housing portfolio committee national housing finance corporation 9 - 10 may 2006

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  • HOUSING PORTFOLIO COMMITTEENATIONAL HOUSING FINANCE CORPORATION9 - 10 May 2006

  • ESTABLISHMENTBorn out of the 1994 White Paper on Housing Policy, the National Housing Finance Corporation (NHFC) was established by the National Department of Housing (NDoH) in 1996 as a wholesale lender

  • ESTABLISHMENT

    As a state owned development finance institution, the principal mandate of the NHFC is to broaden access to affordable housing finance for the low- and moderate-income earners of South Africa

  • MANDATEundertake funding as a wholesale intermediary to promote broader access to housingunderwrite the flow of wholesale funds to retail intermediaries (provide cover, security or guarantee)specialise in identifying, assessing, pricing, monitoring and managing risks associated with the placement of wholesale funds with retail intermediaries undertake proactive programs aimed at building institutional and financial capacity at the retail levelmanaging facilitative interventions supporting bank lending for housing in the target market

  • Governance StructureAudit and Risk CommitteeBoard Credit CommitteeHuman Resources Ethics, and Remuneration CommitteeBoard of Directors

  • FUNDING FRAMEWORKFunding FrameworkThe NHFC has Capital and Reserves of R1,846 billion at 31 March 2005. The funds are made up as follows:

    The NHFC is self-sustaining

  • 2004/5 PERFORMANCE

  • FINANCIAL PERFORMANCE 2004/2005 TO BUDGETIncome from lending

    Slow disbursementsNon-performing SHIsClient Consolidation

    (32% below)

    Income from Investment

    Lower disbursements

    (35% above)

    Operating expenses

    Capacitation of Northwest Housing CorporationDonation to Joe Slovo Park

    (7% above)

    Financial performance

    Profit before tax up 1.6%

  • HOUSING IMPACT 2004/2005Supported 8 new housing retail intermediaries 12,767Financed Unit ImpactBroadened Scope to new areas27000 facilitated+

  • LIH ENVIRONMENTDuring 2004/2005:

    Slow pace of housing delivery during the period

    Non-performance of RETAIL intermediaries on the increase

    Disbursements continue to substantially lag Approvals

    The favourable housing conditions prevailing have not filtered to the LIH market

    New Housing Delivery Strategy on the cards Breaking New Ground to Housing Delivery The NHFC responds to the new housing strategy

  • Developments in 2005/6

  • 2005/2006:STRATEGIC PRIORITIESExtend the reach, scope and coverage to the lowest end of marketDevelop the concept for the Housing Bank Model

    FACILITATE the increase of private sector contribution to scale housing delivery - FSCProvide risk-enhancement mechanism

    Through SPECIAL PROJECTS - Address National Priority Projects:E.g. N2 Gateway Rental Housing, Kliptown etc.

    Fund existing and viable housing retail intermediaries wholesale funds

    Provide focused Technical Assistance to housing retail intermediaries Develop. Fund

  • THE 2005/2006 developments

    New Housing Delivery Strategy Created a momentum for fast-tracking housing delivery

    FSC a major catalyst for private sector involvement in LIH

    Favourable housing incentives e.g. exemptions and reductions in transfer and stamp duties

    National Priorities in housing e.g. eradication/transforming of informal settlements, 2014 Agenda

    Integrated approach to delivery sustainable development and human settlements Partnerships

    Low interest rate era - affordability

  • Preview of 2005/2006 performance (Unaudited)

    Income Created a momentum for fast-tracking housing delivery

    FSC a major catalyst for private sector involvement in LIH

    Favourable housing incentives e.g. exemptions and reductions in transfer and stamp duties

    National Priorities in housing e.g. eradication/transforming of informal settlements, 2014 Agenda

    Integrated approach to delivery sustainable development and human settlements Partnerships

    Low interest rate era - affordability

  • UNAUDITED FINANCIAL PERFORMANCE 2005/2006 (BUDGET COMPARISON))Income from lending

    Slow disbursementsNon-performing SHIsClient Consolidation

    (25% below)

    Income from Investment

    Lower disbursements

    (20% )

    Financial performance

    Profit before tax upOperating Expenses

    (18% below)

  • HOUSING IMPACT 2005/2006ACTUAL: 15 515BUDGET: 16 575

  • Strategic Outlook 2006 and beyond

  • STRATEGIC GOALS (2006 Onwards)Finance and facilitate 175-225,000 housing units by 2011;

    Improve and support the development of a vibrant primary and secondary market in LIH by partnering with private and public sector entities;

    Promote and support government priority projects towards achieving sustainable human settlements objectives that aim to eliminate informal settlements by 2014;

    Transform the Corporation for effective delivery and impact while ensuring that it remains financially sustainable in the long term, by implementing corporate-wide efforts to increase revenue, customer orientation, and the efficient use of resources.

  • KEY STRATEGIC THRUSTS AND OUTCOMES

  • CORE BUSINESSPROJECTS (Financing, Packaging, Facilitation)Social Housing ProjectsPublic ProjectsPrivate ProjectsMostly where the 25 000 units will come from

    Direct LendingSetup appropriate comprehensive infrastructureOperationalise as from first Quarter of 2007

  • OVERVIEW OF THE 2006-2009 BUSINESS PLAN25,14633,26641,996200720082009Housing OpportunitiesR787m2006R1,736m2007Loan book impactR800mR1billionR1billion200720082009Funding Requirementsnil2006

  • BUDGET INFORMATION (Previous MTEF)Comparison Actual 2005 to budget 2005 and budgets for planning years 2006 2008 (Submitted in 2005):

  • BUDGETED INCOME STATEMENT FOR THE FINANCIAL YEAR

  • BUDGETED OPERATING EXPENDITURE FOR THE FINANCIAL YEAR

  • KEY CHALLENGESMunicipal Capacity as regards the supply side of Housing Delivery vis;Human ResourceDelaysAccreditationAvailability of subsidies

    Developers not playing in low income marketCurrently servicing high endResults in scarcity in lower end, and illiquidity in the marketFinancial sector charter stalemateNon-resolution on risk enhancement mechanism and conduit

  • SPECIFIC CHALLENGES IN RELATION TO DELIVERY NHFC EXEPRIENCECapitalIn providing a social window to its lending into the retail market NHFC will have to look to the Department of Housing for concessional fundingPolitical Obstruction in certain projectsIndividual political leaders blocking due processRent boycottsRetail Housing Finance IntermediariesDependency on non-banking housing retail institutions that lack institutional and financial capacity results in lower disbursements vis--vis approvalLandAccess to land for housingLand release processes

  • WAY FORWARDNHFC has undertaken bold steps in its aim to make a serious impact in the Low Income Housing environment in the medium to long term. It will need the support and encouragement of all its stakeholders to achieve the goals set.

    The 2007/2009 Business Plan was presented to the Department of Housing on 18 April 2006 and although final approval thereof is awaited.

    Implementation of NHFCs broadened mandate in process

  • OVERALL EXPANDED MANDATE OBJECTIVESDeepen the access, scope and size of impact in the housing market;

    Facilitate the development of markets for affordable housing finance;

    Continue to pilot new interventions in support of the development of sustainable human settlements;

    Promote increased competition to the low income housing market;Expand scope of lending to enable cross-subsidisation of less profitable elements of business;

    Exploit and avail incentives to the market for facilitating affordable housing finance;

    Ability to raise funds and mobilise resources for the sector and channel them for housing.

  • Equity/Procurement/BEE and contribution to ASGISAIn developing the new business model for NHFC for the 2007/2009 period, it was conscious of the need to respond to the:Millennium Development Goals (MDG)Promoting the development integrated human settlements Special focus on slum reductionProcurement policies to promote female and BEE participationASGISA: Skills development and Employment creation through housing construction (labour intensive)Technical assistance (capacity building) accelerating deliveryBreaking New Ground in Housing strategyIncreasing homeownership and quality of human settlements through expanded mandate enabling alternative solutionsImproving access to housing financeFinance Sector CharterRisk enhancement for the industry

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