Mudarabah-like contracts for social housing by the government of Malta

The government of Malta has announced a scheme to help people aged 40 and above to buy property.
Prime Minister Joseph Muscat said the scheme, first announced in the budget speech for 2019, is particularly for separating couples who would need to move into another property but would not be able to access bank financing easily for the purpose.

The scheme is capped at properties worth up to EUR200,000 (US$223,579) which in substance could result in a comfortable apartment in certain locations in the Maltese archipelago. Applicants must cover 10% of the property value at the outset. They must make alternative financing arrangements to cover at least half the value of the property. The Housing Authority in Malta will cover the other half.

The applicants in these Mudarabahlike contracts will then have 20 years to buy back the remaining half from the Housing Authority, with the cost fixed at the original purchase price. If they cannot pay the Housing Authority back, their heirs will have the opportunity to do so.

Muscat said this scheme would help separating couples to start afresh. Parliamentary Secretary Roderick Galdes said that to date, separating couples had no option other than to rent a piece of property, since they could not afford to buy it. This new scheme gives them a choice.

Family Minister Michael Falzon said measures such as this helped ease pressure from families going through difficulties.

Finance Minister Edward Scicluna said this was a new financial instrument which needs to be studied in detail before being implemented. The scheme will be operated by APS Bank in Malta.

These kinds of solutions have been in the pipeline for a number of years, going back to 2014 when President Emeritus Dr Marie Louise Coleiro Preca was the minister for family and social solidarity. 

Indeed, she has not been in power as a minister long enough to implement all the social measures she had planned due to the fact that Malta called her for the important role of the president of the Republic of Malta through which she left a remarkable and significant impact.


This article was first published in Islamic Finance news Volume 16 Issue 22 dated the 5th June 2019.

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