Title: OCR Document
Author: Readiris
Last saved by: PC10
Company: I.R.I.S.

PARLIAMENT: RESEARCH UNIT

MEASURES BY THE DEPARTMENT OF HUMAN SETTLEMENTS TO CURB PROPERTY REPOSSESSION AND TO ERADICATE INFORMAL SETTELEMENTS IN THE LIGHT OF THE CLOSURE OF SERVCON

9 July 2009

1. Introduction

Servcon was a joint venture between the then Department of Housing and the Council of South African Banks. Established in June 1995, Servcon was aimed at dealing with issues of non-payment of mortgages in the banking sector. Initially, it was involved in the properties that had been repossessed by the banks but in March 1997 it also dealt with cases where borrowers were in default but where the properties had not been repossessed by the banks.

2. Mandate of Servcon

Servcon was mandated to provide exclusive management services with respect to the designated portfolio comprising 33 306 properties in possession (PIPs) and non-performing loans (NPLs) with a value of R 1.277 billion for a period of eight years from 1 April 1998 to 31 March 2006. Servcon had four programmes, namely:

The rescheduling programme which assisted those who could not afford an existing property by providing a mechanism to reassess the property to arrive at a reasonable buy-back or new debt amount.

The subsidised rental programme that gave the occupant time to adjust to paying again after a period of non-payment.

Rightsizing which was designed for the owner/ex-owner who could not afford a property or the rental option by offering assistance to procure and finance in whole or in part an affordable house.

Special assistance which was offered to the aged and disabled such as providing relocation assistance in situ, i.e. without having to relocate.

Since July 2006, Servcon was fully owned by Government and entered into agreements with provincial departments to render services. Its objectives were to identify, acquire or facilitate the acquisition of land and hold it and normalise properties built or owned by provincial housing departments and to finalise the ring fenced portfolio. Its mission included normalising the low income housing and making contribution to the development of integrated human settlements.

In 2008/09 Servon's activities included:

•	A ring-fenced portfolio in 33 310 properties.

•	A normalisation programme that took place in Gauteng, Western Cape and Eastern Cape and had 12 274 properties left to be transferred.

•	Normalising and satisfactorily resolving 20 482 properties in a period of eight years.

•	Acquisition of suitably located state-owned land and property for development.

Of the 12274 properties, 11 474 had been transferred to beneficiaries by the end of March 2008. The majority of the remaining properties had to be completed before March 2009. During its existence, Servcon experienced a number of challenges including, but not limited to, the limited availability and high prices of suitable land, the potential for invasion and the transfer of land to municipalities.

3. Housing Development Agency

In an attempt to fast-track South Africa's housing delivery programme, the Department of Human Settlements launched the Housing Development Agency (HDA) in March 2009. The establishment of the Agency was a response to the "serious threat" that the acquisition, holding and releasing of land posed to the Government's target of eradicating slums by 2014. Access' to well-located suitable land has been identified as one of the bottlenecks in speeding up the delivery of houses in consultation with the developers, the banking sector and other stakeholders.

Another key aim of the HDA is to minimise red tape in the approval of housing developments in both the private and public sector - by acting as a facilitator between the Department and banks.

4. Role of banking sector in housing

In March 2005, the then Department of Housing and the banking sector concluded a Memorandum of Understanding (MoU) aimed at facilitating cooperation between these two with a view to extending housing finance on a sustainable basis to low income borrowers. The MoU was in line with the Financial Sector Charter and Department's "New Comprehensive Plan on Sustainable Human Settlements "This initiative was aimed at transforming the way in which the financial sector, represented by the Banking Association of South Africa (BASA) engaged with the historically-disadvantaged segments of the housing market. Moreover, the two parties committed themselves to working towards the elimination of the refusal of granting home loans on the basis of geographical situation which is also known as "red-lining".

Central to the MoU was the implementation by the financial sector of the delivery of a minimum of R42 billion in targeted investment for new affordable housing finance in R 1 500 to R7 500 income households by 31 December 2008. South Africa's four major banks (Nedcor, Absa, Standard Bank and First National Bank) reported that they had spent R38 billion of the R42 billion as in October 2008.

5. Conclusion

Notwithstanding the aforementioned MOU between the Department of Human Settlements and the banking sector, there is an imperative on the part of the Department of Human Settlements to brief Parliament on whether there are measures in place to guard against the repossession of property due to the current economic meltdown.

REFERENCES

Czenowalow, M. "Government, financial sector in R42bn housing pledge", Reprinted at http://www.enqineerinqnews.co.zalarticle/qovt-financial-sector -in-r42bn-housinq-pledqe-2005-04-01 (Accessed 8 July 2009).

Department of Housing, Framework for the Closure Process in respect of Thubelisha Homes and Servcon Housing Solutions (Pty) Ltd: Presentation to the Portfolio Committee on Housing, Parliament: Cape Town, 20 May 2008.

Mthembi-Mahanyele, S. Parliamentary Media Briefing, Parliament: Cape Town, 12 February 1999.

SA Yearbook 2008/09, "Housing", Reprinted at

http://www.rdp.qov.za/resource centre/sa info/vearbook/2009/chapter13.pdf  (Accessed 8 July 2009).

Sisulu, L. Speech by L N Sisulu Minister of Housing at the Launch of the Housing Development Agency, International Convention Centre: Durban, 2 March 2009.

South African Consulate General, "Housing", Reprinted at http://www.southafrica-newvork.netlconsulate/housinq.htm  (Accessed 8 July 2009).