Impact-driven property finance company TUHF21 has finalised its first funding vehicle aimed at financing rental properties in townships – the uMaStandi Fund – which has attracted R125-million in funding from new sources in its first year of operations.

uMaStandi provides financing in townships – backing property developers in townships to provide decent and affordable rental accommodation – thereby unlocking investment potential in a market segment that has historically largely been ignored by traditional financiers.

For a developing country like South Africa, TUHF21 CEO Lusanda Netshitenzhe says, uMaStandi provides an innovative way for township developers to grow and deliver compelling value for property owners to diversify their portfolios while offering quality, affordable housing.

The funders of the uMaStandi Fund include Nedbank, the Nedbank Black Business Partners Legacy Trust (which includes Old Mutual’s participation), the SA SME Fund, Novo Impact Fund, Apex-Hi Charitable Trust and Oppenheimer Generations Foundation.

Similar to how TUHF21’s partner company TUHF developed the inner-city investment process 20 years ago, uMaStandi will play a similar role for township development.

Netshitenzhe says the company is “proud” to have attracted a mixture of funding partners, including a commercial bank and some innovative impact funders.

“It is especially important to acknowledge that we secured this support because of the catalytic funding provided by Oppenheimer Generations Foundation. These partnerships will be key to building on the momentum we have created during the past year as we move forward in 2023,” she adds.

As a purpose-led bank, Nedbank Residential Property Finance executive Khayise Mashifane says participation in this fund is a demonstration of Nedbank’s ability to adopt a flexible and innovative approach in providing complex funding solutions for clients.

“We worked extensively with uMaStandi and TUHF to come up with a bespoke funding offering which enables uMaStandi to achieve their end goal,” he says.

The uMaStandi facility uses ownership of property as equity to gear a rental enterprise where owners can build quality affordable rental units on their land. It also ensures that construction is properly managed and has all the necessary planning permissions in place.

Property owners, or entrepreneurs who hold title deeds and those who want to buy property on vacant land, can apply for uMaStandi finance to develop units for rental purposes. The uMaStandi team will conduct a feasibility study and, if the proposed project is feasible, will guide the entrepreneur to professionally design the rental units to ensure the layout, size and fittings that are required to respond adequately to market demand.

“When we approached funders to support our vision for township developments, we were initially apprehensive, but then pleasantly surprised by the high quality of investors who took the opportunity, their level of interest and their willingness to commit to township funding.

“In part, this can be attributed to the significant experience and reputation TUHF has built in the market over its 20-year history,” says Netshitenzhe.

While the rental market in townships has largely been informal, it is becoming more formalised and uMaStandi is committed to supporting its further growth, with investments received highlighting how the township market is proving to be the next destination for micro-property development in the affordable housing sector.

Because of the sprawl and low densities in townships – a result of the ineffective use of space in the past – there are many opportunities for densification and bringing in mixed-use developments. This kind of development will stimulate township economies, create places of employment, and offer people access to economic opportunity.

“Our first draw has resulted in the acquisition of R40-million-worth of assets spread across 36 loans. By the end of 2023, we aim to achieve R100-million worth of loans issued by uMaStandi.

“The demand is there, and we are seeing the need to mature beyond small-scale developers to mid-size developers,” says Netshitenzhe.

She says TUHF21’s observation has been that Soweto is still the strongest market for development; however, its new operation in Durban is picking up far quicker than expected with Cape Town and East London also being key growth markets.