TUHF21, an impact-driven property finance company, has announced the finalisation of its first funding vehicle aimed at financing rental properties in townships. uMaStandi Fund has attracted R125 million in funding from new sources in its first year of operations. This reflects the ground-breaking work that uMaStandi is doing to provide financing in townships, thereby unlocking investment potential in a market segment that has historically largely been ignored by traditional financiers. 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.
The funders of the facility included 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.
“We are proud that we were able to attract a mixture of funding partners, including a commercial bank and some innovative impact funders. It is especially important to acknowledge that we secured this support because of the catalytic funding provided by Oppenheimer Generations Foundation. These partnerships will be key to building on the momentum we have created during the past year as we move forward in 2023. For a developing country like South Africa, uMaStandi provides an innovative way for township developers to grow and deliver compelling value for property owners to diversify their portfolios while offering quality, affordable housing,” says Lusanda Netshitenzhe, CEO of TUHF21.
“As a purpose led bank, participation in this fund is a demonstration of Nedbank’s ability to adopt a flexible and innovative approach in providing complex funding solutions for our clients,” says Khayise Mashifane, Executive, Residential Property Finance. “We worked extensively with uMaStandi and TUHF to come up with a bespoke funding offering which enables uMaStandi to achieve their end goal.”
Much as how TUHF21’s partner company, TUHF Ltd, pioneered the inner-city investment process 20 years ago, uMaStandi will play a similar role for township development. The support of these highly regarded institutions will pave the way for other potential investors. It also breaks the perception that townships do not offer sufficient vehicles for growth in the property sector. The uMaStandi facility uses ownership of property as equity to gear a rental enterprise where owners can build quality affordable rental units on their land. It also ensures that construction is properly managed and has all the necessary planning permissions in place.
Property owners or entrepreneurs who hold title deeds and those who want to buy 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, and fittings, etc. respond adequately to market demand.
“When we approached funders to support our vision for township developments, we were initially apprehensive – but then pleasantly surprised by the high quality of investors who took the opportunity, their level of interest and their willingness to commit to township funding. In part, this can be attributed to the significant experience and reputation TUHF has built in the market over its 20-year history”, says Netshitenzhe.
While the rental market in townships has largely been informal, it is becoming more formalised and uMaStandi is committed to supporting its further growth. If anything, the investments received highlight how the township market is proving to be the next destination for micro-property development in the affordable housing sector. “TUHF21 is helping to lead this exciting market. There is potential in the townships that has been ignored for too long, and we believe it is time for the private sector to start recognising that these economies are worth investing in,” Netshitenzhe adds.
Because of the sprawl and low densities in townships – a result of the ineffective use of space in the past – there are many opportunities for densification and bringing in mixed-use developments. This kind of development will stimulate township economies, create places of employment, and offer people access to economic opportunity.
“uMaStandi has learnt 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.
“Our observation has been that Soweto is still the strongest market for development, however, our new operation in Durban is picking up far quicker than expected with Cape Town and East London also remaining key growth markets,” concludes Netshitenzhe.
As a founding shareholder of the TUHF Group, TUHF21 builds on the track record of the TUHF Group by focusing on rapidly exploring other markets, particularly in townships, while growing its existing product portfolio and developing innovative new ones. It is connected to the overarching TUHF ethos of ensuring access to finance for property entrepreneurs is optimised, training and mentorship of clients continue, and that urban regeneration, densification, and management are scaled.