LETTER: If banks can’t rely on property as security, the economy will die
The effects of expropriation without compensation are still not fully understood
17 February 2020 - 17:10
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One wonders how diligently the consequences of expropriation without compensation have been explored. For example, there is a suggestion that in the event of a bonded property being expropriated without compensation the [borrower] would still be compelled to repay the outstanding capital, which would be difficult if not impossible for most.
But it goes much further than that since a bank wIll not permit transfer of a bonded property until the bond is paid up, not willingly wishing to forfeit its security (or is the state also contemplating forcing banks to do so?). In a situation where a bank cannot rely on property as an ongoing security it would be reluctant (to say the least) to grant what would be large long-dated unsecured loans, so imagine then the effect on the banking system, business, development and home ownership, and the inevitability of the economy grinding to a halt and disappearing down the plughole.
Expropriation without compensation is a can of worms, the effects of which are still not fully understood.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
LETTER: If banks can’t rely on property as security, the economy will die
The effects of expropriation without compensation are still not fully understood
One wonders how diligently the consequences of expropriation without compensation have been explored. For example, there is a suggestion that in the event of a bonded property being expropriated without compensation the [borrower] would still be compelled to repay the outstanding capital, which would be difficult if not impossible for most.
But it goes much further than that since a bank wIll not permit transfer of a bonded property until the bond is paid up, not willingly wishing to forfeit its security (or is the state also contemplating forcing banks to do so?). In a situation where a bank cannot rely on property as an ongoing security it would be reluctant (to say the least) to grant what would be large long-dated unsecured loans, so imagine then the effect on the banking system, business, development and home ownership, and the inevitability of the economy grinding to a halt and disappearing down the plughole.
Expropriation without compensation is a can of worms, the effects of which are still not fully understood.
Sydney Kaye
Cape Town
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