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Monday Oct 22, 2012

Subsidised properties put home builders fund at risk

The subsidy housing sector represented a substantial potential risk to the R3.8 billion warranty fund managed by the National Home Builders Registration Council (NHBRC), but not a single claim had been made against the fund yet from this segment.

This is despite Human Settlements Minister Tokyo Sexwale last month lamenting the R50bn government bill to rectify shoddy workmanship on low-cost housing.

The government rectification bill led to Sexwale earlier this year suggesting a debate about the establishment of a state-owned construction company, but stressing last month a decision had not yet been taken on this issue.

Jeffrey Mahachi, the acting chief executive of the NHBRC, confirmed last week that the warranty fund had not received a single claim related to the shoddy workmanship on the houses mentioned by Sexwale because these houses had not been enrolled with the NHBRC and were, therefore, not covered by the fund.

He said the government had to pay for the rectification of those houses, not the warranty fund. He added that the government had only extended the warranty scheme in 2002 to cover subsidised houses, but the NHBRC had also "not paid a single cent" for subsidy houses it had enrolled and inspected.

Mahachi admitted that this did not mean the NHBRC was "perfect" and believed the lack of claims might be because consumers did not know their rights and there were building failures the council did not know about.

Highlighting the potential risk to the warranty fund, Mahachi said a simple risk analysis revealed that there were now 500 000 subsidy houses enrolled under the scheme and a 1 percent failure would result in the fund having to pay out claims on 5 000 houses.

He said the maximum amount the NHBRC had paid out to date from its warranty fund in a single year was R22 million. This was in its 2010/11 financial year when it received one claim for R15m from a block of luxury apartments in Cape Town.

He said payout from the warranty fund in the NHBRC's financial year to March in remedial costs totalled R15m, compared with R22m in its 2010/11 financial year, R14m in 2009/10, R7m in 2008/09 and R5m in 2007/08.

The NHBRC received 649 complaints in the year to March, of which 350 had been resolved by the end of its financial year. However, 95 percent of these complaints, which related to structural problems and roof and maintenance-related complaints, had been resolved, he said.

Mahachi said the turnaround time for the resolution of complaints had been reduced to 21 days from between three months and several years.

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