Housing in Southern Africa July 2015

SUBSIDY HOUSING NURCHAensures the availability of bridging finance to small, med i um and es tab l i shed contractors building low-cost housing and related community facilities and infrastructure. I n Subsidy Housing, NURCHA’s portfolio improved and achieved a staggering 121% growth, with the increase in deals enabling the roll out of 9 773 sites and houses, compared to 4 428 in the previous financial year. Gaining momentum in tight fis- cal conditions, NURCHA’s new loans increased substantially by 47%, from R55,481 million to R81,791 million. Notably, the value of the projects escalated to a whopping R864, 035 million compared with R349,911 mil- lion last year. This all bodes well for NURCHA as a recognised champion in providing subsidy housing and infrastructure. According to Dini Piki, Programme Manager: Subsidy Housing and Infra- structure, NURCHA received 46 loan applications totalling R231,2million. With years of experience in home loans under his belt, Piki says: “The high fallout rate of 46% on applica- tions received versus the actual number of loans signed remains a challenge. One of the main reasons for this is the inability of contractors to supply all the required documen- tation to process a loan application requirements. NURCHA’s amended lending crite- ria and additional support services to emerging contractorswill address this challenge and NURCHA is confident that the volume of loans receiving approval will show a sharp increase in the next financial year.” Managing the debtors’ book with his banking expertise, Piki recognises the need to assist contractors (spe- cifically emerging contractors) with working capital to start work on site. NURCHA’s ability to meet small con- tractor funding needs is only feasible if risks are closely monitored and ad-

ditional construction support services are provided. NURCHAhas introduced more lenient credit criteria under the Contractor Finance andDevelopment Programme to achieve this. DIVERSIFIED PRODUCT RANGE NURCHA embarked on a series of national roadshows and workshops for contractors and developers across the country and the new product of- ferings have contributed to increasing its market share. More than 600 new potential contractors in Port Elizabeth, East London, Mthatha, Durban, CapeTown and Johannesburg and as far afield as Mpumalanga and the North West attended the roadshows. This resulted in four more addi- tional loan types, which will ensure that NURCHA is able to assist a greater number of contractors with working capital. In order to be self- sustainable, NURCHA is extremely cautious in providing developer fi- nance as this money has to be repaid in order to continuously fund more projects to meet its human settle- ments delivery mandate. Overdue loans equated to 20% of the regular loan book. NURCHA’s financial year end coincides with the year end of the employer’s (provincial department of human settlements). During the last quarter of the finan- cial year, provincial departments of human settlements had already ex- hausted their budget. This has caused a delay in payments which will be rectified once newbudget allocations have been finalised.

GROWTH IN LOAN BOOK Loan values have grown significantly in the last year and utilisation of loan is on average 40% of the loan value approved. INFRASTRUCTURE AND COMMUNITY FACILITIES This programme has issued loans to the value of R56 million. In line with the organisational strategy of scaling down the infrastructure lending pro- gramme, as a result of losses suffered in previous years. The programme has been amend- ed to certificate-only lending and the advance rate has been reduced from 90% to 80%. There is no funding provided for materials on or off-site. Two loans signed in the current financial year are for schools, which are key in the development of sustainable human settlements. Other infrastructure projects will be considered subject to the contrac- tor meeting certain funding require- ments. FIVE YEAR STRATEGY Piki says: “NURCHA’s five-year plan focuses on strategic growth areas This includes women contractors, housing for military veterans, back- yard rentals, subsidy housing and infrastructure inmining towns includ- ing Free State (Matjhabeng), North West (Rustenburg), Mpumalanga (Emlahleni) and the Eastern Cape.” ■

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