Private sector eyes PIC’s R10.5bn home loans investment

Private sector investors and developers have shown interest in coming alongside the Public Investment Corporation’s (PIC’s) R10.5 billion investment into SA Home Loans, according to Mashwahle Diphofa, director general of the Department of Public Service and Administration (DPSA).

“There is interest. We continue to engage with other agencies, other entities that enquire about how they can play a role and at an appropriate time we will be able to share the details,” Diphofa somewhat cryptically told media on Wednesday.

Speaking earlier that same day at the launch of the Government Employees Housing Scheme (GEHS), Diphofa said the scheme remains open to welcome “other investors, commercial banks and partners in the advancement of the drive to increase better housing and home ownership among government employees”.

The PIC, on behalf of the Government Employees Pension Fund (GEPF), will invest R10.5 billion into SA Home Loans to boost available housing finance for qualifying government employees and members of the public.

Five billion rand will go towards public service employees, who may fall outside the affordable housing bracket. Of the remaining amount, R2 billion will go to affordable housing loans for households earning less than R20 000 a month; R2 billion will go towards members of the public who could qualify for bank loans; and R1.5 billion will be used to fund affordable housing developers, either in the form of debt or equity.

Current housing allowances provided to government employees will form part of this initiative.

Government currently subsidises income earners of between R3 500 and R15 000 based on a cascading scale, explained Mbulelo Tshangane, deputy director general for the Department of Human Settlements.

Of the 954 000 government employees who receive a housing subsidy, only 30% own a house, while the rest are renting, according to Diphofa.

Highlighting that there is no subsidy component to the investment, SA Home Loans’ Zakheni Dlamini said his organisation has received funding from the PIC “at an attractive funding cost” and will advance home loans at a rate that will seek to recover the funding costs.

SA Home Loans has a mortgage book of around R60 billion, excluding the investment.

It will also provide “non-mortgage” home loans, which will be administered by way of a payroll deduction and will be granted to individuals who can’t secure title deeds on their properties since they live in rural or peri-urban areas.

Asked whether this investment would yield sufficient returns, PIC board member, Dr Claudia Manning said the asset manager’s “top priority” is to ensure it gets “decent returns” for the GEPF.

While this was a “happy marriage” of social and financial objectives, the PIC is confident it will meet the financial requirements, Manning said.

“Our priority is to ensure that financial returns are sustainable and will ensure that when the requirements to fund pensions arise, we have sufficient funding for those obligations,” she highlighted.

The investment into SA Home Loans forms part of the R70 billion that the GEPF has made available for developmental investments over the next five to ten years.

The demand for housing among GEPF members emerged partly through negotiations with organised labour, Diphofa said.

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