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FINANCING HOUSING DELIVERY A view from NURCHA

FINANCING HOUSING DELIVERY A view from NURCHA. Presented By Nhlanhla Mjoli-Mncube Deputy CEO. Wednesday, 26 March 2003. A view from NURCHA. The context What NURCHA has achieved Things we think about NURCHA’s future: arranging sustainable finance. THE CONTEXT.

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FINANCING HOUSING DELIVERY A view from NURCHA

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  1. FINANCING HOUSING DELIVERY A view from NURCHA Presented By Nhlanhla Mjoli-Mncube Deputy CEO Wednesday, 26 March 2003

  2. A view from NURCHA • The context • What NURCHA has achieved • Things we think about • NURCHA’s future: arranging sustainable finance.

  3. THE CONTEXT • 1995 Hope - Transformation • Sustantial resources: - massive inequality • Intervention required • Reduce inequality • Normalise the market • Politicised housing environment • Nervous banks • Many institutions formed

  4. NURCHA’s ACHIEVEMENTS BRIDGING FINANCE GUARANTEES SINCE 1996: • Raised R 140 million in guarantees • Issued guarantees valued at R 264 million • For 510 loans totalling R .5 billion • Financing 113 000 houses • Valued at R 1,5 billion

  5. CONCERNS • Banks lose their appetite • Losses • Difficult business • Banking shakedown • Short term view

  6. CONCERNS 2. The limitation of the guarantee • Shares risk but provides no capital • Only downside potential 3. A slowdown in new business • Declining subsidy value • Major new policies 4. The need to sustain ourselves

  7. THE FUTURE 1. DIVERSIFY PRODUCT RANGE Not just Guarantees but • Full range of credit enhancements • Wholesale and retail lending • Equity or quasi equity $50 million free credit enhancement from OSI

  8. FUTURE 2. Diversify financing partners • Capital markets • Development finance institutions • Donors 3. Reduce risks and improve risk management 4. Find the champions and fund them NURCHA making the match

  9. FINANCIERS CAPITAL MARKETS DONORS DFIS NURCHA PACKAGES FINANCES CHAMPIONS FINANCIAL REQUIREMENTS CONSTRUCTION: RENTAL + CREDIT LINKED + SUBSIDY FINANCING CONSTRUCTION

  10. NURCHA’s VISION “ An organisation that is regarded as a partner of first choice for those seeking innovative housing finance solutions”

  11. RESPONSE TO BUDGET Budget amount is okay, however there are constraints to budget roll out: • Policy on R2479 needs to be politically popularised • Municipal and official buy in • Developer and contractor commitment and role clarification • Design of systems and procedures for the management of R2479 • Interim arrangements during transitional period • Local authority capatilisation

  12. SOME ALTERNATIVES ON THE GROUND • Individual contractor-driven subsidy • Rural subsidies as a mechanism of avoiding R2479 • People’s Housing Process redefined to allow contractor participation • Role of banks and other financial institutions and need for support

  13. OPIC & OSI $ 20 million guarantee R 20 million first loss guarantee NURCHA Loans Paymaster Paymaster Contractor Contractor AN EXAMPLE: THE OPIC FUND RMB Revolving Credit Facility ± R 200 million

  14. THE COST OF FUNDS RMB – Nurcha = Prime -2,3% + OPIC Fee = 2,5% = Prime + 0,2% Nurcha admin fee = R69 per house Paymaster admin fee = ±R500 per house

  15. THE PAYMASTER • Evaluates the loan • Approves on Nurcha’s behalf • Opens a project account • Pays material suppliers directly • Releases funds for labour costs

  16. BENEFITS TO CONTRACTORS • Access to funds • Discounts from suppliers • More rapid payments from province • Tight financial control and monitoring

  17. Contractors supported by Nurcha Types of Contractors

  18. Houses constructed through Nurcha’s intervention: February 2003 TOTAL NUMBER OF HOUSES SINCE INCEPTION = 122,672 Eastern Cape Northern Province KwaZulu-Natal Free State Northern Cape North West Mpumalanga Gauteng Western Cape

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