After recently announcing the close of its second affordable housing fund – Fund II – global private equity investor International Housing Solutions (IHS) says it has attracted some R1.5-billion in investment from prominent entities, including the National Housing Finance Corporation, the World Bank’s International Finance Corporation and the Eskom Pension and Provident Fund.

The Overseas Private Investment Corporation, a first fund contributor, had also invested in IHS’s Fund II.

The launch of Fund II followed “strong” risk-adjusted returns achieved for the investors in its first fund, the R1.8-billion South Africa Workforce Housing Fund (SAWHF), which pioneered the development of large-scale stock in the affordable housing sector in South Africa.

The SAWHF provided financing for over 28 000 housing units with a combined value of more than R8.6-billion.

IHS was also able to track and quantify the social impact of the investment on the lives of people living in the developments that it funded.

IHS managing partner Soula Proxenos believed the returns achieved through the first fund provided “clear proof” that middle- and low-income housing was a sound investment and a strong base for ongoing flows into the sector.

“There has been a great deal of interest in this historically under-focused asset class from both South African and international investors. Our investors are particularly attracted to this asset class, as they want to achieve superior returns and help to improve the social circumstances on the lives of thousands of people.

“With our second fund, our strategy remains the same,” Proxenos explained.

Owing to urbanisation and the growth of the African middle class, he said the need for housing across the continent vastly outstripped supply, especially in the category of affordable housing.

“In countries with a functioning mortgage market, that need translates into market demand. Our investments in Fund II will remain primarily in the form of equity in the development of new single-family homes, multi-family and student housing,” she outlined.

Proxenos further announced that Fund II would consist of two “sleeves”, one of which would invest in South Africa, and the other in other targeted sub-Saharan African countries. 

“Demand outstrips supply in many markets in Africa and, where the right conditions exist, the sub-Saharan 'sleeve' of Fund II will invest in some of these markets.

“Our main focus will remain South Africa, but the sub-Saharan 'sleeve' will start to proactively source deals in Ghana, Zambia, Botswana, Namibia and Mauritius,” she said.

Proxenos believed the group would raise over R3-billion for the new fund.