Absa's plan to seize more lower-income earners

Barry Washkansky*

17 March 2010

Those earning less than R15 142 can buy a property without paying a deposit and get free homeownership classes.

CAPE TOWN - Thousands of households in the low-income bracket will now be eligible for a 110% bond through Absa's recently launched MyHome product. Those households earning less than R15 142 can now buy a property without paying a deposit and bond costs will be included in the bond. (This is normally about 4% of the purchase price of the property). Borrowers taking advantage of the product will receive the added benefit of an HIV/Aids voluntary counselling, testing and treatment programme.



A household income of R15 142 will qualify buyers for a maximum loan of R450 000 with a monthly instalment of slightly more than R4 500.



Luthando Vutula, managing executive of Absa Home Loans, says the majority of income earners in the country fall into this bracket including most civil servants, teachers, nurses etc. Vutula emphasised the support offered for HIV/Aids sufferers as part of the product. Absa has sourced appropriate insurance so that home loan instalments are covered should a client be unable to work due to an Aids-related disease.   



While anyone in that income bracket is eligible for the package, the product is aimed at first time buyers and the package has a specially designed borrower education programme for new owners. The programme teaches home loan customers about all aspects of homeownership.



The 110% loan was previously available to those household earning up to R11 000 a month. By increasing that amount to just above R15 000 they hope to give more people the opportunity to own a home. Vutula expects the demand to be large and says their main concern is finding stock to satisfy this demand. He also expects this incentive to give the property market a boost. 



"Absa has recently intensified its focus on the affordable-housing market. The plight of many lower-income earners' inability to access housing is well recognised within the bank. In fact the bank has been investigating for a number of years a guarantee mechanism to help lower-income earners afford bonds. This is based on a similar methodology to the one mentioned by the president in his state of the nation address," said Vutula.

With the MyHome product and an expected R1bn of guarantees to be provided by government, Absa believes it can commit to provide about R20bn for end-user financing by 2014. Absa has partnered with a French Development Bank, Agence Française de Développement, to secure 20% of the loans with Absa securing the remainder.



The project is part of the Government's Breaking New Ground (BNG) programme, which seeks to provide affordable housing through an integrated approach. All housing projects are designed to accommodate schools, health facilities, public spaces, religious facilities, industrial and commercial opportunities. The aim is to encourage a quality work-life-play environment with integrated communities.



* Barry Washkansky is based in Cape Town. Barry's first job was selling property in the Woodstock area of Cape Town where he sold to many a hippy, professor and first time-home buyer. He now sticks to writing, mostly about property, in particular auctions.

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