Section 19(5)(a) of the Pension Funds Act outlines several scenarios in which a fund may grant a member a loan for various housing purposes. Specifically, subparagraph (i) allows for the redemption of a loan granted by a person other than the fund, buying land an erecting a dwelling, buying a dwelling or doing renovations to a dwelling, against the security of immovable property belonging to the member or their spouse and occupied or to be occupied by the member or a dependent.

The critical condition for granting such a loan, as outlined in subparagraph (b), is that it must be fully secured. This security can be in the form of a first mortgage on the immovable property owned by the member or their spouse, a pledge of the member's benefits from the fund, or both.

Additionally, the loan must adhere to certain limitations outlined in subparagraphs (ii), (iii), and (iv), which include not being liable for any other loan to the fund, not having a lower interest rate than prescribed by regulation, and having a redeemable capital sum over a specified period.

Furthermore, subparagraph (c) outlines the maximum limits for the loan amount based on the type of security provided. If a mortgage on the property secures the loan, it cannot exceed 90% of the property's market value.

When a fund member co-owns a house with another person who is not a fund member, the fund may still grant a loan for housing purposes to the member, as long as certain conditions in the Pension Funds Act are met, as briefly referred to above. However, it's crucial to note that in the event of default, the fund may only be able to attach half the property's value, given that the member co-owns it with someone who is not a fund member.

This limitation of attaching only half the property's value in case of default introduces additional risk for the fund. Therefore, the fund must factor in this risk when determining the loan terms, including the loan amount, interest rate, and repayment period.

Furthermore, the maximum loan amount the fund can grant is typically limited to a percentage of the property's market value, as outlined in the Act. However, given the risk associated with only being able to attach half the property's value in case of default, the fund needs to adjust this percentage accordingly to mitigate its risk exposure.

In conclusion, while the Namibian Pension Funds Act allows for the granting of loans to fund members for housing purposes, including scenarios where the member co-owns a property with a non-member, the fund must carefully consider the additional risk introduced by the limitation on attaching only half the value of the property in case of default, and adjust its lending policies accordingly to manage this risk effectively.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. RFS (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of RFS.







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