Shaun Harris
Lack of housing is a major issue facing South Africa. But it’s estimated that more than a third of the workforce is caught in the trap of earning between R1 000 and R5 000 a month – too much to qualify for the government’s R16 000 housing subsidy, but too low to get a conventional housing loan from a retail bank.
The Department of Housing has come to the fore as one of the better deliverers this year, but the housing backlog remains immense, estimated at around two million units among low and moderate income households.
One solution, says Samson Moraba, CE of the National Housing Finance Corporation (NHFC), is to “let the people build for themselves”. This can allow more people the opportunity to own a home, and provide for those who want to expand or improve existing homes, he says.
Bonus Building Supplies and sister financial services company Home Build Finance, both subsidiaries of McCarthy Retail, take a similar approach to addressing the housing crisis. Last week Home Build Finance and the NHFC concluded an agreement to make available a R100- million credit facility to finance building materials for the owner-builder and for home improvements. Households earning less than R5 000 a month will qualify for the building material loans, ranging from R1 000 to R30 000 depending on affordability of the client and repayable over periods of 24, 36 and 48 months.
Of course, the commercial attraction for Home Build Finance is that the building materials will be supplied by Bonus Building Supplies, a national chain of stores in the market for the past 10 years.
Recently formed Home Build Finance was set up partly in response to the burgeoning micro-lending industry, where many workers in the R1 000 to R5 000 income bracket were turning for housing finance, sometimes with harsh results.
Though newly regulated, the micro-lending industry still charges high interest rates and some players continue with questionable practices such as holding clients’ ID books and ATM cards as security. High interest charges, which often force borrowers to roll over loans, make this form of finance unsuitable for longer-term credit needs such as housing.
Brand Pretorius, CE of McCarthy Retail and chair of Home Build Finance, says the agreement with the NHFC is part of a strategic plan to reposition Bonus Building Supplies in the market by forming key business partnerships that add value to the business.
The company earlier teamed up with Saambou Bank to provide home building finance. The bank runs a payroll deduction facility for employees who take out loans with the backing of their employers. There is also a cash collection loan option.
Moraba says the deal with Home Build Finance removes the “risk of leakage” that can occur when funds are channelled through government and provincial departments, and also means that the loans can only be used for building materials.