BANKS are thrilled at the government's commitment to dedicate more land to low-cost housing.
Last month President Jacob Zuma announced that the government would set up a guarantee fund of R1billion to give incentives to private banks to develop products that meet low-cost housing needs.
These products are for people who earn too much for state subsidies but too little to qualify for bonds.
Zuma also said 6000 hectares would be allocated to low-cost housing in the country.
"Currently only 24000 plans are approved for development annually and this is not enough to meet the demands of affordable housing," said First National Bank housing finance CEO Marius Marais.
"The biggest need in housing finance is funding people who earn between R6000 to R8000 a month," he said.
About 600000 families earning between R3500 and R15000 a month are currently renting apartments because they cannot afford mortgages.
They can afford a house worth R230000.
Most of these families earn less than R8000 a month.
Marais said that a house built with such a budget was comparable to an RDP house, so developers tend not to want to become involved.
"Now that the government has allocated land, this will decrease costs, allowing for more units to be built," Marais said.
About 180000 affordable housing units can be built on the 6000 hectares.
Marais said the this market had experienced a significant recovery in the past four months .
"The affordable housing market is projected to increase by 5 to 8percent in the next 12 months," he said.