National Housing Finance Corporation (2023)
NHFC is a public company that has been set up by the Department of Human Settlements (DHS). NHFC’s role is to provide housing finance products and services to low-income South Africans at affordable rates.
The corporation will focus on areas where there are high levels of poverty and inadequate access to mortgage finance as well as low levels of home ownership.
National Housing Finance Corporation
The NHFC is a public company, wholly owned by the Department of Human Settlements. It is therefore a member of the National Treasury, which in turn makes it a member of the National Credit Regulator and the National Housing Finance Association.
In addition to these functions, it has an important role to play in implementing government policy on affordable housing development and homeownership for low income households.
Functions of the NHFC
The NHFC will act as a catalyst to the development of the housing sector. The NHFC will promote the development of affordable housing in South Africa. It will also promote the development of a sustainable mortgage market, which is essential to establish a well-functioning real estate market that serves all segments of society and includes both formal and informal home owners.
The NHFC’s functions are:
- To act as an investor, developer and financier in order to increase access to affordable housing for all South Africans;
- To develop infrastructure associated with affordable housing; and
- To provide funding for approved projects undertaken by other entities within its mandate.
Board of Directors
The Board of Directors is responsible for the overall governance of NHFC. It is also responsible for appointing the CEO and approving the NHFC’s business plan. The board must ensure that NHFC complies with its mandate and its legislative framework, as well as other relevant laws, regulations, codes and policies in the housing sector.
Management and staff
NHFC is managed by a Board of Directors who are responsible for setting policy, directing the business and ensuring that NHFC operates in accordance with its mandate. The CEO leads NHFC’s management team, which comprises two deputy CEOs (one corporate and one operational), six directors and an internal audit director.
NHFC has a Chief Financial Officer (CFO), Chief Operating Officer (COO) and Chief Information Officer (CIO).
Addressing barriers to access to finance and affordable housing
The NHFC was established in 2011 as a public company by the Department of Human Settlements (DHS), with the aim of providing affordable housing finance products to low income households. The NHFC is an important piece in South Africa’s affordable housing landscape as it helps to fill a gap in funding for low-income communities, particularly those who are not catered for by traditional banking institutions.
The NHFC provides home loans and mortgages to individuals, households and community groups who cannot access finance from other sources. It also offers deposit protection schemes which help to protect clients’ deposits when they borrow money from the NHFC or other financial service providers.
NHFC’s main focus is on increasing access to affordable housing through financing programmes that support development projects such as building houses and providing land for residential purposes or commercial developments like shopping centres etcetera.
Soft terms, on the other hand, are flexible and considered by many to be more consumer friendly. They include longer repayment periods, lower interest rates and flexible repayment schedules. These soft terms help meet the needs of the customer by allowing them more time to repay their loan or purchase their home (this is especially important for those who may have difficulty meeting all their monthly obligations).
In addition, soft terms also help increase access to credit markets because they enable borrowers with lower incomes or who do not qualify for conventional loans (because they have less than perfect credit history) access financing opportunities that are otherwise unavailable in today’s tight funding environment.
The use of soft terms has been shown over time as an excellent tool for increasing accessibility in both residential housing as well as financial services industries. By using this method it allows organizations like Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) provide affordable housing while still maintaining profits which they then pass onto shareholders.
Upfront equity funding
Upfront equity funding allows for the NHFC to provide housing finance to the poor and low-income households. Upfront equity refers to a type of financing that allows borrowers to purchase homes without having to pay any down payment or mortgage insurance. The NHFC is able to offer this type of funding because it can access funds from various sources, including grants from the World Bank and other international agencies.
Covering risk and return on investment through tax incentives
The Housing Finance Corporation (HFC) Act of 1992 introduced a tax incentive scheme to encourage private sector participation in housing finance by providing tax benefits to investors, developers, buyers and lenders. The scheme is an integral component of the Indian government’s strategy to increase housing supply through market forces rather than direct public intervention or subsidy schemes. The following are the key features of HFC:
- Investors in eligible housing projects may claim deduction under Section 80C of Indian Income Tax Act 1961 (ITA). This deduction can be claimed only after construction has been completed and possession taken by homebuyers.
- Developers who receive capital gains from sale of land or flats within five years from completion of development work can claim exemption from capital gains tax if they reinvest 25 per cent or more into another eligible project within six months from receiving such capital gain.
- If a developer gets infrastructure status for his project under Section 80-IA(2)(f), he would be entitled for full exemption on payment made towards interest at concessional rates on loans raised from banks/financial institutions/housing finance companies/public sector enterprises under any central/state sponsored program for lending purposes (such as those provided by HUDCO).
- Buyers who purchase houses worth Rs 50 lakh or less have an option to pay income tax over several installments instead of paying it all at once
Sponsorship of housing finance products
The NHFC will play a role in the development of housing finance products and facilities. The Corporation may be asked to sponsor certain products and facilities, including:
- NHF – Mortgage-backed securities (MBSs) and other types of asset-backed securities;
- NHB – Short-term liquidity products, such as certificates or bonds with maturities up to 4 years, issued by non-bank financial institutions (NBFIs), including Private Finance Institutions (PFI)/Private Equity Funds;
The National Housing Finance Corporation (NHFC) is a public company that has been set up by the Department of Human Settlements (DHS). NHFC is an operational subsidiary of DHS, and it is fully commercial. Its objective is to provide affordable housing finance to poor South Africans.
The National Housing Finance Corporation (NHFC) is a public company that has been set up by the Department of Human Settlements (DHS). Its purpose is to address the housing needs of low-income households and facilitate access to affordable housing.
The NHFC provides funding for developers and other service providers who offer loans or leases for new or existing properties with agreed affordability criteria. This can include rental properties, land development and construction costs. The NHFC also promotes partnerships with private financiers, government departments and non-governmental organisations.