Mashaba's rejuvenation initiative gets thumbs up

Johannesburg Mayor Herman Mashaba
Johannesburg Mayor Herman Mashaba

Bankers have commended the City of Johannesburg for its inner city rejuvenation initiative which they say will help historically disadvantaged people enter the property market.

On Tuesday, Johannesburg mayor Herman Mashaba launched the inner city investor prospectus which gives details of the 71 properties that the city is releasing to the market for development. These properties are in addition to 13 others released last year.

All these assets are aimed at allowing the private sector to take a lead in providing low-cost housing and commercial property in the inner city. The launch of the prospectus, held at council chambers in Braamfontein on Tuesday, was attended by bankers, property investors, real estate funders, construction experts and project managers. The prospectus gives the investor all the information regarding the property they aspire to develop, including pictures of the asset.

Mashaba announced that the City is giving out these properties for free. All that a developer has to do is meet the three requirements:

  • prove that he or she has the money to develop the property;
  • show how during construction there will be jobs and skills transfer; and
  • ensure that the rentals are affordable to poor people.

These properties will be available on long-term leases with the City which will eliminate the first hurdle of entering the real estate market. In total, the City expects to attract investment in the region of more than R16-billion through the development of these properties.

Victoria Ngwenya, a portfolio manager at Nedbank corporate investment banking, said the big milestone for investors is that the City is supporting the initiative for the long term. "The city has committed to the security of the investment. But for any developer that is interested, experience is a big issue," said Ngwenya.

"Unfortunately, construction is [a] very delicate industry. Costs go up and it is expensive. For your deal to be bankable, partner with people who have experience in the sector. The banks need to see an element of skill that basically secures that kind of investment."

She added that for a person entering the market for the first time, partnering with organisations like the Social Housing Regulatory Authority will help tick more boxes for a bank to provide the loan.

Mandla Hadebe, the head of wholesale real estate at Standard Bank, Gauteng, said the inner city is still an attractive space to invest in judjing by the number of people who walk its streets daily. "If you look at the retailers, some of the best performing ones are in the CBD," said Hadebe.

"But the inner city has challenges of crime, therefore it is better to control a block. If there's eight buildings, all eight owners must be of the same mind. Then there will be the same standards, same amenities and people will want to stay there. Today people want amenities. They want to feel safe, they want a gym, they want places with WiFi."