The International Finance Corporation (IFC) and the National Housing Finance Corporation (NHFC) have committed more than $63-million in investment to global private equity investor International Housing Solutions’ (IHS’s) second affordable housing development fund in South Africa.

The IFC will provide $25-million of the funds.

The first IHS fund, the R2-billion South Africa Workforce Housing Fund, was formed in 2007 and enabled the development of more than 28 000 gap-housing units.

Speaking at the launch of IHS Fund 2 in Johannesburg, on Tuesday, IHS managing partner Soula Proxenos said the second fund would enable the organisation to significantly expand the tangible positive social impact for people in the gap market.

“In partnership with the IFC and the IHS, Fund 2 will be able to leverage foreign direct investment of about R3-billion and private sector investment of about R10-billion,” NHFC CEO Samson Moraba said.

The fund was a ten-year development fund with a four-year investment period, she stated, adding that a section of the fund was allocated to development in the rest of Africa. The IHS would decide which countries to target for investment based on whether they had a functioning mortgage market.

“Because of urbanisation and the growth of the middle class in Africa, the need for housing across the continent vastly outstrips supply, especially in the category of affordable housing. In countries with a functioning mortgage market, that need translates into market demand. This offers investors the opportunity to achieve superior risk-adjusted returns,” Proxenos added.

Moraba stated that, through this investment, the NHFC aimed to make a difference in a housing segment that was not currently served by the public market.

Fund 2 would make appropriate and secure housing available at a scale that could not have been achieved through the NHFC alone, he said.

“With the rapid urbanisation taking place, we acknowledge that, as a government entity, scale does not belong to government. We do not have the infrastructure or funds,” Moraba added.

Scale in the housing sector belonged to the private market and, therefore, a part of the NHFC’s strategy was aimed at determining ways in which the private sector could be leveraged to a greater extent to create the required scale.

Meawhile, also speaking at the launch, IFC Southern Africa senior manager Saleem Karimjee pointed out that this was not a routine investment for the IFC, as the organisation funded a segment of the market that most other financial institutions were reluctant to commit to.

He added that the IHS Fund 2 investment would further assist the IFC in achieving its development objectives of creating housing and employment, while also earning a return.

“Providing affordable basic services, such as access to quality housing, is a priority for the IFC in Africa. IHS Fund 2 offers an attractive opportunity for private investors to gain access to a fast-growing market with a significant positive social impact. IFC’s commitment will stimulate investment, growth and job creation in sub-Saharan Africa, demonstrating our support that can help catalyse additional fundraising,” Karimjee added.

Meanwhile, the IFC also noted that the model that was used to develop the IHS Fund 2 in South Africa could be used to encourage the development of similar programmes in other African countries, he said, adding that the IFC was specifically targeting investment in Ghana.