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2nd July 2010

By: Yolande Botes

Creamer Media Assistant Chief Operating Officer and Personal Assistant to the Publishing Editor

  

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Greater private sector investment, leveraged through sustainable public–private partnerships, is critical to effectively narrow the supply gap in the affordable rental housing market, housing development funder, the Gauteng Partnership Fund (GPF) investment officer Katleho Nchapha has said.

He told Engineering News that, while the fund had secured R430-million in investment from the private sector in 2012, banks and lenders remained reluctant to enter the affordable housing market.

“There is the perception that there is an inherent risk in the low-income housing sector. The risk appetite of banks has also been affected by the collapse of the US housing market, which is coupled with the view that there are low potential returns on investment in the sector,” Nchapha added.

The GPF was established in 2002 by the then Gauteng Department of Housing, with the mandate of resuscitating the social housing market and a focus on rental housing in Gauteng. It has, since its inception, facilitated the development of some 24 000 rental housing units.

This mandate was extended in 2008 to enable the fund to operate across the entire affordable housing value chain to facilitate, catalyse, secure and optimise investment in affordable housing in the province.

The GPF aimed to facilitate funding for 6 000 of the 19 350 residential rental units targeted for provision by provincial government by 2014.

“We play a catalytic role between the public and private sector, where we ensure that progress is made from both sides. We engage with the private sector to raise funding, as well as ensure that project timelines are delivered upon,” he said.

The fund offered potential investors several incentives and returns, including concessionary interest rates, financial risk sharing and ‘patient capital’ with between 15-year and 20-year loan terms.

It also boasted a return on investment of about 12% for affordable brownfield rental housing projects and 8% for affordable greenfield rental projects.

Nchapha added that the drive for enhanced private-sector funding came amid a growing backlog of low-income rental units.

“The backlog is currently estimated at between 800 000 and 850 000 households which still require accommodation. Government alone will not be able to make a dent in this without private sector support,” he commented.

The GPF’s current financing partners included the National Housing Finance Corporation and the Trust for Urban Housing Finance, and it was currently engaging with several fund managers and banks, including the Public Investment Corporation and Standard Bank, to secure additional funding.

Despite private-sector investment aversion, the fund had, from its initial 2002 budget of R450-million, managed to gear up some R2.2-billion in private sector funding, and hoped to leverage additional investments to enable it to scale-up current projects.

Nchapha said the fund had several affordable housing projects at various stages of development, with two completed since its ten-year anniversary in December, and a further eight expected to be completed by the end of the year.

Among these is the Jabulani Views residential development, in Soweto, completed in April 2013, which is located close to an amphitheatre, a retail centre and a commercial or office development.

The development, which caters for people earning between R3 500 and R7 500 a month, is part of a larger development plan for the greater Soweto area and comprises 140 single-bedroom units of 30 m2 and 160 two-bedroom units of 40 m2.

Edited by Creamer Media Reporter

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