Potential blocked
Free State resident Maplatjie Ramokhoase was overjoyed earlier this year when her municipality gave her the title deed to her former council home. But she has since had no luck using it to secure a loan from banks.
Since April when she received the title deed, three banks have declined her bid to use her property, valued at R200,000, as collateral to secure a R60,000 loan to pay for building extensions to add a laundry, tuckshop and bathroom to the 12 rooms she already lets out.
The banks turned her down because her bank account didn’t have sufficient cash to demonstrate that she had the ability to pay off any loan — despite the regular rental income she draws.
Ramokhoase, from Ngwathe, Parys, is one of 1,100 home owners in several settlements who, since September 2013, have received title deeds through the Free Market Foundation’s (FMF) Khaya Lam project.
The project forms part of a call by the FMF for government to give all township residents the title deeds to their council homes.
The foundation believes this could help uplift millions of people by providing them with a valuable asset to start a business or become a landlord.
While in one case a beneficiary was able to sell a property and use the sale proceeds as a down payment on a property much closer to a new place of work, it’s less clear how many have been able to tap loans to start or expand a business or make renovations to their homes.
The foundation also wants government to scrap the eight-year sales restriction on state-subsidised or RDP homes, which it says forces poor home owners to choose between losing a valuable asset and getting a job in another city.
FMF executive manager Gail Day points to Peruvian economist Hernando de Soto’s claims that the legal status of being a property owner unleashes a spirit of enterprise and individual initiative more than any other policy measure.
Yet evidence from government’s RDP or subsidised housing scheme on the extent to which titled ownership has helped township residents to increase their wealth, remains patchy.
A 2011 report by the Centre for Affordable Housing in Africa found that most RDP housing beneficiaries had made some investment into their homes, most by using their own savings. Between 1994 and 2009 just 120,000 or about 8% of all subsidised properties had been used to leverage R20bn in mortgage finance. Only 6% of subsidy houses had been sold.
Some respondents, however, indicated that being a home owner with a fixed physical address had made it easier to access unsecured, micro finance.
Adelaide Steedley, a director at the centre, adds that when it comes to acquiring finance using a title deed, banks do not want to take the title to an RDP home because of the political risk of having to foreclose and own an RDP property.
The most significant impact title registrations have, she says, is to increase the assets of a neighbourhood, attracting the interest of developers and investors who monitor the growth of areas on a regular basis using a wide variety of measures and clues.
The centre, however, has embarked on a study to confirm what lending is being done on government-sponsored properties driven from deeds data — which, Steedley says, preliminarily indicates a much higher level of lending than expected.
Matthew Nell, a housing expert and director of development consultancy Shisaka, says that because the RDP housing market is fairly new it can be expected that the use of the house as collateral would be relatively low.
He says title holders of former council homes might fare better in getting finance, using their new homes, than those with titles to RDP homes, because the former market is a more mature one.
However, a 2008 report of township homeowners in Ekurhuleni, by Margot Rubin, a Wits University senior researcher at the School of Architecture & Planning, and UK academic Colin Marx, found that title deeds make little economic difference to household wealth.
In all, 45% with secure tenure had made improvements to their homes, against 33% who owned their homes informally.
‘‘ THE PRESENCE OF A TITLE DEED IS NOT A GUARANTEE THAT BANKS WILL FINANCE HOMEOWNERS MARK NAPIER