Contractors look for money in the wrong places, delaying housing construction

Lihle Mtshali

Lihle Mtshali

The biggest challenge facing emerging contractors gunning for low-cost housing tenders is that they do not consider the issue of finance before winning the tender, according to the National Urban Reconstruction and Housing Agency (Nurcha).

"Once they have the tender then only do they think about finance. They then go to traditional financial houses who turn them down because they are considered high risk," said Peter Springer, marketing and communications manager at Nurcha.

Though the agency said that there was no shortage of funding for emerging contractors - Finance Minister Trevor Manuel, in last month's budget, allocated R11,4billion to housing and community development - most of them were "knocking on the wrong doors", causing delays in housing delivery.

The country currently has a backlog of 2,4million houses and will have to build about 30000 a month if it wants to complete its low-cost housing programme by the target date of 2014, which Housing Department officials have admitted is unrealistic.

Penny Mboyi, Nurcha's business development and relations manager said that delays were mostly caused by entrepreneurs approaching financial institutions such as the Land Bank, which turned down applications for finance to build houses, and others going to lending institutions that required collateral that the contractors did not have.

Mboyi said that money was not only being made available by the government, but also by private sector financial institutions, which ad-vanced loans as long as their risk could be properly managed. She added that the agency partnered with major banks and helped the institutions to control their risk better by providing support to contractors, including the transfer of business skills.

Nurcha, in conjunction with other key construction industry role players, currently runs nationwide workshops to make people aware of the doors that are open to them to obtain finance.