Projects by intervention country

Projects by intervention sector

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Facilitating household access to decent housing

Context

The South African Constitution guarantees each of its citizens the right to decent housing. The government has thus defined as priority objective the complete eradication of informal settlements. The intention of this approach is to promote a non-racial and integrated society through sustainable territorial management and quality construction. Thus, since the end of apartheid in 1994 and with the assistance of the South African government, over 2 million inadequately housed people in South Africa with an income under 3,500 rands (about 300 euros) have benefited from the RDP (Reconstruction and Development Programme), which provides access to decent affordable housing free of charge. This programme was reviewed and has now been renamed "BNG - Breaking New Grounds".

However, the number of families waiting for a solution for adequate housing remains at more than 2 million. Despite the production rate of assisted housing, the natural growth of the population has not allowed the number of applicants to reduce sufficiently.

In particular, a divide has been highlighted between this assisted sector, aimed at households earning less than 3 500 rands per month, and families from the private sector. The government has thus been encouraging greater involvement by private banks to fill the void between subsidised housing and houses financed by conventional mortgages. Within the framework of the Financial Charter, banks therefore undertook to provide financing of up to 42 billion rands to households with an income under 7 500 rands per month (700 euros) before December 2008.

To help meet these challenges, the AFD implemented financing with three of the four major commercial banks in South Africa from 2005, one of which was ABSA, a subsidiary of the British group Barclays. With a market share of over 30%, ABSA is the market leading bank for affordable housing. With the support of the AFD, ABSA launched the product "MyHome" to facilitate the access of households to mortgages and to facilitate home ownership for households with low incomes.


Objectives

The AFD granted ABSA Bank Ltd a line of credit of 40 million euros (about 440 million rands). This line of credit has in particular enabled loans to be set up for households with an income of less than 7500 rands per month and has thus contributed towards achieving the objectives of the Financial Charter.

The main objectives of this funding are:

  • Encouraging the construction and marketing of affordable housing for low-income households;
  • Developing home loans in historically disadvantaged geographical areas;
  • Encouraging the creation and development of a secondary market in these areas;
  • Providing access to housing for thousands of targeted households.


Project description

ABSA Bank Ltd set up a support system for socially disadvantaged households by facilitating:

  • Loans to households with an income of less than 7500 rands per month;
  • The creation of a system of financial aid to persons with a monthly income lower than 11,000 rands (about 1,000 euros) to settle part of the underwriting fee issued in the place of a deposit;
  • Access to training, through the design and implementation of programmes aimed at strengthening the skills of the professionals of the accessible housing sector in South Africa, both at municipal level and in the real estate sector;
  • The organisation of yearly forums allowing the persons in charge of government housing, amongst which the main municipalities, to exchange techniques and practises with the accessible housing sector in an effective way.


Impacts

Financing accessible housing supports economic development, creates employment and promotes social integration of the population.

  • The line of credit has helped finance more than 4600 households with a monthly income under 7500 rands to purchase their homes.
  • The establishment of two training facilities with a total funding of more than 700,000 euros has helped increase the supply of affordable housing.
  • More than 200 people have obtained their estate agent diplomas in 2009. These people are capable of mastering the theoretical and operational knowledge of the affordable housing market to help prospective owners manage their budgets and better understand the contractual and administrative framework of the particular sector.
  • Furthermore, the project is still ongoing and aids and grants made to individuals over the next five years will continue to allow a greater number of households to have a home thanks to facilitated access to credit.


Date and amounts

Agreement signed September 11, 2007.
Financing amount: 40 million euros (about 440 million rands).
Subsidy amount share (financial advantage): 3.4 million euros (about 39 million rands).


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