The first company funded under the Entrepreneur Empowerment Property Fund (EEPF), an incubator programme designed to promote participation in the affordable rental property market by companies owned by historically disadvantaged individuals, broke ground on its rental housing construction project, in Jeppestown, on the eastern periphery of the inner city of Johannesburg last month.
The EEPF, which is a partnership between the Gauteng Partnership Fund (GPF) and the National Housing Finance Corporation (NHFC), reports that funding has been secured for six projects this year. Construction on the projects, which are at different stages, will mostly start next year.
In total, funding has been secured for 13 projects since the EEPF’s launch in 2010, which will result in about 500 units being constructed, says GPF investment officer Vinolia Mashiane.
The six approved projects for this year are in the areas of Roodepoort, Springs, Benoni, the inner city of Pretoria and two projects in Kempton Park.
The bulk earthworks for a R9.4-million greenfield development in Jeppestown, which broke ground on August 27, includes ground levelling, compaction, and laying the foundation.
Mashiane says if the project, at the corner of Park street and McDonald street, runs according to schedule, it will be completed by April 2013.
The project entails the construction of 32 units – seven studio units of 27 m2 each, 13 one-bedroom units of 30 m2 each and 12 two-bedroom units of 45 m2 each on three consolidated stands, measuring 991.86 m2 in total.
On average, each unit will cost R3 400 a month to rent, says Mashiane.
Through the EEPF, the GPF has assisted property development company Take Off Real Estate, the company that was awarded funding to develop this project, in overcoming some of the barriers that prevent historically disadvantaged individuals-owned companies from entering the affordable housing rental market.
These barriers include capital constraints such as access to funding for small companies. Some financial institutions require companies to contribute 30% to 40% of the ¡total project cost as equity towards rental projects.
The GPF has provided a 40% loan of R3.8-million over a 20-year loan period for the Jeppestown project, while the NHFC has provided the bulk of the funding.
The developer’s contribution, which is dependent on the project feasibility and cash flow, may vary between 2.5% and 10% of the total project cost, says Mashiane.
The programme, which is limited to prospective participants invited yearly on public tender, allows each participant 12 months to secure a project, with a maximum project cost of R15-million.
Any 100% black-owned company with an interest in providing housing for people earning an income of less than R15 000 a month can approach the EEPF for funding. However, companies will only be eligible for the programme if they are a registered legal entity with a valid tax clearance certificate, clear credit records, able to identify a potential project that can yield over 15 affordable housing units in Gauteng and can demonstrate access to unencumbered capital as the sponsor’s equity contribution.
Further, the EEPF will provide mentorship and training programmes aimed at moving the skills level of black economic-empowerment companies from a low skills level to a high skills level where there is improved success in the delivery of rental housing units and less reliance on GPF and other concessionary funding from the State.
Mashiane says other greenfield projects under the EEPF, such as the projects in Roodepoort and Kempton Park are in the process of registering bonds with the deeds office of the Department of Rural Development and Land Reform and obtaining municipal approvals to start construction.
The Pretoria inner city project, which is located at 164 Schoeman street, involves the renovation and reconfiguration of an existing building that currently consists of 23 spacious two-bedroom units.
Once completed, the development will comprise 46 one-bedroom units, says Mashiane.