Presentation to the Portfolio Committee for Housing 29 APRIL 2002

1. Presentation to the Portfolio Committee for Housing 29 APRIL 2002

2. Agenda • Mandate and Mission • 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 • NHFC Performance • Challenges for the Corporation • Budget Highlights - 2003 • Budget Overview 2003/5 • Conclusion

3. Mandate In partnerships with the broadest range of organisations, to search for new and betterways 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”

4. 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

5. 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

6. 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 Ensure Quality Housing NHBRC DEVELOPER (Bridging Finance) End-user Guarantees NURCHA Stabilising the Housing Environment Servcon THUBELISHA Property in Possession Right sizing

7. 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

8. 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

9. 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

10. 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

11. 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

12. Undertaking Wholesale Funding… NHFC’s Performance…

13. NHFC Housing Impact – TO-DATE NHFC’s Performance…

14. 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

15. 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

16. 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

17. 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.

18. THANK YOU