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Investing more into Gauteng’s Affordable Housing Market

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Futuregrowth has partnered with the Gauteng Partnership Fund (GPF) to provide funding to property developers investing in projects that add to the supply of rental accommodation in the affordable housing sector in the Gauteng province.

Futuregrowth has committed R250 million of senior debt which will be used to fund developments alongside the GPF’s junior debt and the property developer’s own equity investment into the development.

The GPF is a fund which was established by the Department of Human Settlements, with a vision to be: “The partner of choice in affordable housing delivery in Gauteng”. By focusing on leveraging off the synergies between both the public and private sector as funders of long-term and sustainable housing developments, the GPF and Futuregrowth are a prime example of where the “two worlds” can come together on commercial terms for the greater good of our country.

Hemmingway Heights, Vanderbijlpark - one of the first projects we approved

Many South Africans are faced with a long daily commute to and from work, and in the current economic climate the transport costs eat into people’s incomes to the point that basic needs (like food) can at times be extremely difficult to afford. Imagine earning R10 000 a month, and needing to use a significant portion of this on transport over and above paying for essential items like food, clothing or school fees. This is where the availability of affordable, good quality accommodation close to one’s place of work is a great alternative.  When considering affordability, the following is taken into account:

  • Units are aimed at families with a household income up to R18 000;
  • The monthly rental payments may not take up more than 35% of household income; and
  • Rental developments are located within 10km of a CBD.

The R250 million committed by Futuregrowth on behalf of our clients will be used to fund up to 60% of the total development costs on approved projects. This will be repaid over a 15 year term through the monthly rental income received from the building tenants. The main types of projects that will be funded range from refurbishments/conversion of existing buildings into residential units to greenfield developments, i.e. constructing a residential development on previously vacant or undeveloped land.

The committed funding may also be channelled towards student accommodation. This sector is currently facing a crisis of large proportions due mainly to the shortage in supply of accommodation as well as the unaffordability of some developments. According to a review carried out by Department of Higher Education and Training in 2011, less than 10% of first-year students can be accommodated in the on-campus residences at our public universities as well as the Technical and Vocational Education and Training Colleges. The “Fees Must Fall” movement and students’ grievances are being brought more and more to the fore, a clear indication that something needs to be done. Perhaps a part of the solution to this crisis lies in both the public and private sector “pulling in the same direction” to deliver the units needed at affordable prices to foster a conducive learning environment for this country’s future.

Hemmingway Heights, Vanderbijlpark - one of the first projects we approved

One of the first projects approved as part of this joint-funding agreement with the GPF is a development in Vanderbijlpark called Hemmingway Heights. Situated in southern Gauteng in the Vaal, this affordable rental housing development has 84 units each with two bedrooms and one bathroom. The Vaal is a major industrial region with an established road network and public transport system to service its population and has a wide variety of amenities available for residents. Hemmingway Heights was built by an established and experienced developer who has completed projects in Gauteng as well as KwaZulu-Natal. Construction started in early 2016 and by September 2016 the development had received the required occupation certificate from council allowing the first tenants to move in.

To date, Futuregrowth has approved funding for six developments (four affordable rental housing projects and two student housing projects) with two more projects currently going through our internal credit approval process. Futuregrowth’s main aim is to achieve commercial returns for our clients, in line with the risk being taken, while contributing to the supply of the fundamental need for housing in our country.

By investing alongside a partner like the GPF, we can pool skills and resources to deliver quality, affordable accommodation which is close to people’s places of work. This has a knock-on effect on individuals’ financial health and the well-being of many families in the Gauteng Province.