US fund invests R1.3bn in SA housing
USA-based International Housing Solutions (IHS) has raised US$175 million (R1.3 billion) for the development of 30 000 affordable housing units in South Africa.
Through IHS' South Africa Workforce Housing Fund, the global investment firm will direct the capital towards investments in rental and for-sale housing in the low and moderate income housing markets.
The company raises its capital by researching and marketing investment opportunities in the affordable residential property market.
The South Africa Workforce Housing Fund was supported by the North American pension fund and a US foundation endowment whose investments totaled US$95 million. Up to $80-million was committed in participating debt from the US Overseas Private Investment Corporation, a US government-sponsored agency that supports American investments in emerging markets.
The company expects several additional investors to commit further capital to the SA Fund, increasing its size to $240-million (about R1.8-billion).
South African property developers had found it difficult to raise capital for large-scale affordable housing developments, IHS SA country director Elize Stroebel told Property24, adding that IHS helped developers finance affordable housing projects in the form of equity.
"The equity allows developers to obtain larger loans from the banks at a reduced borrowing cost, which in turn allows them to build bigger developments without having to phase them in or conduct large pre-sales," she told the website.
"As the developers achieve more scale in their projects, they are able to pass the lower costs on to middle income families, in the form of lower rentals and selling prices which in the current South African economic climate is a huge benefit to these families."
The $175-million of capital commitments includes $95-million from a North American pension fund and a US foundation endowment, as well as up to $80-million committed in participating debt from the US Overseas Private Investment Corporation, a US government-sponsored agency that supports American investments in emerging markets.
The company believes the fund will help leverage returns for fund investors while spurring economic and housing development in South Africa.
