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Official finance scheme offers hope

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Flisp programme helps people in the gap market acquire their own homes

The enormous debt burden on South Africans is a huge hurdle in the quest for home ownership, even blocking them from accessing government aid to purchase their own homes.

Buyers in the so-called gap market earn too little to qualify for home loans from commercial banks, but too much to qualify for the government’s free basic housing scheme or RDP housing. 

This means buyers in this market have little chance of owning their own homes – despite being permanently employed with regular incomes.

According to the Department of Human Settlements, South Africans in this market may be employed in the private sector but are often public servants, and may include teachers, soldiers, police, nurses and administrative staff such as clerks and secretaries. 

Read: Buying first house was easy

           Private sector can help to meet demand for housing

          Potential gap market ‘sizeable’

Department spokesman Xolani Xundu says the need to cater for this market is a “serious” one which “has always been there”, but may have been exacerbated by the significant rise in property prices. 

This need is also the reason for the establishment of the government’s Finance Linked Individual Subsidy Programme (Flisp), which caters for individuals or households earning between R3 500 and R15 000 a month. 

But, while years of rising property prices can be blamed for leaving this market without hope of ever owning their own property, the other big challenge is self-inflicted.

“A huge challenge for us is people’s over-indebtedness. Flisp requires one to apply through the commercial banks, and if you do not have a clean credit record, you are unlikely to benefit from this programme,” Xundu says.

The Western Cape Department of Human Settlements echoes this, with Minister Bonginkosi Madikizela saying: “South Africans are heavily indebted.”

Using figures from the Credit Bureau Monitor of March 2015, he says 85.6% of South Africans borrowed money in 2014. This is in comparison to the world average of 42%.

“Furthermore, 46% of the 22 million credit-active consumers in South Africa had impaired records, according to the World Bank Global Findex Report 2014. 

“These factors in turn impact on the ability of consumers to access mortgage loans. Other issues that affect the gap market include rising interest rates and slow economic growth.”

In the department’s interaction with housing consumers, financial institutions and other relevant stakeholders, Madikizela says it found that people needed education about housing and basic financial matters. 

“This is especially the case because, with the limited funding available, loans for housing purposes will have to form a big part of addressing the need….

“With all this in mind, the Western Cape Department of Human Settlements has signed a formal memorandum of understanding with the four major banks – Nedbank, Standard, FNB and Absa – plus SA Home Loans.”

However Alana Potter, director of research and advocacy at the Socio-Economic Rights Institute of South Africa (Seri), says there has been slow uptake of the Flisp programme nationally, “to put it mildly”.

“One of the main reasons for the poor uptake is that to qualify for the subsidy, applicants need to have an approved home loan from a financial institution, and banks are increasingly reluctant to offer home loans to lower income earners.”

She says more detailed problems cited for the slow implementation of Flisp include: 
* Some provinces are slow to conclude implementation protocols.
* Lack of administrative capacity in some provinces.
* Delayed budgeting in some provinces.
* Delays in concluding memorandums of understanding with the banks due to the sale restriction provision in terms of Section 10A and 10B of the Housing Act, which places banks at risk of non-payment on the sale of the house by the beneficiary.

Picture: Supplied

What is Flisp

Flisp is a programme where the government works with the banks and property developers to help get mortgages for people who fall within the gap market. The Department of Human Settlements’ Xolani Xundu says such people can apply for bank loans to buy or build their homes and the government gives them a top-up or subsidy to make up any shortfall

How it works

Households in Gap Market, if buying a home for the first time, may apply for a Finance Linked Individual Subsidy Programme (FLISP) subsidy through commercial banks, says the Department of Human Settlement’s Xolani Xundu.

Depending on the applicant’s gross monthly income, their once-off FLISP subsidy qualifying amount may vary between R10000 and R87000. Any residential property acquired with a FLISP subsidy may not exceed the R300000 price margin.

Western Cape human settlements minister Bonginkosi Madikizela says FLISP aims to reduce the initial mortgage loan amount to monthly repayment instalments that will become more affordable. The subsidy, he explains, works on a sliding scale, so the less people earn, the higher the subsidy amount.

Qualifying criteria 

*Individuals earning between R3 501 and R15 000 a month.

* A South African citizen or a permanent resident with a permanent resident permit.

* Not have accessed a government subsidy before. 

* Not have owned property. ‘

* Be competent to contract (over 18 and of sound mind). 

* Be married, co-habiting, or single with dependants. 

* Must have an approved home loan.

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