Transcript Yusuf Patel - SAARDA - The Banking Association South Africa

DEVELOPERS
PERSPECTIVE
5th Annual Banking Summit
Banking Association South Africa
31 October 2014, Empire Hotel, Sandton
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Picture: Cosmo City
Making Sustainable Communities
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Picture: Malibongwe Ridge
Creating Jobs
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Mega-Scale Housing Delivery:
Economic Impact
Integrated sustainable human settlements
Project
Example:
Savanna
City
No. Units
>18 000
Impact during
construction
(R)
R28,4 bn
Employment
during
construction
54 900
Post
construction
(R)
Post
Construction
employment
R12,7 bn
Notes: Direct, indirect and induced impact of a typical housing project in South Africa
Major Benefits
• Stimulate economic growth
• Build social cohesion
• Deliver a quality and equitable built environment
• Long term revenue stream for municipalities
No referencing and usage without permission from Basil Read (Pty) Ltd
Source: Basil Read Developments
12 700
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SAARDA
represents nearly 80% of
all affordable housing
developers
(Charter Housing)
“ SAARDA is dedicated to provide affordable housing to the people of
South Africa and to improve and to assist in the delivery of affordable
housing in the residential sector for all its members and to promote the
common interest of affordable residential developers in South Africa”
South African Affordable Residential Developers
Association
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SAARDA can:
• Support government to achieve housing delivery targets
• Link government with affordable housing developer issues
• Be a platform for municipalities to engage with the sector
• Promote common agenda to keep housing accessible
(contain costs)
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SAARDA has pledged:
• To support Minister Lindiwe Sisulu by contributing to
the 2nd Human Settlements Social Contract as a
partnership that will deliver 1,5 million housing
opportunities (subsidized and affordable housing
below R600 000 value) over the next 5 years (20142019) primarily through the design and
implementation of mega-scale projects.
• To assist in meeting the housing needs of South
Africans in a sustainable way.
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SAARDA has committed to:
1. An immediate contribution of at least 100 000
housing opportunities in the GAP and Below R600
000-00 market.

This is made up projects that are being implemented by its
members and that are at current advanced planning stage
or early implementation.
2. Making available human resources and expertise to
assist in improving policy, funding, implementation
and monitoring in the human settlements sector.
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SAARDA further commits to:
3.
Work with the Department of Human
Settlements and HDA to establish a project
tracking system and undertake quarterly
progress review with Minister to unblock
challenges and fast-track delivery.
4.
Being an industry level platform for the Minister
to engage with affordable housing developers,
amongst others, in respect of:
•
•
•
•
•
Improving public-private collaboration
Policy and delivery matters
Challenges facing developers
Promoting enterprise development (emerging
developers, contractors especially women,youth)
Technology and Innovation
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Key Issues related to Achieving the
1,5 million Target
• Affordable housing delivery
is a key economic and job
creation driver
• Housing contributes to
sustainable communities and
neighbourhoods
• Affordability is the big
challenge and therefore
focus has to be on
containing delivery costs
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What can
people
afford?
R350 000 house
Need
R11 667 income p/m
R200 000 house
Need
R6 667 income p/m
R100 000 house
Need
R3 334 income p/m
Reduce regulatory approval & preparation time
Plan better for bulk & lower contributions
CONTAIN
COSTS
Apply Standards consistently
Achieve economies of scale
Innovation (technology & policy)
Public-Private Investment Mix
Housing Market
Households (%) by Household Income Category
2006
7.58%
Income Category (Monthly)
30 001+
16001 - 30000
5.66%
11001 - 16000
6.27%
8001 - 11000
6.74%
6001 - 8000
6.82%
4501 - 6000
7.17%
3501 - 4500
7.04%
2501 - 3500
8.96%
1501 - 2500
11.64%
1001 - 1500
11.32%
501-1000
8.54%
201-500
7.40%
0-200
4.84%
0.00%
2.00%
4.00%
6.00%
8.00%
Open market
(19.5%)
Gap market (27.8%)
Outstanding demand
- 600 000 units
Subsidy market
(52.7%)
Outstanding demand
– 1,8 million units
10.00%
Number of Households (as %)
Source: Adapted from Global Insight
12.00%
14.00%
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Bulk Contributions
• Planning challenge: Lack of certainty regarding the availability
of bulk
• Policy challenge: Uncertain bulk service contribution
framework
• Cost challenge: High and rising bulk service contribution costs
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Bulk Contributions Impact
Selling
Price
VAT
Top
Structure
Internal
LPFM
Available
for Bulk
R400 000
R56 000
R175 000
R60 000
R60 000
R49 000
R400 000
R56 000
R200 000
R60 000
R60 000
R24 000
R350 000
R49 000
R175 000
R60 000
R60 000
R6 000
R350 000
R49 000
R200 000
R60 000
R60 000
-R19 000
Illustration:
• 50m2 house
• Building rate: (1) R3500/m2; (2) R4000/m2
• LPFM: Land, Pre-development costs, Finance cost,
Marketing costs
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Bulk Contributions: Usage Standards
• Lower contributions should apply to affordable housing
developments compared with up-market housing
Water Usage Comparison
High Income Household
Affordable Housing
9 Kl/day
0,8 Kl/day
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Service Standards
• Implementation of standard of services and design
criteria not based on engineering principal or national
framework
• Status of Guidelines for Human Settlement Planning
and Design, Volume 1 & 2 (THE RED BOOK - CSIR):
planning guidelines, storm water management,
roads, water supply, sanitation, solid waste
management and electrical supply
• Engineering service agreements with municipalities
require guidelines
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Development Applications
• Consistency and enforceability of Municipal IDPs and
Spatial Development Frameworks:
 Engagement with affordable housing developers
up front in the planning processes
• Service standards regarding applications:
 Information requirements
 Procedures
 Turnaround times
 Appeal processes
Implementation of SPLUMA…..
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Key Proposals: Regulatory Framework
• Special fast-track approval system that integrates all
sector requirements for affordable housing priority
projects
• Consider regulations to give effect to Priority Housing
Development Areas (PHDA) – HDA Act
• Specify in SPLUMA regulations
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Key Proposals: Bulk Infrastructure
• Integrated bulk funding approval – single pot
• Link to special fast-track approval system – sector
integration
• Link to mechanism for developers to install
infrastructure on behalf of state/municipalities and
recover costs
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Key Proposals: Innovation
• Integrate “Green” funding, subsidies and incentives to
promote new building technologies, renewable energy,
recycling
• Enable renewable energy generation at project level
and special grid feed-in tariff for affordable housing
developments
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Conclusion: Address Cost Containment
• Time factor wrt regulatory
approvals
• Bulk availability and cost
• Consistent standards
• Economies of scale
• Innovative technology,
process and policy
• Public-Private investment
mix
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Thank You