MAIN IMAGE: Lusanda Netshitenzhe, CEO of TUHF21; Bulali Mdontsane, TUHF21 client and developer.
The property industry spotlight is on townships in recent months, as more and more role players acknowledge what many residents have known for some time – that these markets are formalising and growing.
The Department of Public Works and Infrastructure’s new norms and standards document recognises the shift in terms of rentals, specifically informal ‘backyard’ rentals, and what this bodes for social housing. “The government cannot financially afford a commitment to the eradication of informal settlements and the provision of fully subsidised, stand-alone houses for low-income households. Meeting this demand alone will require the government to build at least 1.8 million houses at a current cost of R343 billion,” it said. Recognising this, the Department is now adapting its policy, focusing on upgrading informal settlements, providing site and service schemes, and affordable rentals.
“This is good news for our uMaStandi funded property entrepreneurs as one of the main roadblocks to creating affordable rental units, built to code, has been obtaining planning permission which is determined by local government,” shares Lusanda Netshitenzhe, CEO of TUHF21.
TUHF21 is an impact-driven property finance company, which recently announced the finalisation of its first funding vehicle aimed at financing rental properties in townships. uMaStandi Fund has attracted R125 million in funding from Nedbank, the Nedbank Black Business Partners Legacy Trust, (which includes Old Mutual’s participation), the SA SME Fund, Novo Impact Fund NPC, Apex-Hi Charitable Trust, and Oppenheimer Generations Foundation. According to TUHF21, the facility will be used to continue the good work started by uMaStandi of backing property developers in townships to provide decent and affordable rental accommodation.
“It’s a fact that we need higher density developments in urban centres around South Africa. At present people are by necessity forced to live far from their workplaces, spending an exorbitant percentage of their income on commuting, and often living in unsafe and unsanitary conditions,” shares Netshitenzhe , “Our goal is to help entrepreneurs to develop quality, high-density rental units and we’ve had great success in Soweto where these units are rented for between R1,800 and R5,000 per month”.
Netshitenzhe goes on to say that the Western Cape government is making the right noises in terms of planning permission and service delivery and that the KZN government is actively working alongside organisations like TUHF21 to facilitate these developments in areas that currently allow for it. The two holdouts seem to be Tshwane and Ekurhuleni where there seems to be a lack of will and unnecessary bureaucracy.
How does it work?
Property owners or entrepreneurs who hold title deeds and those who want to buy a property or vacant land can apply for uMaStandi finance to develop units for rental purposes. The uMaStandi team will conduct a feasibility study and, if the proposed project is feasible, will guide the entrepreneur to professionally design the rental units to ensure the layout, size, fittings, etc. respond adequately to market demand. The process takes around 21 days. “We build long-term relationships with our clients because our relationship needs to hold for the fifteen-year loan term. The goal is to ensure that these developments are successful, and to that end, we also provide training on how to manage these rental properties”.
A case study
To date the TUHF Group, which includes specialist commercial property financiers TUHF Ltd and and uMaStandi, has granted 812 loans, financed 46,374 units and created 1,316 jobs.
Bulali Mdontsane is one of these clients and, with the assistance of uMaStandi, has developed Singleton Heights, located at 17 Casper Street in Protea Glen. Singleton Heights is not Mdontsane’s first foray into property development and ownership (he has completed two other developments), but it is his most ambitious to date – the double-story property consists of 30 bachelor apartments that are 25 square metres in size, and each has a dedicated parking bay. They are designed to be lock-up-and-go accommodations, 29 of the thirty are let, and the remaining one is for a live-in caretaker.
Mdontsane explains, working with uMaStandi has helped him manage his property portfolio in a more professional manner as well as avoid some of the major traps and pitfalls involved in an owner-run development.
His advice for anyone who wants to get into property development is to bear in mind that every phase of this business is about people; from aligning with the neighbours to ensuring you have buy-in from political leaders and the community, being able to connect with people is essential. He also stresses the importance of looking beyond one’s financial gain, a value that aligns him with uMaStandi’s purpose.
“I think as developers we have a role to play in changing the face of the spaces that we walk across and addressing the housing problem in South Africa. And for me, my chosen space is the township and I do believe that my mission and what TUHF21 does through uMaStandi, is linked. No one is coming to save us. People need safe living spaces and I think we can be the solution we are waiting for,” says Mdontsane.
Next steps for TUHF21
“uMaStandi has learned from the lessons and experiences of partner company TUHF Ltd and will continue to accelerate growth in this dynamic market. The funds we have raised to date are just the beginning. Our first draw has resulted in the acquisition of R40 million worth of assets spread across 36 loans. By the end of 2023, we aim to achieve R100 million worth of loans issued by uMaStandi. The demand is there, and we are seeing the need to mature beyond small-scale developers to mid-size developers,” says Netshitenzhe.
