RURAL HOUSING LOAN FUND Presentation at the : ANNUAL WORKSHOP 23 MARCH 2017 JABULANI FAKAZI, CEO 1
Outline 2 RHLF mandate Howe we create value for people in our mandate Business model RHLF Pricing Policy Policy context Market and Regulatory environments Medium Term Strategic Framework (MTSF) Targets 2017/18 Annual Performance Plan o Strategic Oriented Outcomes Update on DFI Consolidation Concluding remarks
Mandate and Core Business RHLF MANDATE: To facilitate access to housing finance for low income rural households in order to enable them to improve their housing and living conditions. The implementation of the RHLF mandate entails compliance with the following three requirements: 1) Loan usage: RHLF funding can only be used to build new houses, house extensions and to effect improvements to a house, connecting to utilities, water harvesting, fencing, productive housing, purchasing of land by individuals or groups for residential purposes. 2) Rural areas: RHLF funding should only be used for a housing purpose in rural areas that are broadly defined to include tribal/communal land, agricultural areas, rural and small towns. 3) Low income: Eligible borrowers are those that are classified as low income earners and for which the upper income limit is currently set R15, 000 p.m. To support the implementation of the government s rural development programme ensuring that housing finance reach rural nodes prioritised by government. 3 Mandate Compliance monitoring internal team that follow loans
Voucher programme (Pending) Description A programme to enable qualifying beneficiaries to access housing subsidy funds to build their own houses in rural areas (communal land) Status Approved by MINMEC, but implementation is on hold Piloting cost of a voucher house to assist Minister in approving the quantum for the Programme completed in 2016 Programme being revised based on findings during pilot Will go through policy development processes up to MINMEC approval 4
Creating value for people in RHLF s mandate Mission: To empower people in rural areas to maximise their housing choices and improve their living conditions through access to housing credit. 5
FROM A SHACK TO A PERMANENT STRUCTURE, HAMMANSKRAAL, GAUTENG 6
7 BNG/RDP HOUSE EXTENSION, HARRISMITH, FREE STATE
ADULT COUPLE MEMBERS OF A BUILDING CLUB, NTABAMHLOPHE, ESTCOURT KZN
A TEACHER, LUDEKE, MOUNT FRERE (EASTERN CAPE)
A factory worker in Mandeni, KZN
Business model Wholesale Lending Facilities approved for intermediaries Must be repaid Retail borrowers decide what they need to do maximise housing choice 11 Intermediaries Loan requirements Cost of borrowing Commercial or non-profit (CBOs) Focus is on start-ups / emerging lenders Carry credit risk Unsecured, so can never lose homes Ideally disbursed through building merchants or on the back of written quotes and do third party payment Must be used in line with the RHLF mandate Compliance with the National Credit Act & Regulations RHLF discounts to those who charge less Pricing Policy
RHLF Pricing Policy Maximum interest charged for unsecured developmental credit i.t.o. NCA Regulations is RR + 27% RHLF PRICING POLICY Rate charged to retail borrowers Rate charged by the Rural Housing Loan Fund REPO +>=25 % Prime + 4% REPO +>=23-24.9 % Prime + 3% REPO +>=21-22.9 % Prime + 2% REPO +>=19-20.9 % Prime + 1% REPO +>=17-18.9 % Prime % REPO +16.9 or less % Prime 1.5% Community based organisations are charged Prime MINUS 2.5% RR=7% P=10.5% 12
Policy Context Outcome 8: Human Settlements Comprehensive Rural Development Programme SMME and Cooperatives Development National Development Plan Adequate housing Improved quality of living environments Informal settlements upgrading Ensuring funding reach priority rural areas Housing Finance SMMEs & Coops to onlend Support entrepreneurs & job creation Inclusive rural economy Transforming rural human settlements 13
Market and Regulatory Environment Market conditions Economic growth Unemployment Interest rates Inflation Regulatory Environment Interest rate caps Fees (initiation, service) Credit Life Insurance fee Rand exchange rate Levels on indebtedness Court Judgements 14
MINISTER S COMMITMENT AND RHLF CONTRIBUTION MTSF Period 2014/15 2015/16 2016/17 2017/18 2018/19 TOTAL 41 542 43 457 43 187 51 135 54 315 233 636 15 As at Dec 2016: 113 851 (49% of MTSF target)
Strategic Outcome Orientated Goals Stakeholder Perspective incremental housing 16
Strategic Outcome Orientated Goals Business process 17
Strategic Outcome Orientated Goals Financial Perspective 18
Strategic Outcome Orientated Goals Learning and growth 19
DFI Consolidation update: We have come a long way! Minister s communication 2014 announced that consolidation will go ahead, with NHFC serving as the base for consolidation In August 2015 RHLF Board receives letter from Minister asking it to note the consolidation process and to resolve to sell company assets and liabilities to NHFC Enabling Transaction Mechanism to implement Consolidation Minister of Finance announced Income Tax Amendments to enable NHFC to receive assets of RHLF and NURCHA in a tax neutral manner 24 Feb 2016 State President signed into law the Taxation Amendment Act in January 2017 RHLF Board approved donation agreement on 17 November 2016, with Conditions Precedents to be met before implementation, with key one being: Application to Companies Tribunal for an exemption from part of Schedule 2 of Companies Ac to enable RHLF as an NPC to transfer its business to a profit company, other than another NPC or trust Almost ready for submission to Companies Tribunal 20
Other Ongoing Activities Consolidation of RHLF into NHFC is the first phase, the end state is the establishment of the Human Settlements Development Bank (HSDB), and to realise this the following are underway: Drafting of the HSDB Bill Development of the Business Case for the HSDB, including: Financial Model to make a case for capitalisation of the HSDB Organisation development aspects Stakeholder engagements underway Establishment of well capitalised HSDB will: Enable scaling up delivery of incremental housing loans in rural areas and in urban markets Meanwhile: RHLF Board and staff remain fully committed and in support of the consolidation process Business as usual in trying to meet and exceed APP targets. 21
Concluding Remarks RHLF achieves its mandate within the constraints of its funding resources as well as the challenges faced by the economy proof of vibrant market for incremental housing finance Target market for IHF is huge and more needs to be done to significantly increase market coverage even more post-consolidation as lending will include urban/metro areas RHLF business model resonates with active citizenry advocated in the NDP people drive their building process and improvement of their living conditions key is enabling them to access affordable housing finance! 22