Foreign investment in affordable housing in South Africa
The need for development of affordable housing in urban areas has increased tremendously over the last 10 years. The rate of employment in the main metropols compared to outlying areas continues to contribute significantly to this increase as more people are inclined to move towards the metropol areas in search of greater job opportunities.
According to the Human Settlements’ department annual report their goal is to achieve the establishment of 400 000 households by the end of 2012 and also to facilitate 600 000 housing opportunities in the gap market for people who earn between R3 500 and R12 800 monthly. Goals that are highly achievable as international investors are now investing in the South African residential property market.
IHS (International Housing Solutions) has to date raised R1.9 billion for both our sales and rental residential market.
IHS has substantial international backers. Based on the performance of their initial funding to date, there will be more capital made available for investment in the South African real estate market. Rob Wesselo, Managing Partner of IHS South Africa, says, “We believe that this market is getting better and better. Rapid urbanisation is causing the supply gap to grow at a rapid rate as supply is hindered by the conservative lending by banks and capacity constraints at municipal levels.”
The IHS has thus far provided funding for 33 projects with approximately 25 000 units across all major urban centres in South Africa. Their rental portfolio comprises 5 000 units which to date has performed above expectations. Rob says that the IHS has commissioned a study on the social impact of the affordable housing sector, as it believes the sector is punching above its weight in terms of financial as well as social return on investment. He also added that he believes that there is no industry that creates as many job opportunities as construction so there is a double impact with their investment, not only are they creating jobs but also provide families with homes. Wesselo added that foreign investors are keen to invest in Africa`s emerging market and this sector offers them a niche opportunity to invest in the burgeoning lower and middle class of South Africa.