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DEVELOPERS PERSPECTIVE 5 th Annual Banking Summit Banking Association South Africa 31 October 2014, Empire Hotel, Sandton.

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Presentation on theme: "DEVELOPERS PERSPECTIVE 5 th Annual Banking Summit Banking Association South Africa 31 October 2014, Empire Hotel, Sandton."— Presentation transcript:

1 DEVELOPERS PERSPECTIVE 5 th Annual Banking Summit Banking Association South Africa 31 October 2014, Empire Hotel, Sandton

2 Making Sustainable Communities 2 Picture: Cosmo City

3 Creating Jobs 3 Picture: Malibongwe Ridge

4 Mega-Scale Housing Delivery: Economic Impact Integrated sustainable human settlements ProjectNo. UnitsImpact during construction (R) Employment during construction Post construction (R) Post Construction employment Example: Savanna City >18 000R28,4 bn54 900R12,7 bn No referencing and usage without permission from Basil Read (Pty) Ltd 4 Source: Basil Read Developments 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 Major Benefits Stimulate economic growth Build social cohesion Deliver a quality and equitable built environment Long term revenue stream for municipalities

5 “ 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 SAARDA represents nearly 80% of all affordable housing developers (Charter Housing) 5

6 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) 6

7 SAARDA has pledged: To support Minister Lindiwe Sisulu by contributing to the 2 nd Human Settlements Social Contract as a partnership that will deliver 1,5 million housing opportunities (subsidized and affordable housing below R value) over the next 5 years ( ) primarily through the design and implementation of mega-scale projects. To assist in meeting the housing needs of South Africans in a sustainable way. 7

8 SAARDA has committed to: 1.An immediate contribution of at least housing opportunities in the GAP and Below R 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. 8

9 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 9

10 Key Issues related to Achieving the 1,5 million Target 10 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

11 11 CONTAIN COSTS What can people afford? R house R house Need R6 667 income p/m Need R income p/m R house Need R3 334 income p/m Reduce regulatory approval & preparation time Apply Standards consistently Plan better for bulk & lower contributions Achieve economies of scale Innovation (technology & policy) Public-Private Investment Mix

12 Housing Market Households (%) by Household Income Category % 7.40% 8.54% 11.32% 11.64% 8.96% 7.04% 7.17% 6.82% 6.74% 6.27% 5.66% 7.58% 0.00%2.00%4.00%6.00%8.00%10.00%12.00%14.00% Number of Households (as %) Source: Adapted from Global Insight Income Category (Monthly) Subsidy market (52.7%) Outstanding demand – 1,8 million units Open market (19.5%) Gap market (27.8%) Outstanding demand units

13 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 13

14 Bulk Contributions Impact Selling Price VATTop Structure InternalLPFMAvailable for Bulk R R56 000R R R R R56 000R R R R R49 000R R R6 000 R R49 000R R R Illustration: 50m2 house Building rate: (1) R3500/m2; (2) R4000/m2 LPFM: Land, Pre-development costs, Finance cost, Marketing costs 14

15 Bulk Contributions: Usage Standards Lower contributions should apply to affordable housing developments compared with up-market housing High Income HouseholdAffordable Housing 9 Kl/day0,8 Kl/day Water Usage Comparison 15

16 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 16

17 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….. 17

18 Key Proposals: Regulatory Framework 18 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

19 Key Proposals: Bulk Infrastructure 19 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

20 Key Proposals: Innovation 20 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

21 Conclusion: Address Cost Containment 21 Time factor wrt regulatory approvals Bulk availability and cost Consistent standards Economies of scale Innovative technology, process and policy Public-Private investment mix

22 Thank You 22


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