South African property developers now have a new source of finance to help overcome the historic difficulties they have faced in obtaining cost-efficient funding to build homes that are affordable for the majority of South Africans.
International Housing Solutions (IHS) - a joint venture between MuniMae of the
IHS is focusing on financing the construction of homes for households earning between R2,500 and R7,500 a month. This income bracket is often described as the “missing middle”, as families within this income range earn too much to qualify for government-funded housing, but also find that adequate housing is too expensive, either for purchase or rental.
IHS recently won a bid from the US Overseas Private Investment Corporation (OPIC) to create a US$300 million leveraged fund to finance affordable housing projects in South Africa and Jordan. Up to US$225 million from this fund, coupled with project-based debt, could be made available to finance over US$1.0 billion (approximately R7.2 billion) worth of housing development for low- and middle-income households in
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“The equity allows developers to obtain larger loans from the banks at a reduced borrowing cost, which in turn allows them to build bigger developments (more homes) without having to phase them in or conduct large pre-sales. As the developers achieve more scale in their projects, they are able to pass the lower costs on to families, in the form of lower rentals and selling prices.”
Stroebel says IHS is already partnering with developers and banks in several exciting greenfields developments and inner-city rejuvenation projects involving thousands of affordable homes. The group is proving to be a valuable partner because of its global experience in the sector and its understanding of what it takes to make these investments work.
“We believe there are many opportunities in which we can help to accelerate the supply of affordable homes for both purchase and rental. We are dedicated to helping bridge the housing gap that exists in SA – there are some 2.4 million homes that still need to be built over the next few years,” Stroebel concludes.