Property: Major cash injection for rural housing improvement
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In a major deal between the government-owned Rural Housing Loan Fund (RHLF) and the Elite Group (a wholly owned affiliate of AltX listed group African Dawn Capital) more than R28-million will ultimately become available in small loans (also known as incremental housing loans) for Gauteng owners of low cost rural houses to improve them.RHLF acting MD and Chief Financial Officer Andrew Jager said the Elite Group had proven that they have the needed expertise and the track record to effectively manage the funding that will be made available to them.
“They have the infrastructure to grant loans to qualified candidates within minutes and to then make electronic payments to third parties for products and services delivered. We have come to know Eddie Stoop and his team and we think they fit in well with our overall business plan,” Jager said.
Elite Group CEO, Dr Eddie Stoop said the line of credit that had been made available would make it possible for his company to make many more incremental loans available to owners of low cost rural houses.
“An incremental loan is basically money destined for improvement of the client’s existing home, including extending the house. Because of the nature of the market, most low cost home owners prefer to improve them in increments – hence the name incremental loans. Most either don’t qualify for a regular mortgage bond or simply don’t want to take on the 20 or 30 year debt burden that a mortgage brings with it,” Stoop said.
Run under auspices of the government’s Department of Housing, funding provided by RHLF has had a major impact on rural housing. Working through housing microfinance lenders and other financial retail outlets the organisation has made large sums of money available to the rural housing market as part of the government’s promise to provide housing for all needy South Africans.
Rural home owners will be able to borrow up to R20 000.00 provided they can prove that they earn a minimum wage of R7 500.00 a month, Stoop said.
Jabulani Fakazi RHLF Business Relations Manager said a problem that many rural home owners faced was that their homes were built on traditional land which meant that they did not have legal title to the land and cannot, therefore, access mortgage finance.
“When banks grant a mortgage bond, they demand that the owner produces a title deed as a form of security. In the case of many – if not the majority of rural dwellers – this is simply not possible because it is communal land. In this context housing microfinance is a viable and an appropriate option to improve housing situation in rural areas.”
Stoop said loans for urban home improvements among low income earners owners of properties below R400 000, had also reached record highs. The line of credit made available to Elite will extend this growth curve to rural areas, Stoop said.
“The past six months have been record months for Elite with growth in the double digit numbers.
“While we and our customers are subject to the same high interest rates as the rest of the country, lower income earners are spending modest sums of money on improving their homes, mainly due to the fact that organisations such as RHLF are now making it possible for clients to borrow money in increments to improve their living environment.”
He said most of the loans were between R8 000.00 and R20 000.00 and were made available on an unsecured basis.
“Most of customers would not even get through the front door of the big four banks because of their modest earnings and because in many cases they would lack the collateral to secure even small loans.
“Because we have been in the micro lending industry for a long time and have the administrative resources to check a client’s entire credit and employment history, including whether he or she has been adversely listed on a credit bureau, we are able to transact the deal entirely over the telephone.”
“We are unique in the financing industry in that our clients do not need to come to our offices to apply for a loan. They can speak to our call centre telephonically. Once we have approved his or her application, the money is paid electronically into the building material supplier’s bank account, on receipt of the necessary confirmation documentation. In cases where cash is needed, for example to pay for labour, money is paid directly into a borrower’s bank account and the client can draw it immediately at any ATM country-wide.”
Stoop said targeting the home improvement industry has been a remarkable success story with turnover virtually doubling every month, this however would not have been possible if we did not have the support of Andrew Jager and his team at the Rural Housing Loan Fund.
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