New model fuels boom in backyard flats
Companies construct township back rooms for a share of the rent
● The rental income that Johanna Selowa receives from the backyard rooms on her property in Kaalfontein, Midrand, goes a long way to supporting herself and her children.
When health reasons meant she had to stop working in her 40s — with a bond to pay — she had to secure an income. She used her pension payout to build four rooms at the back of her home.
But it was when her path crossed with a company developing rental properties in townships that she became a full-time landlady.
The Indlu Housing Project provides upfront financing to property owners to build outbuildings for tenants.
Selowa got to add an additional six back rooms after she obtained a six-year loan from the company.
“This income is my bread and butter. At this age I cannot find a job and I don’t receive any grant money. I rely on the rental income,” she said.
In townships throughout SA the business of back rooms is booming as Indlu and other small companies enter formal deals with homeowners, paying for the construction of units and sharing the rental spoils.
But the boom in backyard dwellings comes with challenges, often straining municipal infrastructure in terms of the provision of sanitation, water and electricity.
Not everyone plays by the rules, either. Inspectors last month found a property with 13 bachelor flats and 25 shacks in Thokoza, Ekurhuleni. The ablution facilities were all out of order.
City of Ekurhuleni spokesperson Themba Gadebe said the owner of the property — who they have not been able to track down — had not paid rates or service charges for years.
Indlu co-founder Cobus Truter said he spotted an opportunity while developing a shopping centre in Tembisa.
He realised that backyard rental income was helping many unemployed people who were also struggling to get capital to build more formal accommodation.
Indlu’s business plan entails the company funding the construction of the dwellings. For the first six years the homeowner gets 10% of the rental income from the units. After that the company pulls out and the homeowner gets the full rental income.
“It is all about building local rental businesses while supporting local contractors, material suppliers and labourers,” said Truter.
“Then we realised that there is an opportunity to use technology to help people to build credit records and access loans,” he said, referring to an app Indlu launched to connect tenants and homeowners.
In the Indlu model, homeowners have to apply for the relevant rezoning and approval for building plans.
Teboho Mafodi, founder of the TM Group, also does deals with property owners — his company builds the dwellings and takes 70% of the rental income for three to five years, depending on the size of the loan.
The company also buys homes and extends them, or develops them in partnership with homeowners.
“Some of the landlords have the money and all they need is expertise,” said Mafodi.
The company handles the rezoning applications.
Plumber Bongani Dube, who rents a backyard room from the After12 property company, said it is quite affordable. He pays R1,500 for his room in Ebony Park, Midrand, which includes a private bathroom.
During his state of the province address in July last year, Gauteng premier David Makhura said the township real estate market was a fast-growing component of the township economy, with enormous potential to empower people.
Makhura said the percentage of Gautengers living in backyard structures had almost doubled in the past 15 years, from 13% in 2001 to 24% in 2016.
Makhura’s spokesperson, Vuyo Mhaga, said this week it was estimated that more than 900,000 people in Gauteng live in back rooms.
“The population of people migrating to the province seeking better opportunities puts pressure not only on accommodation but also on the provision of services,” he said.
Mhaga said the province is working with developers to help provide better accommodation for people.