Standard Bank remains committed to funding affordable housing developments

Posted On Thursday, 04 September 2014 15:18 Published by
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Standard Bank, Africa's biggest lender by assets and earnings, remains committed to funding affordable housing developments and continues to see healthy demand for homes in this segment.

Affordable housing

This is despite the challenging economic conditions facing South African consumers. The funding solutions available from Standard Bank are specifically tailored to affordable housing initiatives that provide housing opportunities priced at between R300, 000 and R580, 000 per unit.

"In the real estate sector, the affordable housing market is one of our key strategic focus areas," said Ms Somaya Joshua, Head: Residential Development Finance, Gauteng at Standard Bank's Real Estate Finance division, speaking from the 6th Annual International Housing Solutions Affordable Housing Conference in Johannesburg.

"This is not only due to the massive shortfall in available housing stock in this segment but also because of the role that affordable housing developments can play in transforming South Africa's socio-economic landscape. When you fund an affordable housing development you're not just building houses, you're building communities."

South Africa's Ministry of Human Settlements estimates that the shortfall in the affordable housing market is approximately 600,000 units. For the purposes of its funding initiatives, Standard Bank has chosen to align to the financial sector charter which defines the affordable housing segment as developments which provide homes priced at levels which cater to households with total monthly incomes of between R3, 500 and R18, 000.

Supply is still not keeping pace with demand. "As a bank we will continue to play an active role in funding this sector in partnership with developers who have an established track record in the sector," says Ms Joshua. "There is greater risk in funding the developer in an affordable housing scheme rather than the end user," says Ms Joshua.

"If we don't apply the requisite criteria in order to ensure that we lend responsibly we would potentially end up harming the end user as a failed development means financial resources are wasted on homes that don't end up being built."

Standard Bank's unwavering commitment to the end-user in the affordable housing space was recognised by the Department of Human Settlements which awarded it the 'Best Bank Award" at its annual gala dinner on 25 August. One in three affordable homes in South Africa are currently funded by Standard Bank, which has been providing more than R3billion a year in mortgage finance to consumers looking to purchase homes in this segment in the last 3 and half years .

"While we do expect some pressure on the affordable housing market from higher interest rates and compounding inflationary pressure going forward, we still expect to see positive growth in this segment and expect it to continue to outpace inflation as well as the rest of the residential housing market," Ms Nolwazi Nzama, Head of Affordable Housing at Standard Bank, said at the Affordable Housing Conference.

"The performance of this book is well within the bank's defined risk parameters while demand dynamics in this under serviced market make it a very stable and attractive proposition."

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