Financing eco-friendly container homes
Low cost eco-friendly container homes like these from Umnyama Ikhaya could provide a solution to South Africa’s housing shortages, but the banks are still hesitant to finance these structures. Source: umnyamaikhaya.co.za
“In addition to the limitations imposed by the banks, our municipalities do not appear to condone unusual building methods”
At face value, prefabricated, container homes would appear to be the perfect solution for South Africa: quick turnaround times; economically viable; and perhaps most importantly, eco-friendly. So why has this trend not gained traction?
One reason may well be that the banks have not yet embraced this building philosophy, not that they are unaware of the trend that more and more homebuyers look for more cost-effective sustainable housing options rather than the traditional home.
Commenting on the matter, Mpho Ramatong, FNB Home Finance Division Channel Head: Housing Schemes, said they are aware of the paradigm shift from the brick and mortar homes due to reasons such as the cost availability of decent affordable housing, costs involved in buying and owing a house and lastly costs of rates and taxes to mention a few. “Therefore, consumers are left with no choice but to opt for buying alternative low cost houses,” he said.
Ramatong said FNB would be willing to finance such homes, subject to approved certification and accreditation (Agrema Certificat).
Nedbank would look at a mobile home financing package as follows: the land cost, which would be subject to standard mortgage financing criteria for vacant land, and the ‘container’ home cost, which would be viewed separately. Thus, the land financing would require a loan-to-value ratio of 50%, which would mean that buyers would be required to raise deposits of 50% of the value of their land. The homes would then be regarded as ‘mobile’ and so the banks would need to get creative about financing same.
According to Linda Rall of ooba, based on feedback received from the banks, both Standard Bank and Absa have advised that they are not currently able to bond these structures as they fall outside their acceptable security requirements. FNB told Rall they are open to considering financing options, subject to complying with strict criteria, for example: the container home is to be fixed to a normal foundation footing/slab; the building needs to have complied with national building regulations and municipal by-laws; and they will also assess the costs and benefits of using alternative building methods versus conventional ones.
In addition to the above, technical requirements like NHBRC registration, and the use of an accredited professional team of builders and engineers are essential.
BetterBond COO Mary Lindemann says: “Banks do grant bonds for alternative forms of housing but require various regulatory and compliance certificates to do so. The structure must comply with SABS building and fire resistance standards and of course must have the necessary electrical, gas and plumbing compliance certification.”
The standard 30m2 units costs R400 000 and come fully equipped with off-the-grid solar panels, batteries, inverters and gas appliances.
Lindeman adds that this adds to the paperwork that a prospective borrower needs to have ready and correct before applying for a bond. She suggests applying through a reputable originator which understands all the different bank requirements.
So, although eco-friendly living is becoming more and more commonplace, the banks are still hesitant to provide finance. Comments Carol Reynolds, Pam Golding Properties area principal for Durban Coastal: “The rationale behind these somewhat unusual lending criteria, is that the banks may be unsure about the longevity of these housing solutions. Whereas traditional bricks and mortar homes have stood the test of time, and if anything, appreciate in value over-time, the banks may be of the opinion that prefabricated homes do not have a life-time guarantee and may in fact, depreciate over time.
More creative solutions needed
Continues Reynolds: “In addition to the limitations imposed by the banks, our municipalities do not appear to condone unusual building methods, and as a result, town planning divisions often fail to pass plans for projects that propose more environmentally sustainable, economically savvy, building options. A classic example of this is wooden homes. The use of modular, pre-engineered wooden homes is common-place in countries like the USA and Indonesia, yet in South Africa, and more particularly, in KwaZulu-Natal, wooden homes are simply not allowed to be built in many suburbs. This is perhaps a legacy from the past where wooden homes were deemed to be ‘rural’ and not in keeping with more sophisticated, affluent suburbs. Again, this archaic mentality needs to shift to embrace a more modern, egalitarian view. Our sub-tropical KZN coastal belt provides the perfect landscape for the development of beautiful wooden beach homes.”
Concludes Reynolds: “Perhaps the solution lies in government endorsing some forward-thinking, progressive developers to take the lead and roll-out projects that make modular homes funky and functional and most importantly, financially viable, by having end-user financing options pre-packaged by the banks from the outset.”
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In addition, they also have water tanks, solar pressure pumps and waterless, extracting dehydration toilets.