Samson Moraba said the bank would take the form of the Development Bank of Southern Africa, which is a development finance bank.
He said as many as 3 million people, mainly public servants, would benefit from home loans from the bank. The gap market comprises people who earn too much to get RDP houses and too little to get mortgages from banks.
Groups expected to come knocking at the door of the Human Settlements Development Bank include nurses, teachers and soldiers.
The bank was officially launched in Cape Town on Friday by Human Settlements Minister Lindiwe Sisulu.
Moraba said the new institution will work with the traditional commercial banks and that the banking sector was represented at the launch on Friday.
He said when it comes to the gap market, the commercial banks can come to their rescue whenever they wish.
This is because commercial banks are averse to risk. The new bank will be able to help anyone who qualifies for the mortgage in the gap market.
Moraba added that the new bank would help increase the number of homeowners in the country: “We're ramping up the number of people who qualify for ownership,” he said.
He added that the bank would be fully operational after October, following the completion of formal processes to set it up.
Sisulu said: “I am happy we finally got to this point. It has taken us a long time."
She added that what is left is the legal underpinning to set up the bank. They also need to ensure the gap market is covered by the bank. She said the establishment of the bank for this market is backed by other parties in Parliament.
Sisulu said the bank would also help new players who had been trying to get into the market, bringing in a number of entrepreneurs that have struggled to enter.