SA’s listed residential assets market is small compared with international peers. This might be changing.
JSE-listed Balwin Properties is no stranger to developing large sectional title estates. But its next project, Mooikloof Mega City, is on a scale rarely seen.
In what could be the world’s largest sectional-title development, with a value of around R44bn, the colossal inclusionary housing project located east of Pretoria could count a total of 50 000 apartments.
Asked how confident he is the 50 000-figure will be met, Balwin Properties CEO Steve Brookes replies: “100%.”
Mooikloof Mega City, a green-model development supported by government as a strategic integrated project, has been designed specifically for the gap housing market. It means housing opportunities for people earning a combined monthly income between R3 501 and R18 000. These income earners earn too much to get a free house from government and too little to get a bond from a bank.
It’s a new market for Balwin. “We needed to create a brand for people who earn a certain income, so we created our Green brand. Because of our EDGE certification, buyers get a reduction in their mortgage rate,” Brookes tells finweek.
First-time home buyers and qualifying individuals will have assistance through the Finance-Linked Individual Subsidy Programme (Flisp). Flisp grants first-time home buyers a subsidy of between R27 960 and R121 626.
Balwin has acquired 210ha, costing R332.5m, for the project, which will be developed in multiple phases. Mooikloof Mega City, 70% owned by Balwin, will consist of a residential component, two educational facilities and a commercial node.
Balwin will undertake the residential developments and will sell approximately 20ha for the development of educational facilities and a commercial node. Government is carrying the R1.4bn cost of external bulk services.
Mooikloof Mega City’s 30% shareholding balance is owned by joint venture partners. Brookes remains mum on who those equity partners are.
Balwin will initially develop 16 000 green-model residential apartments over five developments; the first portion, already underway, launched on 3 October.
These 2 500 EDGE-certified apartments – ranging in price from R499 000 for a studio to R799 000 for a three-bedroom, two-bathroom apartment – will be ready for occupation on 1 February 2021.
Balwin is adding external and internal amenities to its lower-cost brand with a secure entrance, treelined boulevard, 24hr concierge, and a lifestyle centre that includes a heated pool, outdoor gyms, a laundromat, pizzeria, and herb garden.
Over the life cycle of the project, Mooikloof Mega City will provide approximately 115 000 direct and indirect jobs. “We are very proud to help this country in some small way to improve the economy,” he says.
Reviving inner-city living
Balwin may be concentrating on the lower-income homeowner, but Divercity Urban Property Fund’s inner-city development focuses on the lower-income renter. Spanning six city blocks that were the former heart of the diamond and precious metals trade in Johannesburg, lies Divercity’s newly-launched Jewel City.
Vacant for decades, a R1.8bn redevelopment has transformed this extension of Maboneng into a mixed-use quarter. The revitalised, fully-pedestrianised and security-patrolled precinct is amenity-rich and includes lawns, play areas, schools, clinic, gym, bank, restaurants and convenience retail.
And it is reviving inner-city living with its modern and affordable residential spaces. Aside from the fully- let retail space and 20 000m2 of commercial space, Jewel City consists of 2 700 apartments: 1 550 of those in two new residential buildings.
‘The Diamond’ is a six-storey converted office block, ‘The Onyx’ a newly-built 11-storey building. Rentals for these apartments start at R3 499 per month for a bachelor to R5 799 for a two-bed, one-bath unit.
Prepaid electricity and metered water from energy-efficient heat pumps have been employed to boost affordability and minimise operating costs.
Covid-19 was expected to put a dent in letting aims. But if a precinct is safe, well-managed, energetic and affordable, people will want to live there. Unsurprisingly, about 1 000 units were let even before the official launch on 24 September.
“The pace of letting has astonished us,” Carel Kleynhans, CEO of Divercity, tells finweek, saying that 70% of new tenants are from outside the central business district.
Divercity, whose assets stand at over R3bn, aims to list when that number is closer to R10bn.
Residential as an asset class exists in most well- developed property investment markets. But SA is significantly underweighted in this relative to its international peers.“Residential as an asset class is poorly understood ... and there is shortage of investable stock,” says Kleynhans.