Presentation to the Portfolio Committee for Housing

29 APRIL 2002

Agenda

1. Mandate and Mission2. Strategic Overview– NHFC’s Context :

• The South African Housing Finance System• The Housing Institutional Environment• The NHFC Primary and Secondary Responsibilities• Implications for the Corporation

3. NHFC Performance4. Challenges for the Corporation5. Budget Highlights - 20036. Budget Overview 2003/57. Conclusion

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 corporation’s endeavours should in time ensure that every South African with a regular source of income can gain access to finance for buying or renting or incrementally building or improving his/her own home”

Mission

The NHFC seeks to create housing opportunities for the low and moderate income families by: FundingFunding or UnderwritingUnderwriting the funding of intermediaries and institutions to promote broader access to housing and housing finance FacilitateFacilitate the building of Adequate and Sustainable capacity within the organisations and institutions that it funds PartneringPartnering organisations and institutions to deliver innovative housing finance solution options

The SA Housing Finance System

Capital Markets (Banks,Investors, Life/Pension Funds

REGULATION Parastatals(e.g. NHFC)

Govt

Loan secured by property, lower LTV

ratiosLending

Institutions

LOAN UNDERWRITING

LOAN ORIGINATION

LOAN SERVICING

BANKS

Non Mortgage Security

NON-BANKS

NGOs

DepositorsDepositors Borrowers

SubsidyBeneficiaries

The Institutional Environment

Rent

Own

ConstructionAnd Credit mobilisation

Stabilising the HousingEnvironment

Servcon

Property in Possession

NURCHA

NHBRC

THUBELISHA

Right sizing

DEVELOPER (Bridging Finance)

RURAL HOUSINGLOAN FUND

End-userGuarantees

Financialintermediary

Capacity Building

Ensure Quality Housing

Funding or Guarantee the Funding

SOCIAL HOUSINIG FOUNDATION

Rural Micro-Finance

NHFC Primary Responsibilities…

Stimulate the Primary and the Secondary

market in the low and moderate income housing

sector Undertake the funding as a wholesale

intermediary and act as a fund manager Specialise in identifying, assessing, pricing,

monitoring and managing the risks associated

with the placement of funds Promote Alternative forms of tenure Partner with established institutions in

providing innovative housing finance solution

options Successfully implement the Presidential Job

Summit Housing Pilot Project

NHFC Secondary Responsibilities…

Research and Product development Improve Access to housing finance Build / Support housing finance capacity Specialise – Develop, align and implement credit

and other standards in the LIH (unique sector –

appropriate standards) Pilot funding programs that would improve the

performance of the sector

Implications for the NHFC

Sustainability of both Niche / Retail Lenders and Housing Institutions – Capitalisation and Capacity Building Issues

Facilitate entry of the private sector into the LIH – Risk-enhancement mechanisms

Raise additional Capital from the markets – Cost of Funding of the Corporation

Effective linkage of subsidies to housing programmes – Subsidies, Savings, Equity and Credit to deliver better affordability levels and draw developers to this market

Diverse and highly skilled work force

NHFC’s Performance…

Primary Market Stimulation : Since Inception

Increased access to housing through micro-finance products

Created capacity of alternative / niche lenders in the LIH sector – 25 new intermediaries

Solely funded ALL housing institutions that have delivered high quality stock in most areas – GGICHC, HAEL, GMHA, CTCHC, etc.

In 1999, established Gateway Home Loans to deliver home ownership at scale using the secondary market process

Now… Continues to stimulate the primary market by

improving liquidity and supporting capacity building the sector

NHFC’s Performance…

Partnership : Since Inception No sustained partnership in place as

yet Lessons about partnership :

High risk perceptions – leading to PPP that would be based on :

No risk-sharing – 100% guarantees No value for money

Indicator Now Target 2002/3

Cum. Approvals R 1.5bn R 1.9bn

Cum. disbursement R 1bn R 1.5bn

No of houses delivered

80 397 90 500

No of loans granted 195 043 205 000

No of new Intermediaires

25 28

Undertaking Wholesale Funding…

NHFC’s Performance…

NHFC Housing Impact – TO-DATE

HOUSING IMPACTHOUSING IMPACT TOTAL TO DATETOTAL TO DATE

Complete housing units financedComplete housing units financed 80, 39780, 397

Incremental housing loans Incremental housing loans grantedgranted

489 480

Number of people benefitedNumber of people benefited 2,47 million2,47 million

NHFC’s Performance…

Challenges…

Environmental…Environmental… Successfully attracting the private Successfully attracting the private

sector is a challenge – risk-sharingsector is a challenge – risk-sharing Integration and co-ordination within the Integration and co-ordination within the

housing sectorhousing sector Integrating capacity across government Integrating capacity across government

institutions e.g. SMME, Infrastructureinstitutions e.g. SMME, Infrastructure Integrated support of financing Integrated support of financing

initiatives of governmentinitiatives of government The primary market in this is highly The primary market in this is highly

dysfunctionaldysfunctional

Challenges…

NHFC Specific…NHFC Specific… Demise of small banks – potential to deliver Demise of small banks – potential to deliver

in this market – Saambou, FBC, etc.in this market – Saambou, FBC, etc.

Market consolidation results into loss of Market consolidation results into loss of

capacity – Cashbankcapacity – Cashbank

Inadequate capacity of alternative lenders to Inadequate capacity of alternative lenders to

take-over the gap created and be responsible take-over the gap created and be responsible

custodians of the monies channeled thru themcustodians of the monies channeled thru them

Tendency to “dump” housing stock Tendency to “dump” housing stock

The housing back-log keeps on increasing, The housing back-log keeps on increasing,

yet there is inadequate capacity to do deliveryet there is inadequate capacity to do deliver

Accelerated delivery on the Job SummitAccelerated delivery on the Job Summit

Budget Highlights…

Priorities of the Corporation…

Prudently, grow the lending business of the Corporation and thus improve on its housing delivery impact

Continuously enhance the Corporation’s Risk Management capacity and competency

Attain accelerated delivery on the Job Summit Pilot Project

Effectively implement the Corporations processes and systems – Drive Speed, Flexibility and Impact

Focus on the need to challenge, develop and retain the best people in the Corporation

Improve the Corporations Marketing and Communication with all its Stakeholders

Budget Overview 2002/5

• Deliver housing finance to a cumulative total of 334,000 households (of which 30,500 new and 7,500 existing houses) in most provinces;

• Facilitate the building of capacity in the housing and housing finance sector by supporting 11 new and emerging housing finance intermediaries and housing institutions;

• Change the housing finance environment through promoting new loan products, relevant delivery channels, supporting appropriate regulatory & policy frameworks and new housing options.

THANK YOU