re-imagining finance for housing and human settlements ... settlements summit... · funding so as...

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"Re-imagining Finance For Housing andHuman Settlements Development”

21 September 2017 – Human Settlements Development Summit

Human SettlementsDevelopment Bank

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Agenda

1. The Key Development Challenge

Some Choices, Trade Offs and Non-Negotiables

Strategic Objectives and Examples

What Customers can Expect

Key Activities

2. Multiple Solutions

3. Discussions

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The key development challenge

• Housing Backlog• Affordability Thresholds• Limited private sector participation• Limited/fragmented funding in Human Settlements• Limited Developmental Outcomes

A massive challenge, on adaunting scale

• Land• Development• Operations and Maintenance and• Financing

However, the challenge is notonly solved just by unlocking

finance and catalysinginvestments

Supported by a robust Housing Delivery Platform made up ofStakeholder Engagement

Sustainable FundingDelivery Model

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HumanSettlements

DevelopmentBank

Serves as acatalyst for

change in thehuman

settlementsfunding and

financing role(redefinition)

Additionality:“…Activitiesthat HSDBis

able to impactbeyond thatwhich would

have occurred

Focus inaddressing

market failurethru innovativefinancing andeffective risk

mitigationinstruments

Support theeffective

transformationof the humansettlements

sector

Some Choices, Trade-Offs andNon-Negotiables…

Human Settlements Development Bank (HSDB): Business Case Slide 414 September 2017

• In order to meet the humansettlements finance needs ina sustainable manner, acoordinated and integratedfinancial institutionalstructure is required that isable to effectively leveragegovernment grants,wholesale and investmentfunding so as to maximiseprivate sector funding andparticipation, as wellhousehold contributions.

• The core to what we doresides in the need toprovide effectivegovernment financingsupport to key segments ofthe housing market, in theface of considerable marketfailure, significant need anddeclining fiscus.

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Strategic Objectives


Increase the provision of finance across the human settlements value chain

Increase the Private Sector Leveraging capability

Enhance Integration and coherence of Human Settlements grants with othersources of funding to create scale – Fund Mobilisation

Remain sustainable while pursuing development objectives

Support effective transformation of the human settlements sector

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Increase the provision of finance across the HS Value Chain…

Improve Access to housing finance: three policy themes :– Reduce Loan Origination costs – Underwriting Risk, MDI– Reduce costs of Funding – Liquidity / Wholesale facilities, e.g. MBSecurities– Leverage Collective Savings to Reduce rates – Pension/Provident Fund, GEHS

De-Risking or Guaranteeing or Subsidising Developers

Improve Rental Markets – Social and Private

Human Settlements Development Bank (HSDB): Concept and Roadmap Slide 621 November 2016

Non-Financial Financial• Fast track approval time-frame • Where Equity and Debt required• Facilitate take-offs • Risk mitigation• Facilitate land availability • Developer tax incentives

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Increase the private sector leveraging capacity…

Risk Enhancements instruments

– Playing a catalytic role in attracting other investors and lenders by e.g.taking equity, junior and mezzanine debt

– Position as a Lead Arranger / Syndicator to facilitate lending in anunchartered markets

– Offer guarantees to mitigate high risk perceptions

– Push the innovation envelop in the sector thru risk mitigation , JVs, etc.


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Support the effective transformation of the HS Sector …

Equity and Investment Strategy to achieve the following:

A. Economic and Enterprise Development

• Playing a catalytic role in attracting other investors and lenders

• Provision of risk capital to facilitate lending within sound gearing levels

B. Project Preparation Financing (risk capital) – Pre Equity Financing to Projects

Financing of:

• Feasibility Studies and

• Project Design

to de-risk the project to make it bankable and attractive to Financial and Commercial Investors


ConfidentialKey Activities


Lender / Lead Arranger

Risk Mitigation (Higher Risk Appetite)

Risk intervention in managing housing value chains inefficiencies Address risk of all players – lenders, developers, home buyers

Fund Mobiliser

Champion Innovation in Partnership with Private sector New Product design Housing subsidy innovation Explore financing opportunities across value chain

Specific sector Transformation agenda Entrepreneurial level - Increase PDIs level of participation (contractors, developers, property

landlords) Household level- affordability, facilitate solution options for over- indebtedness and deep Rural

market penetration

Champion Market Knowledge Continuously track, analyse and interrogate market performance

ConfidentialWhat do our customers expect from us


FacilitatorFacilitator

1. Credit Guarantees2. Payment Guarantees3. Insurance Products4. FLISP5. Product Innovation

support

InvestorInvestorLenderLender

Risk Capital Provider

1. *Equity Investments2. *Strategic Investments

using Junior, Mezzanineand Debt instruments

1. Mortgage-backed finance2. Non-mortgage lending3. Developer finance4. Bridging Finance for

Contractors

AdvisorAdvisor

1. Technical Assistance2. Transaction Advisory3. Grant making

Immediate Long-Term

Research, Monitoring and Evaluation* Developmental outcomes

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Agenda

1. The Key Development Challenge and Background




Key Activities


3. Discussions

2. Multiple Solutions,,,

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• “Traditional” mortgage loans• Unsecured Loans – Incremental housing finance• Instalment sale for housing• Other type instruments e.g. Income linked home

loans• Increase financing under permission to occupy (pto)

MULTIPLE END-USERFINANCE SOLUTIONS

• Savings mobilisation (cooperative housing, stokvels,etc)

• End-user subsidies (FLISP, Employer Subsidies)• Form of rental subsidy – e.g. Social HousingENHANCE HOUSING

FINANCE AFFORDABILITY

Multiple Solutions “No Silver Bullet”

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• Risk enhancement for households (e.g. MDI)

• Equity / Junior or Mezzanine

EFFECTIVE RISKMITIGATION

INSTRUMENTS

• Financial literacy• Financial capability• Consumer financial educationCONSUMER EDUCATION

Multiple Solutions “No Silver Bullet” ….continued

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• De–risking projects• Reduce town planning delays• Land holding costs• Tax incentives for low income housing

developments

REDUCE COST OFHOUSING

DEVELOPMENTS

• Effective application of grants to leverageprivate sector investments

• Leveraging private sector technical capability• Effective coordination within government’s

sphere (National, Provincial, Local and Govtentities)

EFFECTIVEPARTNERSHIPS


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• Mobilise sector players towards a commongoal – role of the orchestrator

• Direct public and private investments to whereits needed the most

• Maximise available infrastructure

WORKING TOWARDS ASHARED HUMAN

SETTLEMENTS VISION


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Agenda

1. The Key Development Challenge and Background




Key Activities


3. Discussions3, Discussions

re-imagining finance for housing and human settlements ... settlements summit... · funding so as...

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