Re-imagining Finance For Housing and Human Settlements ... Settlements Summit... · funding so as...
Transcript of Re-imagining Finance For Housing and Human Settlements ... Settlements Summit... · funding so as...
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"Re-imagining Finance For Housing andHuman Settlements Development”
21 September 2017 – Human Settlements Development Summit
Human SettlementsDevelopment Bank
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Agenda
1. The Key Development Challenge
Some Choices, Trade Offs and Non-Negotiables
Strategic Objectives and Examples
What Customers can Expect
Key Activities
2. Multiple Solutions
3. Discussions
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The key development challenge
• Housing Backlog• Affordability Thresholds• Limited private sector participation• Limited/fragmented funding in Human Settlements• Limited Developmental Outcomes
A massive challenge, on adaunting scale
• Land• Development• Operations and Maintenance and• Financing
However, the challenge is notonly solved just by unlocking
finance and catalysinginvestments
Supported by a robust Housing Delivery Platform made up ofStakeholder Engagement
Sustainable FundingDelivery Model
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HumanSettlements
DevelopmentBank
Serves as acatalyst for
change in thehuman
settlementsfunding and
financing role(redefinition)
Additionality:“…Activitiesthat HSDBis
able to impactbeyond thatwhich would
have occurred
Focus inaddressing
market failurethru innovativefinancing andeffective risk
mitigationinstruments
Support theeffective
transformationof the humansettlements
sector
Some Choices, Trade-Offs andNon-Negotiables…
Human Settlements Development Bank (HSDB): Business Case Slide 414 September 2017
• In order to meet the humansettlements finance needs ina sustainable manner, acoordinated and integratedfinancial institutionalstructure is required that isable to effectively leveragegovernment grants,wholesale and investmentfunding so as to maximiseprivate sector funding andparticipation, as wellhousehold contributions.
• The core to what we doresides in the need toprovide effectivegovernment financingsupport to key segments ofthe housing market, in theface of considerable marketfailure, significant need anddeclining fiscus.
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Strategic Objectives
Human Settlements Development Bank (HSDB): Business Case Slide 514 September 2017
Increase the provision of finance across the human settlements value chain
Increase the Private Sector Leveraging capability
Enhance Integration and coherence of Human Settlements grants with othersources of funding to create scale – Fund Mobilisation
Remain sustainable while pursuing development objectives
Support effective transformation of the human settlements sector
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Increase the provision of finance across the HS Value Chain…
Improve Access to housing finance: three policy themes :– Reduce Loan Origination costs – Underwriting Risk, MDI– Reduce costs of Funding – Liquidity / Wholesale facilities, e.g. MBSecurities– Leverage Collective Savings to Reduce rates – Pension/Provident Fund, GEHS
De-Risking or Guaranteeing or Subsidising Developers
Improve Rental Markets – Social and Private
Human Settlements Development Bank (HSDB): Concept and Roadmap Slide 621 November 2016
Non-Financial Financial• Fast track approval time-frame • Where Equity and Debt required• Facilitate take-offs • Risk mitigation• Facilitate land availability • Developer tax incentives
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Increase the private sector leveraging capacity…
Risk Enhancements instruments
– Playing a catalytic role in attracting other investors and lenders by e.g.taking equity, junior and mezzanine debt
– Position as a Lead Arranger / Syndicator to facilitate lending in anunchartered markets
– Offer guarantees to mitigate high risk perceptions
– Push the innovation envelop in the sector thru risk mitigation , JVs, etc.
Human Settlements Development Bank (HSDB): Concept and Roadmap Slide 721 November 2016
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Support the effective transformation of the HS Sector …
Equity and Investment Strategy to achieve the following:
A. Economic and Enterprise Development
• Playing a catalytic role in attracting other investors and lenders
• Provision of risk capital to facilitate lending within sound gearing levels
B. Project Preparation Financing (risk capital) – Pre Equity Financing to Projects
Financing of:
• Feasibility Studies and
• Project Design
to de-risk the project to make it bankable and attractive to Financial and Commercial Investors
Human Settlements Development Bank (HSDB): Concept and Roadmap Slide 821 November 2016
ConfidentialKey Activities
Human Settlements Development Bank (HSDB): Business Case Slide 914 September 2017
Lender / Lead Arranger
Risk Mitigation (Higher Risk Appetite)
Risk intervention in managing housing value chains inefficiencies Address risk of all players – lenders, developers, home buyers
Fund Mobiliser
Champion Innovation in Partnership with Private sector New Product design Housing subsidy innovation Explore financing opportunities across value chain
Specific sector Transformation agenda Entrepreneurial level - Increase PDIs level of participation (contractors, developers, property
landlords) Household level- affordability, facilitate solution options for over- indebtedness and deep Rural
market penetration
Champion Market Knowledge Continuously track, analyse and interrogate market performance
ConfidentialWhat do our customers expect from us
Human Settlements Development Bank (HSDB): Business Case Slide 1014 September 2017
FacilitatorFacilitator
1. Credit Guarantees2. Payment Guarantees3. Insurance Products4. FLISP5. Product Innovation
support
InvestorInvestorLenderLender
Risk Capital Provider
1. *Equity Investments2. *Strategic Investments
using Junior, Mezzanineand Debt instruments
1. Mortgage-backed finance2. Non-mortgage lending3. Developer finance4. Bridging Finance for
Contractors
AdvisorAdvisor
1. Technical Assistance2. Transaction Advisory3. Grant making
Immediate Long-Term
Research, Monitoring and Evaluation* Developmental outcomes
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Agenda
1. The Key Development Challenge and Background
Some Choices, Trade Offs and Non-Negotiables
Strategic Objectives and Examples
What Customers can Expect
Key Activities
2. Multiple Solutions
3. Discussions
2. Multiple Solutions,,,
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• “Traditional” mortgage loans• Unsecured Loans – Incremental housing finance• Instalment sale for housing• Other type instruments e.g. Income linked home
loans• Increase financing under permission to occupy (pto)
MULTIPLE END-USERFINANCE SOLUTIONS
• Savings mobilisation (cooperative housing, stokvels,etc)
• End-user subsidies (FLISP, Employer Subsidies)• Form of rental subsidy – e.g. Social HousingENHANCE HOUSING
FINANCE AFFORDABILITY
Multiple Solutions “No Silver Bullet”
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• Risk enhancement for households (e.g. MDI)
• Equity / Junior or Mezzanine
EFFECTIVE RISKMITIGATION
INSTRUMENTS
• Financial literacy• Financial capability• Consumer financial educationCONSUMER EDUCATION
Multiple Solutions “No Silver Bullet” ….continued
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• De–risking projects• Reduce town planning delays• Land holding costs• Tax incentives for low income housing
developments
REDUCE COST OFHOUSING
DEVELOPMENTS
• Effective application of grants to leverageprivate sector investments
• Leveraging private sector technical capability• Effective coordination within government’s
sphere (National, Provincial, Local and Govtentities)
EFFECTIVEPARTNERSHIPS
Multiple Solutions “No Silver Bullet” ….continued
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• Mobilise sector players towards a commongoal – role of the orchestrator
• Direct public and private investments to whereits needed the most
• Maximise available infrastructure
WORKING TOWARDS ASHARED HUMAN
SETTLEMENTS VISION
Multiple Solutions “No Silver Bullet” ….continued
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Agenda
1. The Key Development Challenge and Background
Some Choices, Trade Offs and Non-Negotiables
Strategic Objectives and Examples
What Customers can Expect
Key Activities
2. Multiple Solutions
3. Discussions3, Discussions