the risks posed by a rapidly expanding housing credit portfolio. the financial crisis of 2008 and its consequences for the world economy serve as a useful reminder of this need. part of the central bank mandate is to ascertain that, notwithstanding competition and the need to make profits, banks maintain a prudent approach in granting housing loans. at the same time, the regulatory framework set up by the bank of mauritius is such that it encourages investment in housing, particularly with regard to first - time buyers. in line with international standards prescribed by the basel committee for banking supervision, credit extended for residential purposes is classified in the preferential bucket of 35 per cent of risk - weighted assets in the computation of capital adequacy ratio requirement. accordingly, banks are implicitly encouraged to increase the quantum of their portfolio for housing credit given that they maintain lower regulatory capital for holding these assets in their books. in 2004, a commission of inquiry was set up by the government on the sale by levy system in the light of several cases of foreclosures and rising number of lawsuits being filed in court against borrowers whose loans had become non - performing. subsequently, the promulgation of the borrowers protection act in 2007 came to the rescue and clearly set out the obligations of lenders in providing clear information on the terms and conditions governing the grant of any credit facility, including financing of the acquisition of immovable property. several measures were taken by the bank of mauritius : banks were requested to abide by the provisions of the said act for all loans, specifically with respect to facilities below the amount of rs2 million ; in view of a closer monitoring of cases being lodged in courts against borrowers, banks were requested to provide information on all cases of sale by levy on a periodical basis to the bank of mauritius. presently, the bank of mauritius is working on several initiatives that aim at promoting investment by first - home buyers. macroprudential measures shall shortly become applicable to credit extended by the banking sector for residential purposes, and these policy measures shall include guidelines towards demarcating credit granted for housing purposes and property investment based on speculation and commercial purposes. there is no doubt that making a clear distinction in the terms and conditions applicable for first - house buyers would facilitate the granting of loans. it is also perceived that buying a first house represents a low - risk investment as the collateral for mortgage financing is usually secured by fixed charge on both land and building. however, the bank of mauritius has adopted the stance that

banks have to maintain sound bis central bankers ’ speeches lending standards in granting credit facilities to the housing sector. while having due regard to the level of household indebtedness at the macro level, the bank of mauritius has underlined the need for all financial institutions to undertake proper assessment of borrowers ’ repayment capacity. this would prevent households from becoming overleveraged. the bank of mauritius further ensures that accurate information is conveyed through advertisements issued by financial institutions to attract borrowers. in this regard, while “ teaser rates ” for home loans can be conspicuously displayed, the bank of mauritius requires that other information, including the annual percentage rate ( apr ), be displayed as well so that the potential borrower is clearly made aware of the implied interest rate applicable on an annual basis. conclusion housing finance contributes significantly in raising living standards of people, be it either in africa or any part of the world. viewed at the macro level, housing finance generates economic growth via job creation, entrepreneurship, and economic linkages to other sectors. however, one cannot ignore the fact that the recent financial crisis that rocked the global economy is closely related to a crash in subprime mortgage lending in the united states, the so - called cds or credit default swap. while taking lessons from the global financial turmoil, the bank of mauritius remains committed to its goal of maintaining the soundness and stability of the financial system in mauritius. stakeholders should therefore aim at ways to improve access to housing finance in a sustainable way. ladies and gentlemen, you will concur that affordability remains a major challenge in housing markets in africa. several constraining factors such as poverty, lack of long - term financing, reform in land management system, and the rising cost of building materials are issues that remain to be tackled by all delegates present at this conference. however, it is reassuring to note that lenders are becoming more proactive and experimenting with new products, and that housing microfinance is complementing conventional financing methods. work being undertaken by the african union for housing finance is laudable while aiming to promote housing credit as part of financial inclusion in africa. i am sure all delegates present here from africa mainland will benefit from the fruitful deliberations over the next three days and will reach concrete resolutions that shall foster sharing of knowledge and cooperation among members of the african union for housing finance in mobilising funds for shelter and housing on the african continent. i thank you for your attention. bis central bankers ’ speeches