The Overseas Private Investment Corporation (Opic), the US government’s development finance institution, has approved $80 million (R847m) in financing for International Housing Solutions Fund II, a global private equity fund that will provide quality, affordable housing units to families across sub-Saharan Africa.
This follows the Eskom Pension and Provident Fund announcing in April that it had invested R100m in the fund and earlier commitments of more than R500m to the fund by the National Housing Finance Corporation and the International Finance Corporation, a member of the World Bank.
Soula Proxenos, the managing partner at International Housing Solutions (IHS), said last week that it was encouraging that there was such strong interest in the region and the asset class from both local and international investors.
Proxenos said IHS’s first fund, the SA Workforce Housing Fund, proved that it could make affordable residential property attractive to global institutional investors by delivering good returns.
“We aim to do this again in our second fund. For IHS, good business has always meant doing well financially, while making a positive social impact,” she said.
Proxenos said the second fund, which had a target capitalisation of about R3 billion, would invest in multi-unit and stand-alone housing developments in South Africa, Ghana, Botswana, Namibia and Mauritius.
Overlooked
“Across these countries, significant numbers of existing housing units are in need of replacement or modernisation. Demand for housing in these markets far outpaces supply, particularly for the middle of the affordable housing segment,” she said.
“Government programmes often focus on the poorest segments of the population, while most private sector builders are drawn to the luxury end of the market, creating what’s known as a ‘missing middle’.
“Fund II places a specific focus on this overlooked segment in the sub-Saharan African housing market.”
Brooks Preston, Opic’s vice-president for investment funds, said sub-Saharan Africa had been a priority region for the corporation and its goal was to find investment managers with good commercial acumen that could deliver development impact and profits in tandem.
“IHS is an excellent case of a private equity manager that is achieving both goals by building and selling affordable housing for the rising middle class. IHS delivers near-term economic growth, community development and attractive returns,” he said.
IHS’s first fund enabled the financing and development of more than 28 000 homes with a combined total value of more than R8.6bn throughout the country. IHS hopes to achieve more than this with the second fund.
Proxenos added that IHS was pleased the second fund’s strategy would incorporate a strong “green” component, especially as this was previously regarded as beyond the scope of affordable developments.
“We believe the inclusion of the incubation of green tech in future developments will lead to a new approach to affordable housing construction on a global scale,” she said.