Global private equity investor, International Housing Solutions, is set to pump more than R1.6 billion into funding the development of affordable homes in sub-Saharan Africa, following major inflows from both local and international investors into its second fund.
The success in raising funding for IHS Fund II, follows the unprecedented achievement by the first IHS fund, the SA Workforce Housing Fund, both in enabling the large-scale development of affordable housing in SA and showing strong returns in this new sector.
Rob Wesselo, Managing Partner of IHS, says the new tranche of investment has allowed it to again invite developers with whom the company will partner, to create the next generation single- and rental developments and student housing.
“The new inflow of funds guarantees a solid pipeline for ongoing investment and we look forward to making a positive contribution in the enablement of developments and the provision of new homes,” he says.
“Our first fund was very successful and financed the development of more than 28 000 units with a combined total value of more than R8.6 billion. It also achieved good risk-adjusted returns for investors. The SA Workforce Housing Fund was established six years ago and pioneered the development of large-scale stock to meet the high demand in the affordable housing sector in SA.”
Wesselo notes that more than 80% of SAWHF investments complied with the requirements of the Financial Sector Charter, which identifies lower income households as targets for funding—these households historically did not receive as much funding from the financial sector as needed.
“We were also able to track the major positive social impact this has had on the lives of many in terms of raising living standards and improving social cohesion,” he says.
“The construction industry remains one of the biggest employers and this provides a double impact for our investments – job creation as well as the creation of homes for families who would not otherwise be able to get a start on the property ladder.”
Wesselo says that one of the fund’s flagship projects, which illustrates the good partnership I H S has forged with developers, was its stake in the Fleurhof development in the Western Johannesburg area, between Soweto in the South and Roodepoort in the north.
The project is one of the largest housing projects of its kind in the country and has become a model of integrated development. When completed it will comprise 10 193 free standing and sectional title, low-and middle-income housing units, 8 nursery and pre-schools, 5 schools, 38 community gardens and play areas, churches, shops, 5 business centres and an industrial park.
The project offers both rental and homeownership options.
Wesselo says the development has transformed the area and is a good example of how I H S’s partnership with developers goes beyond just providing homes to create thriving communities. Fleurhof is already nearly half completed and around 5000 residents currently live there, many of whom have already made further improvements to their homes.
“Our investment focus continues to be primarily in the form of equity in these types of developments. The new tranche of funding allows us to form additional partnerships with developers and gives us the ability to further extend our investment footprint and provide homes to thousands of other families.”
Wesselo says a portion of Fund II will be invested in partnership with developers further afield in sub-Saharan African Countries like Ghana, Mauritius, Botswana and Namibia, where demand hugely outstrips supply and the provision of affordable housing was causing a property boom.