NHFCNHFCPortfolio CommitteePortfolio Committee

Of HousingOf Housing13 June 200113 June 2001

NHFCNHFCPortfolio CommitteePortfolio Committee

Of HousingOf Housing13 June 200113 June 2001

NATIONAL HOUSING FINANCE CORPORATION NATIONAL HOUSING FINANCE CORPORATION LIMITEDLIMITEDNATIONAL HOUSING FINANCE CORPORATION NATIONAL HOUSING FINANCE CORPORATION LIMITEDLIMITED

The National Housing Finance Corporation is one of five state-owned development finance institutions in South Africa.With initial, permanent capital provided by government, each one supplements its capital with private sector funding.

In this way, partnerships between the public and private sectors are created.

INDUSTRIALDEVELOPMENTCORPORATION

DEVELOPMENTBANK OF

SOUTHERNAFRICA

KHULAENTERPRISE

FINANCE

LAND ANDAGRICULTURAL

BANK

NATIONAL HOUSINGFINANCE

CORPORATION

South AfricanGovernment

Industrialdevelopmentfinance for, andinvestments into, industrialconcerns

Infrastructuredevelopment finance forprovincial/localauthorities,parastatals andutilities

Small, medium and microenterprisedevelopment financefor lending intermediariesfinancing small, mediumand micro enterprises

Agriculturaldevelopmentfinance

Housing developmentfinance forintermediariesfinancing housingand housinginstitutions

In In partnershipspartnerships with the with the

broadest range of broadest range of organisations,organisations,

to to searchsearch for for new new and and betterbetter ways to ways to mobilisemobilise finance for finance for housinghousing, from, from

sourcessources outsideoutside the the statestate......

""The corporation’s endeavours should The corporation’s endeavours should in time ensure that every South African in time ensure that every South African

with a regular source of income can with a regular source of income can gain access to finance to acquire, rent gain access to finance to acquire, rent and/or improve a home of his/her ownand/or improve a home of his/her own””

THE MANDATE . . .THE MANDATE . . .THE MANDATE . . .THE MANDATE . . .

The NHFC seek toThe NHFC seek to

create housing opportunities for the low and create housing opportunities for the low and

moderate income families bymoderate income families by::

Funding intermediaries to promote broader Funding intermediaries to promote broader access to housingaccess to housing

Building adequate and sustainable capacity Building adequate and sustainable capacity within the organisations to which it fundswithin the organisations to which it funds

Partnering organisations to Partnering organisations to pioneer pioneer new new financefinance and and housing deliveryhousing delivery approaches approaches

THE MISSION . . .THE MISSION . . .THE MISSION . . .THE MISSION . . .

Wholesale Debt Funding : R 1 Wholesale Debt Funding : R 1 083m083mWholesale Debt Funding : R 1 Wholesale Debt Funding : R 1 083m083m

Provide credit facilities to retail lenders in low Provide credit facilities to retail lenders in low income housing market – income housing market – existing existing institutionsinstitutions(Rural/Urban):(Rural/Urban): BanksBanks - Unibank, Cash Bank - Unibank, Cash Bank Non-BanksNon-Banks – Agishana, Grand Finance, Mid First, Protea, – Agishana, Grand Finance, Mid First, Protea,

SumexSumex Building Material SuppliersBuilding Material Suppliers – Bonus Building Supplies – Bonus Building Supplies Development CorporationsDevelopment Corporations – Ithala, Mpumalanga – Ithala, Mpumalanga

Challenges / ExperiencesChallenges / Experiences Consolidation / Alliances – extending reach by the big banksConsolidation / Alliances – extending reach by the big banks Environment highly competitive – no room for small lenders, Environment highly competitive – no room for small lenders,

clientsclients Liquidity pressures in this marketLiquidity pressures in this market Blending of credit with SAVINGS and SUBSIDIESBlending of credit with SAVINGS and SUBSIDIES Risk Management become increasingly importantRisk Management become increasingly important

Build & Capacitate new Inst: R Build & Capacitate new Inst: R 170m170mBuild & Capacitate new Inst: R Build & Capacitate new Inst: R 170m170mSHFSHF provides capacitation of new housing provides capacitation of new housing

institutionsinstitutions Fund housing projects of the Fund housing projects of the housing housing

institutionsinstitutions for for alternative tenurealternative tenure – promote – promote Social HousingSocial Housing:: Rental stock Rental stock - SEMAG, Greater Germiston, Durban Metro, - SEMAG, Greater Germiston, Durban Metro,

HAELHAEL Rent-to-BuyRent-to-Buy – CTCHC, Reatlehile – CTCHC, Reatlehile Installment SalesInstallment Sales – CTCHC, ABAHLALI – CTCHC, ABAHLALI Co-operativesCo-operatives – COPE, NEWTOWN HOUSING CO. – COPE, NEWTOWN HOUSING CO.

Challenges / ExperiencesChallenges / Experiences Setting time of viable housing institutions – 18 approx. Setting time of viable housing institutions – 18 approx.

monthsmonths Project have to be scale magnitude – approx. 3000 unitsProject have to be scale magnitude – approx. 3000 units Grant funding is crucial at early stages of the projectGrant funding is crucial at early stages of the project Vat and Income Tax Exemption – make them sustainableVat and Income Tax Exemption – make them sustainable Enabling regulatory environment – Rental Housing ActEnabling regulatory environment – Rental Housing Act

Partnering other Partnering other Organisations…Organisations…Partnering other Partnering other Organisations…Organisations…

Intent to deliver housing and housing finance Intent to deliver housing and housing finance at at scalescale

In 1999, setup Gateway Home Loans(PTY) - In 1999, setup Gateway Home Loans(PTY) - PPPPPP

Loan OriginationLoan Origination and and ServicingServicing by major by major banks – end up in banks – end up in SecuritisationSecuritisation : Accredited : Accredited LendersLenders Designed a Non-Mortgage financial instrument : Makhulong Designed a Non-Mortgage financial instrument : Makhulong

Home Loan – Pension provident fund backed / other forms of Home Loan – Pension provident fund backed / other forms of collateralcollateral

BanksBanks – SBSA, NEDCOR, AFRICAN BANK, CASH BANK, ETC – SBSA, NEDCOR, AFRICAN BANK, CASH BANK, ETC

Lessons LearntLessons Learnt Need for Primary Market stimulation – no big banks in this Need for Primary Market stimulation – no big banks in this

marketmarket Need for policies/regulation to facilitate the banks Need for policies/regulation to facilitate the banks

involvementinvolvement Scale delivery is crucial for successful securitisationScale delivery is crucial for successful securitisation

Risk Enhancement mechanisms – NHFC to assume greater Risk Enhancement mechanisms – NHFC to assume greater riskrisk

Performance TO-DATE Performance TO-DATE “HIGHLIGHTS”“HIGHLIGHTS”

Performance TO-DATE Performance TO-DATE “HIGHLIGHTS”“HIGHLIGHTS”

NHFC Approvals and NHFC Approvals and DisbursementsDisbursementsNHFC Approvals and NHFC Approvals and DisbursementsDisbursements

0

200

400

600

800

1000

1200

1400

1997 1998 1999 2000 2001

Approvals

Disbursements

Rm (Annual)

Number of End User Loans…Number of End User Loans…Number of End User Loans…Number of End User Loans…

0

50000

100000

150000

200000

1997 1998 1999 2000 2001

End UserLoans

Number of Housing Units…Number of Housing Units…Number of Housing Units…Number of Housing Units…

0

10000

20000

30000

40000

50000

60000

70000

80000

1997 1998 1999 2000 2001

Housing Units

Social Impact of the NHFC…Social Impact of the NHFC…Social Impact of the NHFC…Social Impact of the NHFC…

Potentially more Potentially more 2,5 million2,5 million low and low and moderate income families’ moderate income families’ quality of lifequality of life would would be improved due to NHFCs funding activitiesbe improved due to NHFCs funding activities

EXAMPLES OF PROJECTS FUNDED EXAMPLES OF PROJECTS FUNDED BY THE NHFC…BY THE NHFC…

EXAMPLES OF PROJECTS FUNDED EXAMPLES OF PROJECTS FUNDED BY THE NHFC…BY THE NHFC…

CTCHC – WESTERN CAPECTCHC – WESTERN CAPECTCHC – WESTERN CAPECTCHC – WESTERN CAPE

Mitchells PleinMitchells Plein

ABAHLALI - EASTERN CAPEABAHLALI - EASTERN CAPEABAHLALI - EASTERN CAPEABAHLALI - EASTERN CAPE

Port Elizabeth / Nelson Mandela MetroPort Elizabeth / Nelson Mandela Metro ABAHLALIABAHLALI……

TSUTSUMANI - GAUTENGTSUTSUMANI - GAUTENGTSUTSUMANI - GAUTENGTSUTSUMANI - GAUTENG

AlexanderAlexander SEMAG ( All Africa Games )SEMAG ( All Africa Games )

DURBAN METRO - KZNDURBAN METRO - KZNDURBAN METRO - KZNDURBAN METRO - KZN

Durban Durban

Housing Budget Relevance… Housing Budget Relevance… Housing Budget Relevance… Housing Budget Relevance… Initially Initially capitalisedcapitalised by SA Government : by SA Government :

Seed Capital Seed Capital

CURRENT YEAR : 2001/2002 – CURRENT YEAR : 2001/2002 – No Allocation No Allocation from Budgetfrom Budget

Current Capital Structure :Current Capital Structure : Seed CapitalSeed Capital R 880mR 880m Debentures from Debentures from Private SectorPrivate Sector R R

100m100m Distributable Reserves/ProfitDistributable Reserves/Profit R R

350m350m R 1 R 1

330m330m Financial Vision - Longer term Financial Vision - Longer term goalgoal is to is to

be self-sustainable…be self-sustainable…

ExtendExtend the housing finance market the housing finance market down-stream : accommodate the low down-stream : accommodate the low income householdsincome households

Unlock Unlock private sector capital into the private sector capital into the NHFC target marketNHFC target market

EnsureEnsure that there is that there is increased increased competitioncompetition in this sector of the market in this sector of the market

Improve on the Improve on the internal internal efficienciesefficiencies

Challenges for the NHFC…Challenges for the NHFC…Challenges for the NHFC…Challenges for the NHFC…Financial…Financial… Where the Where the nextnext funding for the Corporation funding for the Corporation

would come from – would come from – Self SustainabilitySelf Sustainability Link Link SavingsSavings and and SubsidiesSubsidies to to CreditCredit

(package (package betterbetter affordability levels with a affordability levels with a quality product delivered)quality product delivered)

IncreaseIncrease private sector investment in the low private sector investment in the low income housing market – “risk enhancement” income housing market – “risk enhancement” mechanismsmechanisms

Run a Run a Cost Effective OperationCost Effective Operation – “ – “Lean and Lean and MeanMean””

Conform to all the Public Finance Management Conform to all the Public Finance Management Act regulations ( already do )Act regulations ( already do )

Challenges for the NHFC…Challenges for the NHFC…Challenges for the NHFC…Challenges for the NHFC…

Housing Impact…Housing Impact… Putting the “Putting the “roof over peoples head”roof over peoples head” : :

MANDATE!!!MANDATE!!! Deliver finance for Deliver finance for ALLALL forms of Low Income forms of Low Income

Housing Housing OwnershipOwnership ( including, the Urban Renewal Projects ) ( including, the Urban Renewal Projects ) Alternative TenureAlternative Tenure : Rental / Rent-To-But / Installment Sale : Rental / Rent-To-But / Installment Sale IncrementalIncremental : Thrust of the RURAL housing market (in line : Thrust of the RURAL housing market (in line

with the Presidential Integrated Sustainable Rural with the Presidential Integrated Sustainable Rural Development Strategy - ISRDS)Development Strategy - ISRDS)

How to deal with the How to deal with the AIDSAIDS factor that is most factor that is most

prevalent in this target marketprevalent in this target market Work with other Work with other NGOs to NGOs to quantify the magnitude and the quantify the magnitude and the

likely impact of AIDS among the likely impact of AIDS among the LIHLIH

Explore housing solution options for the Explore housing solution options for the AIDSAIDS sufferers sufferers

Challenges for the NHFC…Challenges for the NHFC…Challenges for the NHFC…Challenges for the NHFC…

Policy…Policy… Effectively use the Effectively use the policy instrumentspolicy instruments such as such as

the the HLMDAHLMDA and theand the CRACRA to to ensureensure maximum maximum participation by the private sector e.g. banks participation by the private sector e.g. banks and non-banking financial and insurance and non-banking financial and insurance institutions in the low income marketinstitutions in the low income market

Stipulation of “Stipulation of “ENABLING MEASURESENABLING MEASURES / / EXEMPTIONSEXEMPTIONS” that will ensure the NHFC can ” that will ensure the NHFC can fulfillfulfill its its public mandatepublic mandate

Challenges for the NHFC…Challenges for the NHFC…Challenges for the NHFC…Challenges for the NHFC…

Private Sector Participation…Private Sector Participation… Innovative financial structuringInnovative financial structuring : :

Aggressive risk “Aggressive risk “Enhancement MechanismsEnhancement Mechanisms” ” ( Strategic Thrust ) ( Strategic Thrust )

Through “Through “Enabling MeasuresEnabling Measures”, the NHFC ”, the NHFC becoming a becoming a strategic partnerstrategic partner to to private private sectorsector – the spirit of PPP extended – the spirit of PPP extended

“ “Implicit GuaranteeImplicit Guarantee” by the Government – ” by the Government – To enable the NHFC to deliver lower costs of To enable the NHFC to deliver lower costs of fundingfunding

ConclusionConclusionConclusionConclusion

NHFC’s Mandate : “Putting the Roof Over NHFC’s Mandate : “Putting the Roof Over

People’s Head”People’s Head” Strategic Focus :Strategic Focus :

Self Sustainability – Question of future fundingSelf Sustainability – Question of future funding Focused on Housing Delivery Agenda Focused on Housing Delivery Agenda Establishment of “Establishment of “Enabling ArrangementsEnabling Arrangements” – We need ” – We need

Your HelpYour Help Normalisation of the housing finance sector among Normalisation of the housing finance sector among

the low and moderate income familiesthe low and moderate income families

Thank You – Portfolio Committee of HousingThank You – Portfolio Committee of Housing