By Bongani Sibeko, Credit Analyst Intern at TUHF

There are a few policies and initiatives aimed at supporting and stimulating economic growth in townships focusing on spatial strategies, the provision of services, development of physical, economic, and social infrastructure, small business support services, and public works.

Through the historic economic marginalisation and the constraints faced by township economies, a real estate market termed ‘backyard renting’ emerged. This market has been on a growth trajectory as evidenced in a World Bank report from 2020 which found that “more than 13% of urban households in South Africa reside in backyard dwellings”.

Backyard renting is when a homeowner builds accommodation units with the intention of deriving an income from renting them out. This is shifting to what can be called Freehold Apartment Blocks (FAB) – when the property developer does not reside in the same yard as their tenants but is rather a property investor who develops rental units on a freehold stand for investment purposes.

Backyard rooms versus Freehold Apartment Blocks (FABs)

With the township economy transforming to a formal economy, it has attracted formal investment from companies such as uMaStandi, the Gauteng Partnership Fund, and Indlu Living who all provide financial products tailored for the township’s property sectors. This financial provision will be a catalyst to the transformation of the township residential rental market.

The key question: is the development of FABs financially feasible from both the financier and property entrepreneur’s perspective?

The development of financial models that will clearly demonstrate the income generation potential of FAB’s relative to the costs involved at both construction and operational levels is required. These models can be used to measure the long-term financial sustainability of FABs on a macro level to prove the case for real estate investment in South Africa’s townships.

Both the academic community and the industry needs to come together to explore and support this emerging real estate market to ensure that upcoming property investors are able to take advantage of opportunities it presents.

If you have a topic that you think is interesting and that would provide our readers with valuable insight, you can submit your article to pr@propertywheel.co.za as part of our ‘Young Professionals’ campaign.

You don’t need to have formal writing experience – we will assist you, but you need to be under the age of 40, having graduated with at least one years’ work experience in the real estate industry.

Knowledge sharing is powerful!

Ts & Cs:

Property Wheel reserves the right not to publish content submitted as part of its Young Professionals Campaign.

Writers must ensure that their employers have granted them permission to submit the content and that they are happy with Property Wheel referencing them in the publication and posts.