One of the largest impact investors in Africa, the CDC Group has announced a USD $36 million (R500 million) commitment to Divercity Urban Property Fund, an affordable housing platform focused on the regeneration of South African cities.
The investment will fund the construction and management of more than 2 500 new residential units (predominantly in Johannesburg) over the next five years by providing quality, affordable and environmentally sustainable housing for low and middle-income households in well-located but underinvested neighbourhoods in South Africa’s major cities. This transaction was also funded by South African impact investor Futuregrowth and existing Divercity shareholders.
South Africa faces a housing shortage of 2.3 million units. A significant majority of its lower cost housing is built on the urban periphery, limiting residential options for low and middle-income households to predominantly informal, congested, and low-quality housing on the outskirts of cities. It also impedes access to essential services including schools, healthcare facilities, public transport networks and employment hubs needed for improved social inclusion and living standards.
CDC Group’s capital will enable Divercity to grow its rental housing platform that provides low and middle-income households with safe, inclusive, and affordable housing options. Construction of the new residential units will help address the growing housing deficit and issues of spatial segregation in South Africa, meeting the needs of people with limited other housing options available, including women, single parents, and young families. Up to 4 000 construction and operational jobs are expected to be created.
The new units will be constructed to green building standards, demonstrating both CDC’s and Divercity’s commitment to minimising greenhouse gas emissions and supporting climate change mitigation, in alignment with CDC’s commitment to invest from a climate lens.
Divercity has also acquired its residential property and asset manager, Ithemba Property, that has a twenty-year track record in managing affordable rental housing. Through the creative design and structure of this platform by investors CDC, Ithemba and Atterbury, Divercity will be underpinned by market leading property development and asset management expertise in rental housing which will be a competitive differentiator.
“Cities in Sub-Saharan Africa are experiencing rapid population growth as an increasing shortage of housing units with low-income populations being particularly affected” comments Samir Abhyankar, Managing Director, Head of Direct Private Equity, CDC Group.
“With our re-entry as an equity investor in South Africa we are proud to have partnered with Atterbury and Ithemba to set up Divercity as a leading affordable and sustainable housing platform in South Africa. The investment will help promote inclusive growth and enhance social and economic integration in the country. CDC’s patient capital and development expertise can help accelerate growth, improve living conditions and support the livelihoods of low-income and vulnerable households.”
With investment in Africa’s housing sector constrained, CDC’s countercyclical funding can stimulate local housing markets and drive transformative economic, inclusive, and sustainable impact in South Africa and other African countries.
Ilaria Benucci, Head of Construction and Real Estate, CDC Group, says: “Urban population growth and a challenging macroeconomic environment necessitates patient and long-term investments that will help close the gap between demand and supply in South Africa’s housing market. We are delighted that our investment in Divercity will support the developer to deliver rental housing that will meet the housing needs of groups within the low- and middle- income bracket. We are confident CDC’s investment will have a demonstration effect on commercial investors, ushering in greater investment into the housing sector.”
“We are delighted to welcome CDC to the Divercity partnership. I am confident that they will add significant value to the funds’ goal of changing the face of affordable rental housing in South Africa and establishing it as an investment grade asset class” notes Carel Kleynhans, CEO of Divercity.
This investment by CDC helps contribute to UN’s Sustainable Development Goals (SDG) on decent work and economic growth (SDG 8), on sustainable cities and communities (SDG 11), and combating climate change and its impact (SDG 13).