Housing fund thin on detail, caution banks
President Jacob Zuma's plan to set up a housing guarantee fund of R1 billion was thin on how it would address risk issues. It also lacked detail on how its implementation would affect the challenges of housing in South Africa.
Luthando Vutula, the managing executive of Absa Home Loans, said last week the biggest problem would be the levels of risk cover that would be provided between the banks and the government.
Vutula said the bank and the government had to be involved in intensive bilateral talks to understand the structure of the guarantee and mechanisms involved. "We also need to obtain clarity on the proposition and the rules that support this new initiative before the credit risks can be accurately determined," Vutula said.
Zuma, delivering his State of the Nation address on Thursday, said the fund's aim would be to incentivise the private banking and housing sectors to develop new products.
This new initiative would be to accommodate people whose salaries were too high to get government subsidies, but who earned too little to qualify for bank mortgages, said Zuma.
This would form part of the government's work towards upgrading informal settlements and providing proper services and land tenure to 500 000 households by 2014. According to Zuma, the government planned to set aside more than 6 000 hectares of "well-located" public land for low-income and affordable housing.
Busi Mngomezulu, a senior communications manager at Smart Solutions, a division of FNB, added that this fund would have limited impact on the housing problem.
Mngomezulu said: "This is because affordability remains the key challenge in South Africa." FNB is a subsidiary of FirstRand.
Standard Bank said it welcomed the initiative and would work closely with the government and other key players in executing this initiative.
Clive van Horen, the managing executive of secured lending at Nedbank, South Africa's fourth-biggest bank, said it was eager to explore all available avenues to help alleviate the housing backlog.
"In light of these new developments, Nedbank is committed to working and partnering with all parties involved in the near future," said Van Horen.
Pierre Venter, the general manager of financial services at the Banking Association of SA, said at this stage the association did not know what the government's intentions were with the plan.
Business Report
Posted at 09:00AM Feb 16, 2010 by Editor in Residential |