Presentation to the Portfolio Committee for Housing

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• Presentation to the Portfolio Committee for
  Housing
• 29 APRIL 2002

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Agenda

• Mandate and Mission
• Strategic Overview
• NHFCs Context
• The South African Housing Finance System
• The Housing Institutional Environment
• The NHFC Primary and Secondary Responsibilities
• Implications for the Corporation
• NHFC Performance
• Challenges for the Corporation
• Budget Highlights - 2003
• Budget Overview 2003/5
• Conclusion

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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 corporations 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

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Mission

• The NHFC seeks to create housing opportunities
  for the low and moderate income families by
• Funding or Underwriting the funding of
  intermediaries and institutions to promote
  broader access to housing and housing finance
• Facilitate the building of Adequate and
  Sustainable capacity within the organisations and
  institutions that it funds
• Partnering organisations and institutions to
  deliver innovative housing finance solution
  options

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The SA Housing Finance System
Capital Markets (Banks, Investors, Life/Pension
Funds
Parastatals (e.g. NHFC)
Govt
REGULATION
Loan secured by property, lower LTV ratios
Non Mortgage Security
Lending Institutions
BANKS
NON- BANKS
NGOs
LOAN UNDERWRITING
LOAN ORIGINATION
Subsidy Beneficiaries
LOAN SERVICING
Depositors
Borrowers
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The Institutional Environment
Funding or Guarantee the Funding
Own
Financial intermediary
Rent
RURAL HOUSING LOAN FUND
Rural Micro-Finance
Capacity Building
SOCIAL HOUSINIG FOUNDATION
Construction And Credit mobilisation
NHBRC
Ensure Quality Housing
DEVELOPER (Bridging Finance)
End-user Guarantees
NURCHA
Stabilising the Housing Environment
Servcon
THUBELISHA
Property in Possession
Right sizing
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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

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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

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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

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NHFCs 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

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NHFCs 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

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Undertaking Wholesale Funding
NHFCs Performance
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NHFC Housing Impact TO-DATE
NHFCs Performance
HOUSING IMPACT TOTAL TO DATE
Complete housing units financed 80, 397
Incremental housing loans granted 489 480
Number of people benefited 2,47 million
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Challenges

• Environmental
• Successfully attracting the private sector is a
  challenge risk-sharing
• Integration and co-ordination within the housing
  sector
• Integrating capacity across government
  institutions e.g. SMME, Infrastructure
• Integrated support of financing initiatives of
  government
• The primary market in this is highly
  dysfunctional

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Challenges

• NHFC Specific
• Demise of small banks potential to deliver in
  this market Saambou, FBC, etc.
• Market consolidation results into loss of
  capacity Cashbank
• Inadequate capacity of alternative lenders to
  take-over the gap created and be responsible
  custodians of the monies channeled thru them
• Tendency to dump housing stock
• The housing back-log keeps on increasing, yet
  there is inadequate capacity to do deliver
• Accelerated delivery on the Job Summit

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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 Corporations 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

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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.

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THANK YOU