Estate Living Magazine Retirement Living - Issue 40 April 2019 | Page 43
d e v e l O p m e n t
updates, quantity surveying, etc. Rather than putting pressure on
anyone, their involvement is more of a monitoring role.
Furthermore, all aspects of the development, including the
insurance cover, need to comply with the Housing Development
Schemes For Retired Persons Act 65 of 1988.
Equity Guarantee for Property Developers
Equity Guarantee for Property Developers guarantees the equity
contribution (or a portion thereof), while the bulk of the funding
they require may be raised from their financiers. The financier would
therefore have a development loan backed by A-rated security,
which would make it possible for the bank to release a higher level
of funding. This helps speed up the development and releases a
significant amount of working capital (cash) for the developer.
Costs, financiers and underwriters
How can Santam work with developers?
It was to ease the negotiation of some of these hurdles that Santam
created its seamless developer-specific insurance, which consists
of these two complementary products: Real Estate Scheme
Development Insurance and the Equity Guarantee for Property
Developers.
These products are attracting enormous enthusiasm in the property
development industry. Property developers recognise the benefits
as it reduces their gearing and frees up their cash, which they can
then distribute to shareholders, use to refurbish existing properties,
or use to increase the number of developments they undertake in a
year.
The retirement schemes industry also has two unique challenges
when it comes to the timing of the completion of the estate:
(i)
retirees/purchasers cannot sell their current home and wait for 18
months for their unit within a scheme to be completed and (ii) banks
will not give long-term home loans to retirees/purchasers for the
purchase of the property. Therefore, the estate/units need to be
ready and completed at the same time as the retirees/purchasers
have the cash available to purchase. The above products offered
by Santam solve this unique challenge for developers of retirement
estates.
Santam is an authorise financial service provider (licence number 3416)
In sum, it’s essential that, in order to provide the optimal retirement
options and outcomes to retirees seeking suitable accommodation
for their best years, developers follow the guidelines and invest in
adequate insurance to ensure that projects are not only protected,
but have access to funds.
santam.co.za
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Payment can either be made as a one-off, upfront premium, or
it can be split between a lower premium and the insurer taking a
percentage of the project profit.
I N V E S T M E N T
An Equity Guarantee for Property Developers depends on the risk.
It is typically priced as a percentage of the developer’s equity that is
insured – depending on the developer’s history with the company
and other underwriting factors.
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