re-imaging finance for housing and human … presentation ver4.pdf · • escalation r12 625 •...

RE-IMAGING FINANCE FOR HOUSING

AND HUMAN SETTLEMENTSDEVELOPMENT

Challenges Facing a Private sectorInvestor.

Presented by: Willem Odendaal

Issues to be Addressed

• Current Financial Model – Strengths and Weaknesses

• Current Blockages experienced by Private Sector whenInvesting in Affordable Housing

• Actions and Measures required to Improve PrivateSector Investment into Affordable Rental and FinanceLinked Subsidized Housing

• Questions and Answers

Current Financial Model – Strengths and Weaknesses

• Definition of Affordable Housing

Income/Month NDHS IHS

Rental Maximum House HoldIncome/m

R15000 R23000

Maximum Rent/m R4500 R7000

For Sale Maximum HouseHoldIncome/m

R15000 R23000

Market Value of Unit R440000 + R20000 R765000


• Demand for Rental Accommodation –TPN

• House Hold Income between R10000 and R23000/m– 53.2%

• House Hold Income between R0 and R3000/m –22.5%

Current Financial Model – Strengths andWeaknesses

• Rental Units for Social Housing - Matlosana GardensProject

• Rent/m Floor Area mxm• Studio R1065 30• 1 Bedroom R1600 34• 2 Bedroom R2500 40• 3 Bedroom R3233 48

• Funding of a Unit• Average Cost per Unit R352 401• Subsidy per Unit R265 948• Equity per Unit 10% R35 240• Debt per Unit 14% R51 213


• For Sale Units in Vosloorus• Land R30 190• Bulk and internal Services R68 100• Top Structure R187 500• Professional Fees R18 630• Other Cost (NHBRC, Transfer Cost etc) R42 051• Contingencies R14 341• Escalation R12 625• Sales Expenses R41 900• TOTAL R415 337


• For Sale Units in Vosloorus – 265 Unit Project

• Developer• Project Cost R110 000 000• Equity Required R24 000 000 (22%)• Peak Debt Required R31 000 000 (28%)

Purchaser of Units• Purchase Price R450 000• Loan R430 000• FLISP Subsidy R20 000


• Strengths Social Housing• Low equity required – 1O%• Low Debt – 14%• Large Demand –at least 30% of rental demand• Quality Housing• Good Management of Property

• Weaknesses Social Housing• High operational cost 49%+• Exit Strategy may be Problematic for ODA• Limited Stock Available


• Strengths of For Sale Housing

• Purchaser obtain an asset• Owner can improve property to meet future needs• Developer unlock value of land• Reasonable profits for developer• Developer create work for construction units


• Weaknesses of For Sale Housing

• Slow sales rate as a result of credit records – 3 out of 10• Presales of up to 80%• Development Debt expensive – 28%• High Equity required -22%• No economy of scale as projects are smaller or phased.• High risk as a result of slow statutory approval process

CURRENT BLOCKAGES EXPERIENCED BYPRIVATE SECTOR IN AFFORABLE HOUSINGSECTOR

ACTIONS AND MEASURES REQUIRED TOIMPROVE PRIVATE SECTORINVESTMENT INTO AFFORDABLERENTAL AND FINANCE LINKED HOUSING

• Spatial Development Frameworks of municipalities identifyareas for Integrated Housing Developments

• Municipalities or HDA purchase land subjected to rezoning• Appoint dedicated professional teams to manage rezoning

process.• Municipalities provide bulk services to areas• Municipalities enter into Land availability agreements with

private sector to develop land• Integrated developments consist of 33% BNG, 33% rental

(including social housing) and 33% credit linked housing(including FLISP)– Fleurhof model

• Standardize SPLUMA regulations for all municipalities

ACTIONS AND MEASURES REQUIRED TOIMPROVE PRIVATE SECTORINVESTMENT INTO AFFORDABLERENTAL AND FINANCE LINKED HOUSING

• Prioritize Statutory Approval Processes to fast trackdevelopments and avoid high holding cost andescalation

• Centralize funding allocation to projects bytransferring all funds to Housing DevelopmentBank and pay developers on time

• Provide incentives to employers to provide once offhousing subsidies to make FLISP units affordable(Anglo Coal provides R60000 per employee)

Questions and Answers

re-imaging finance for housing and human … presentation ver4.pdf · • escalation r12 625 •...

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