R10.5bn investment in SA Home Loans to boost government worker’s access to housing

The Government Employees Pension Fund (GEPF), through its asset manager the Public Investment Corporation (PIC), will invest R10.5 billion into SA Home Loans to boost available housing finance for qualifying government employees and members of the public.

The GEPF’s initiative will be available to its 1.2-million active members who qualify for credit and will also yield social returns with loans extended at competitive rates, the pension fund said.

Of the funds, R5bn is earmarked for public servants, R2bn will be allocated to affordable housing for low-income earners, R2bn to help SA Home Loans extend mortgages to other qualifying applicants and R1.5bn for affordable housing developers.

"We can make good financial returns," Dries de Wit, vice-chairman of the GEPF, said. Adding that housing is key to economic development, stimulates the demand for goods and services, and will help grow the economy.

SA Home Loans, the country’s fifth-largest mortgage provider, has built a website that will poll government employees to gauge their housing needs and aspirations, said Guy Saville, a director of the company. If this pilot project works, the housing finance model could be extended to other South Africans with more lenders becoming involved, he said.

With assets under management of R1.6 trillion, the GEPF has 1.2 million contributing members and just more than 400 000 pensioners receiving a pension from the fund every month.

“This is not a charitable investment, it is an innovative way of unlocking value for both the GEPF and the beneficiaries of the fund,” Dr. Claudia Manning, a member of the PIC board, said at the launch of the Government Employees Housing Scheme (GEHS.)

“We believe we can make good financial returns for our members and pensioners while helping those who qualify to access affordable housing,” added vice chairperson of the GEPF board, major general Dries de Wit.

De Wit said that construction of housing is labour-absorbing, and stimulates demand for and supply of a range of related goods and services - which all points to economic benefits in the long-term.

“Not only is more long-term funding for housing needed but in general, pension funds are underinvested in residential property, particularly affordable developments,” he said.

Both Manning and De Wit highlighted the need to finance housing for middle-income earners who earn too much to qualify for a government-subsidised house and too little to qualify for a mortgage.

The GEHS was established in response to the housing finance and access gap that exists among households in the monthly bracket of R3 500 to R15 000, said Mashwahle Diphofa, director general of the Department of Public Service and Administration (DPSA).

“We are aiming to change the reality of many South Africans and help to place them on a path to acquiring homes, which would then allow them to, for example, use the equity in the home to borrow money for education and growing a small business," Manning said.

SA Home Loans is the largest non-bank provider of home loans in South Africa, said CEO, Kevin Penwarden.

“The R10.5 billion investment gives us much-needed funding to grow existing offerings and also to venture into new territory,” Penwarden said.

In addition to the R10.5 billion, the PIC has allocated R500 million equity to be invested directly into Affordable Housing Development Company, which will assist with developing affordable housing.

As it stands, some 954 000 government employees receive a housing allowance, which increased from R900 a month to R1 200 a month in July 2015. Only 30% of these individuals own houses.

“Our shared goal for the housing scheme is to see more than 520 000 employees who are currently receiving the housing allowance as tenants change their status to become home-owners,” Diphofa said. 

Abel Sithole, principal executive officer of the pension fund, said the investment "will enable many government employees to own their own houses at a much more affordable rate."

Bloomberg/ BDLive

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