NHFC Portfolio Committee Of Housing 13 June 2001

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NHFCPortfolio CommitteeOf Housing13 June 2001
NATIONAL HOUSING FINANCE CORPORATION LIMITED
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South African Government
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.
KHULA ENTERPRISE FINANCE
NATIONAL HOUSING FINANCE CORPORATION
DEVELOPMENT BANK OF SOUTHERN AFRICA
LAND AND AGRICULTURAL BANK
INDUSTRIAL DEVELOPMENT CORPORATION
Industrial development finance for,
and investments into, industrial concerns
Infrastructure development finance
for provincial/local authorities, parastatals
and utilities
Small, medium and micro enterprise development
finance for lending intermediaries financing
small, medium and micro enterprises
Housing development finance for intermediaries fin
ancing housing and housing institutions
Agricultural development finance
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THE MANDATE . . .
In partnerships with the broadest range of
organisations, to search for new and better ways
to mobilise finance for housing, from sources
outside the state... "The corporations
endeavours should in time ensure that every South
African with a regular source of income can gain
access to finance to acquire, rent and/or improve
a home of his/her own
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THE MISSION . . .

• The NHFC seek to
• create housing opportunities for the low and
• moderate income families by
• Funding intermediaries to promote broader access
  to housing
• Building adequate and sustainable capacity
  within the organisations to which it funds
• Partnering organisations to pioneer new finance
  and housing delivery approaches

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Wholesale Debt Funding R 1 083m

• Provide credit facilities to retail lenders in
  low income housing market existing
  institutions(Rural/Urban)
• Banks - Unibank, Cash Bank
• Non-Banks Agishana, Grand Finance, Mid First,
  Protea, Sumex
• Building Material Suppliers Bonus Building
  Supplies
• Development Corporations Ithala, Mpumalanga
• Challenges / Experiences
• Consolidation / Alliances extending reach by
  the big banks
• Environment highly competitive no room for
  small lenders, clients
• Liquidity pressures in this market
• Blending of credit with SAVINGS and SUBSIDIES
• Risk Management become increasingly important

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Build Capacitate new Inst R 170m

• SHF provides capacitation of new housing
  institutions
• Fund housing projects of the housing
  institutions for alternative tenure promote
  Social Housing
• Rental stock - SEMAG, Greater Germiston, Durban
  Metro, HAEL
• Rent-to-Buy CTCHC, Reatlehile
• Installment Sales CTCHC, ABAHLALI
• Co-operatives COPE, NEWTOWN HOUSING CO.
• Challenges / Experiences
• Setting time of viable housing institutions 18
  approx. months
• Project have to be scale magnitude approx.
  3000 units
• Grant funding is crucial at early stages of the
  project
• Vat and Income Tax Exemption make them
  sustainable
• Enabling regulatory environment Rental Housing
  Act

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Partnering other Organisations

• Intent to deliver housing and housing finance at
  scale
• In 1999, setup Gateway Home Loans(PTY) - PPP
• Loan Origination and Servicing by major banks
  end up in Securitisation Accredited Lenders
• Designed a Non-Mortgage financial instrument
  Makhulong Home Loan Pension provident fund
  backed / other forms of collateral
• Banks SBSA, NEDCOR, AFRICAN BANK, CASH BANK,
  ETC
• Lessons Learnt
• Need for Primary Market stimulation no big
  banks in this market
• Need for policies/regulation to facilitate the
  banks involvement
• Scale delivery is crucial for successful
  securitisation
• Risk Enhancement mechanisms NHFC to assume
  greater risk

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Performance TO-DATE HIGHLIGHTS
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NHFC Approvals and Disbursements
Rm (Annual)
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Number of End User Loans
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Number of Housing Units
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Social Impact of the NHFC

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

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EXAMPLES OF PROJECTS FUNDED BY THE NHFC
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CTCHC WESTERN CAPE

• Mitchells Plein

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ABAHLALI - EASTERN CAPE

• Port Elizabeth / Nelson Mandela Metro
• ABAHLALI

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TSUTSUMANI - GAUTENG

• Alexander
• SEMAG ( All Africa Games )

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DURBAN METRO - KZN

• Durban

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Housing Budget Relevance

• Initially capitalised by SA Government Seed
  Capital
• CURRENT YEAR 2001/2002 No Allocation from
  Budget
• Current Capital Structure
• Seed Capital R 880m
• Debentures from Private Sector R 100m
• Distributable Reserves/Profit R 350m
• R 1 330m
• Financial Vision - Longer term goal is to be
  self-sustainable

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• Extend the housing finance market down-stream
  accommodate the low income households
• Unlock private sector capital into the NHFC
  target market
• Ensure that there is increased competition in
  this sector of the market
• Improve on the internal efficiencies

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Challenges for the NHFC

• Financial
• Where the next funding for the Corporation would
  come from Self Sustainability
• Link Savings and Subsidies to Credit (package
  better affordability levels with a quality
  product delivered)
• Increase private sector investment in the low
  income housing market risk enhancement
  mechanisms
• Run a Cost Effective Operation Lean and Mean
• Conform to all the Public Finance Management Act
  regulations ( already do )

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Challenges for the NHFC

• Housing Impact
• Putting the roof over peoples head
  MANDATE!!!
• Deliver finance for ALL forms of Low Income
  Housing
• Ownership ( including, the Urban Renewal Projects
  )
• Alternative Tenure Rental / Rent-To-But /
  Installment Sale
• Incremental Thrust of the RURAL housing market
  (in line with the Presidential Integrated
  Sustainable Rural Development Strategy - ISRDS)
• How to deal with the AIDS factor that is most
• prevalent in this target market
• Work with other NGOs to quantify the magnitude
  and the likely impact of AIDS among the LIH
• Explore housing solution options for the AIDS
  sufferers

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Challenges for the NHFC

• Policy
• Effectively use the policy instruments such as
  the HLMDA and the CRA to ensure maximum
  participation by the private sector e.g. banks
  and non-banking financial and insurance
  institutions in the low income market
• Stipulation of ENABLING MEASURES / EXEMPTIONS
  that will ensure the NHFC can fulfill its public
  mandate

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Challenges for the NHFC

• Private Sector Participation
• Innovative financial structuring Aggressive
  risk Enhancement Mechanisms ( Strategic Thrust
  )
• Through Enabling Measures, the NHFC becoming a
  strategic partner to private sector the spirit
  of PPP extended
• Implicit Guarantee by the Government To
  enable the NHFC to deliver lower costs of funding

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Conclusion

• NHFCs Mandate Putting the Roof Over
  Peoples Head
• Strategic Focus
• Self Sustainability Question of future funding
• Focused on Housing Delivery Agenda
• Establishment of Enabling Arrangements We
  need Your Help
• Normalisation of the housing finance sector
  among the low and moderate income families
• Thank You Portfolio Committee of Housing