SA Affordable Housing November - December 2019 // ISSUE: 79 | Page 17

COVER STORY
including sanitation, water reticulation, roads and storm water.
It recently launched the development to the consumer, backed
by the credibility that comes from bank accreditation. This tells
potential buyers that the unit is in an acceptable location, is
geotechnically sound, is municipally serviced, and in all
likelihood will be built on schedule. It certifies that the
development has jumped all the hoops and end-users are now
free to apply.
A well-attended meeting was held on 22 August hosted by
Montrose and attended by all the major banks, as well as
estate agents, mortgage originators and the entire value
chain necessary for the marketing of such a large and
complex development.
“We want the entire process to be coordinated, so that
when a prospective buyer comes along, he or she doesn’t have
to fill in a separate form for each bank and deal with different
estate agents’ Offers to Purchase. There will be different
parties involved but all the paperwork will be synchronised,”
explains Mhlaba.
“Montrose is not just another housing project, it’s a Mega
City with all the necessary amenities, retail components and
industry for job creation. We are currently in the process of
engaging with the Department of Education with regard to
them building a high school and primary school.” This makes it
attractive to market.
GOING TO MARKET
“Now that any buyer can be assured of funding from any of the
banks (dependant on personal creditworthiness), the next step
is to stage promotions in public spaces where we can reach
beneficiaries and interested parties – teachers, nurses, police,
mine employees, public sector employees and more – starting
from the Randfontein area and then spreading further afield.
The idea is to persuade people that they can live and work in
the same location – that is the rationale of a mixed-use
development, it’s not just a place to sleep but a lifestyle – so it
makes sense to speak first to people already working in the
area and only later persuade further-afield people to move
here,” says Mhlaba.
Approximately 20% of all units fall under government
subsidy schemes, either the 100% scheme, FLISP or social
housing, with the remainder being bonded. The banks will be
interested in both the bonded units and the FLISP scheme, in
Phase 1. One of the rationales behind mega cities, Mhlaba
explains, is that while people earning less than R3 500 a
month are eligible for the fully subsidised homes as per
government criteria, the likelihood is that they will improve
their condition in life given access to work and stable living
conditions. This element is also limited to 20% of the entire
development – so there is considerable scope for upward
momentum of the community.
To qualify for a bank-financed mortgage bond, a family needs
to earn in the region of at least R15 000 – so the government
addresses those between R3 501 and R15 000 with two
products: a sliding scale of subsidy according to how much is
actually earned for a bonded home, known as the FLISP scheme;
as well as social housing which is rented with the opportunity
to buy (with terms and conditions). In the case of FLISP’s
bonded scheme, the subsidy is paid in the form of a grant of
between R87 000 and R23 000 on the sliding scale. This grant is
deducted from the cost of development, thereby reducing to an
affordable rate the amount that has to be bonded.
“Government has its own list of beneficiaries for 100%
subsidy, FLISP and social housing as people over the years
apply for housing and join a waiting list.” That is for the 20% of
the development. Applicants for FLISP are required to apply for
a mortgage bond before applying for the FLISP subsidy, it was
revealed at the 22 August meeting. This inconveniences the
www.saaffordablehousing.co.za
Preparations for the foundations for a new section of the
development.
banks, but the reason, as explained, is that if it were the other
way round the funds in NHFC (National Housing Finance
Corporation) which administers the grant system, would be
rapidly frozen by applicants who were approved following
pre-screening by NHFC, but declined by a bank for reasons of
poor creditworthiness. For a bank, it is not just the income level
but prior record of repaying debt that is assessed.
For pure bonded units (the remaining 80%), real estate
agents from the area are being signed up to assist with the
marketing, as they already have databases of people looking
for homes. “Everyone is eligible – the beauty of real estate is
that anyone can bring a buyer and we only pay commission
upon the successful conclusion of a deal. There are no sole
mandates. Montrose plans on also having its own inhouse bond
originators in a JV with an existing company to access its
systems. This will primarily provide a benchmark to monitor
third-party firms and begin the process of compiling market
data,” says Mhlaba. “We need to be an active player ourselves.”
Montrose expects strong demand for the units, and they have
been priced accordingly – starting at R366 000, a level at which
there is a lot of interest. “We’re getting many calls expressing
interest already. The affordability is a factor of the cost of land
– the further you go from Sandton the lower the cost of the
land”, provided you don’t go all the way to Cape Town.
There is a third product that government offers under its
Rapid Land Release Programme which is under development
and finalisation. Mhlaba says, “There is a possibility that
Gauteng Department of Human Settlement will administer it
and probably later it might be administered by NHFC or both.”
It is a final aspect of the development is a scheme where
certain people may not qualify for a government subsidy for
reasons of affordability, but nonetheless have savings to build
a bonded and unbonded home for themselves. In this case,
government buys the site and the applicant is given a two-year
window to build, provided they do so according to approved
plans that conform to the character of the overall development.
“This supports the buyer as the asking price is reduced
significantly and this will definitely improve the fortunes of the
buyer with the commercial banks and or alternatively the buyer
will utilise his or her savings to build a house on their own.
“Montrose City Mega Development indeed is the epitome of
what a smart city development looks like. With all stakeholders
anything is possible as it is the case with the clear visibility of
the local authority, provincial government, national
government and entire private sector together with the turnkey
developer to ensure that such a development is a success and
looks indeed that it will be an interesting 7 – 10 year journey
of developing the Montrose City Mega Development – it has
only been 18 months since it started,” says Mhlaba.
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