the cost of buying land over a three year period. e.g the N$4000 per month
- Work out the cost of your current rental per month N$ for three years e. g N$3000
Then compare that to what you would pay if you were to take the bank provided finance:
- It will probably going to take 4 to 6 months to construct a house and be ready to move in should you opt to use the bank.
- To build on a plot that, its would probably costs roughly N$300 000 depending on the size of the house. If you take the total amount of the land and the building with the bank financed over a 20 year period, your monthly installment will be roughly N$4197
- Then you need to consider others costs of owning a house such as rates and taxes, utilities bills etc.
At face value, it might seems to be cheaper to pay the plot over a three year period directly with the municipality but what that means that you cannot stay in that house for that three year period. It also means that you will still need to finance the building of that plot in three years time and the costs of building on the plot might be expensive when compared to today.
If you can afford to pay a higher amount, the best option would actually be to build with the bank and pay more that the minimum required from the bank to save on interest rate. After all, there are no cancellation fee with the bank if you settle your bond after three or four years.
This advise does not apply:
- if you can afford to pay the plot cash
- If you can pay off the plot in less than 3 years.
- You have a current place to stay now that is not expensive when combined with your plot payment or are currently staying at home.
- If you do not intend on building on the land in the next three years.
A lot of people lost out on the previous plots because they did not have the 10% required deposit. If you think you really want to take this opportunity, you might want to consider arranging a term loan with the bank so that you have the cash ready. If you do not get the plot, you can pay back the money. If you do get a plot, you can incorporate it in your monthly payment.
All the best with the process