Banks Continue to Fund Affordable Homes - 09-23-08

September 23 - In 2005, some of the top banks in South African signed an agreement with the government that they would extend loans and mortgages for the purchase of affordable homes by the lower income public. The terms of the agreement were that the total extended by these banks would be R42 billion over a period of several years, ending in 2008.

Because of the current market conditions in South Africa's economy, there have been considerably less affordable homes being developed and sold. At the very most, homeowners have considered extending their existing houses and have been seeking out funds for this purpose.

As we near the end of 2008, South African banks are starting to push to meet their lending commitments on affordable homes and in recent weeks several of these banks have announced funding projects for lower income citizens.

Recently, Absa announced that due to the shortage of new housing development in the affordable housing sector (traditionally described as dwellings of less than 80 square meters), it would be funding extensions and renovations to old township homes and RDP.

The Managing Executive for Absa Home Loans, Luthando Vutula said: "We realize many homeowners want to improve their lifestyles and building onto an existing house is one of the most cost effective ways for homeowners to upgrade."

This move by Absa is smart one, considering that building plans passed for affordable homes in the first half of 2008 were down a huge 43%, year on year.

Nedbank also announced this week the approval of a loan for the funding of services and infrastructure in an affordable housing project in Shoshanguve for 775 homes.