FEATURES
Rob Wesselo, MD of IHS.
units that cost between R500 000 and R700 000 to build; rentals have a cost from R3 500 to R7 500 per month,” he says.
Under Wesselo’ s leadership, IHS has completed more than 60 projects.“ I’ ve enjoyed everything that I’ ve done, I’ ve loved every house we’ ve completed,” he smiles. Although they are always developing their product, the Fluerhof housing project in Johannesburg is one project that stands out for him, due to its sheer scale.
“ The Village in Clubview, Centurion is an example of our latest product type, it’ s a typical project and we are building these all over the country,” he says. The complex consists of 288 units and offers 24-hour security, wide open spaces and lush trees, coupled with braai facilities and a children ' s play area. The apartments are tiled throughout, the kitchen has granite tops and each apartment has its own balcony or patio. Wesselo says that they’ ve spent a lot of time with architects Boogertman + Partners to create a finish that is easy on the eye, elegant and sophisticated.
“ The look and feel is awesome. It’ s affordable but it looks great,” he says.
SOCIAL HOUSING MEETS IHS
Wesselo happily tells me that they’ ve just approved their first social housing project in Matlosana, an area previously known as Klerksdorp.
“ We are busy tenanting the 1 200 units. We’ ve already approved 3 700 social housing units; half of which are either built or under construction. It’ s a nice product to rent from R1 000 a month,” he says. The move really excites Wesselo as this will see the company providing housing for a lower Living Standards Measure( LSM). These projects are in partnership with the developer Instratin. Social housing is completely different to affordable housing because the former looks at an income band for rental purposes while the latter is purely market driven.“ When we build affordable housing, we build capital structures which fund these houses. We raise some debt from banks and invest equity, we’ ve raised about USD515- million( R7.3-billion) of equity over the past eight years. In the past we didn’ t receive subsidies from government for affordable housing, but we have started to access subsidies for social housing from the government,” he adds.
Social housing is regulated and invested in through the Social Housing Regulatory Authority( SHRA). It subsidises projects to deliver affordable rental housing for low to moderate income groups and to achieve spatial, economic and social integration of the urban environments in South Africa. In the past only non-profit organisations were subsidised but raising capital can be difficult for such organisations. Legislation was changed when the SHRA was established in 2010.
SHRA invests with other development agencies( ODEs) privately investing in social housing.“ There’ s a structure where you receive subsidies from government upfront, so you can rent to people with lower income bands at a lower price, and it can still be viable,” he says. IHS has invested in four deals committing R120-million worth of equity.
He predicts that soon we will see social housing REITs.“ The market should also be an institutional asset class. It is an awesome way to access equity markets, it’ s much cheaper than private equity funds.” According to Wesselo, this is the sector where the government and the private sector can work well together.
“ Capital in equity market is cheap compared to private equity capital, if government matches that with subsidies SHRA can work well,” he says. He commends the number of houses that government has delivered over the years.“ In other countries when you talk about housing they are amazed, no other country in the world has delivered the number of free houses that South Africa has. The social housing rental product idea gets more bang for your buck because it’ s more sustainable,” he says.
THE START OF GREEN AFFORDABLE HOUSING
IHS has several investors.“ Many investors we raise money from are development facilitation institutes( DFIs). They are not just interested in profit, they also want impact,” he says. Impact refers to servicing a market that’ s been underserviced for a long time and that provides safety, jobs, easy access to work, school and opportunities.
He says that this is one of the ways they got into the green affordable housing space. Investors had equity available for investment in green affordable housing.
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JANUARY- FEBRUARY 2018
AFFORDABLE
SA HOUSING