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Harry Gey van Pittius Pr.Eng. is the Founder and Managing Director of Kiron, a property development company. He is a member and previous Chairman of the South African Affordable Residential Developers Association (SAARDA) and a member of the South African Institution of Civil Engineering (SAICE).
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Harry

The National Human Settlements Indaba in October 2014 has failed to produce any significant housing opportunities and government will not reach the target of 1,5 Million housing opportunities by 2019. What are the major problems we need to overcome in order to develop one million housing opportunities, create integrated housing schemes, jobs, entrepreneurs and black economic empowerment by 2019.

Conference

The major problems

The purchase of suitable land for residential development. 

A major problem for local authorities is their limited manpower as well as the appointment of consultants to identify to purchase suitable land for residential development. Established developers have the necessary know-how to identify potential land for residential development based on their experience. To speed up this process it will be much easier and faster to create a joint development, where a private developer purchases the land and undertakes the necessary studies in order to conclude the deal. 

In a case study, we looked at land owned by the Johannesburg Property Company and Ekurhuleni suitable for residential development. The obvious choice would be to form a Joint Venture and provide serviced stands to Council, which would alleviate the housing crises in the area. For example in Northern farms (close to Steyn City and Diepsloot) where there is huge demand for housing as well as Southern farms (near Lenasia and Kibler Park) and Ekurhuleni – Clayville.

All these portions of land should have been used to stimulate the economy and create new young black developers as well as entrepreneurs. 

A joint venture between the established developers, new young black developers, banks and the local authority would have been the right way to go, instead this was all allocated to one single established developer.

The availability of bulk-and link services are without a doubt the biggest technical problem on all proposed development sites. Local authorities do not plan in advance and install the necessary bulk services for future developments. 

The government provide bulk service grants to local authorities but this is used to solve current problems and no new water purification plants are currently being built. The existing plants do not have the capacity to handle the increased demand. Consultants must be appointed to look at future developments and to upgrade existing purification plants for water as well as sewerage.

Electrical bulk supply is unfortunately a problem in South Africa.  What has now become a major problem is that all houses are fitted with solar geysers and the electrical demand (kVA) has dropped but local authorities and banks are still demanding a 3kVA supply. This can be reduced to 2,5kVA to concur with current usage without any problems.

Here is a tried and tested plan on how to deliver 106 500 housing opportunities in Gauteng and create thousands of jobs over a three year period. 

This will stimulate the economy and create new young black developers as well as entrepreneurs.

The Integrated Housing Scheme and Black Economic Empowerment Stimulus is designed to stimulate Black Economic Empowerment as well as provide 106 500 houses for residents in the City of Johannesburg, City of Tshwane, Ekurhuleni, Emfuleni and Mogale City.

The total integrated Housing Scheme is based on a joint venture between Private Sector (established developers and contractors), new young black developers, banks and Local Authorities.  

The plan is based on two basic footings:

  • To provide local authorities with proper serviced stands at an affordable price. Currently a 180m² to 220m² stand with Red Book Standard services, water, sewer, tarred roads, storm water and electrical reticulation can be provided to Councils at a cost of approximately R100 000 excluding VAT. This price includes land cost but excludes bulk service contributions. To provide an integrated housing scheme 50% (53 250) serviced stands must be used for RDP housing and 50% of the serviced stands for Affordable bonded housing.
  • To stimulate black economic empowerment and to create jobs the local authorities will have to address the biggest problem for all new businesses, namely start-up capital. This can be solved by making available serviced stands to numerous new developers/contractors to build RDP housing as well as acting as developers by selling houses, building and negotiating bonds from banks for their customers. The Councils provide opportunities to new developers and contractors to build a total of 53 250 RDP houses by providing cash flow and income as well as allocating 53 250 serviced stands to market affordable bonded housing at a cost of R150 000 (excl VAT) per serviced stand payable on transfer will stimulate the industry. 

Metros have land available for housing but they do not have the manpower, the know-how or expertise to produce a proper serviced stand (water, sewer, tarred roads, storm water and electrical reticulation).  

At this rate we propose that the Councils make this land available for joint ventures with established developers. If councils do not have land available, then established developers can purchase the land and service the land and sell it to the Local Authorities.

We propose that established developers provide Metros with the following fully serviced stands.

  • City of Johannesburg – 300 000 fully serviced stands including electrical reticulation over a period of three years
  • City of Tshwane – 30 000 fully serviced stands including electrical reticulation over a period of three years
  • Ekurhuleni – 25 500 fully serviced stands including electrical reticulation over a period of three years
  • Emfuleni – 10 500 serviced stands including electrical reticulation over a period of three years
  • Mogale City – 10 500 serviced stands including electrical reticulation over a period of three years           

The format is based on the following:

  • 53 250 RDP houses
  • 17 750 serviced stands per year to be allocated to 355 black empowered developers/contractors over a three year period to construct RDP houses
  • Each black empowered developer/contractor is also allocated to build 50 x RDP houses (spec to be provided by Council) per year for Council
  • This will empower the black developers/contractors with the necessary cash flow without start-up capital. The South African Affordable Residential Developers Association (SAARDA) will play a major role with the major banks in assisting and training the new developers to assist with bond applications, construction and transfers.
  • Each developers/contractors will purchase these stands from Council for an amount of R150 000 (excl VAT) per stand (based on 2017 costs) to be payable on transfer into the end-user’s name.
  • The developers/contractors design their own houses and sell their own packages to prospective buyers and submit bond applications to the six major banks.
  • This will give each developer/contractor 50 bonded houses to be erected, financed by the bank (private enterprise) and 50 RDP houses financed by Government per year.
  • The serviced stands for RDP houses will be cross subsidised by the sale of the serviced stands to the developer/contractor for private bonded houses. This will generate an approximate R2,870 billion surplus income from sales of serviced stand for cross subsidised RDP houses.
Budget:

Budget

In Conclusion: 

  • The Council is provided with fully serviced stands, all RDP houses are also provided with fully serviced stands and a fully incorporated integrated housing project.
  • The Council stimulates the economic activity in the area and creates 355 black empowered developers/contractors and 8 165 new permanent jobs.
  • The Council has a method where the private sector gets involved to assist in providing housing and the Council use the profit for cross subsidising RDP housing.
  • The private sector and black empowered developers/contractors work hand in hand with the Council to build 106 500 houses in three years in Gauteng.
  • SAARDA and the major banks can assist in the training, financial assistance, bonds etc., on this project.
  • With a total three year budget of R12,378 billion the Metros provide 53 250 RDP houses, 53 250 Affordable bonded houses, create 355 black empowered developers and 8 165 new permanent jobs. By extending this plan to all provinces one million housing opportunities could be created.

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