KfW Development Bank, working in tandem with other donors, is providing relief on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ) by investing EUR 15M in the construction of new homes in South Africa. On the one hand, this money is being used to finance more than 25,000 new homes for the lower middle classes. Technology to conserve energy and water is also being installed in 5,000 of those units, which will significantly reduce their tenants’ and owners’ utility bills. Energy-efficient housing has another beneficial effect: 33,000 tons and 182 million liters of water will be saved each year compared to conventional housing. The green technology put to use far exceeds the requirements of South African law. Thanks to KfW’s investment, these energy-efficient houses will be marketed at prices similar to conventional houses in order to make them affordable for low-income households as well. Because demand for energy-efficient housing is still low in South Africa, the price has to be kept low in order to help the technology flourish.
The financing takes the form of a fiduciary participation held by KfW on behalf of the German federal government. This is paid back to the government with interest. Buyers have to take out standard market mortgages for the homes themselves. The South African housing fund “International Housing Solutions II” (IHS II) is acting as a partner to KfW and the other investors on this project. IHS II brings together the funds contributed by various donors, such as KfW and the World Bank subsidiary International Finance Corporation (IFC), as well as South African banks and pension funds, and invests them in the housing construction projects. It is the first-ever African fund to specialize in financing affordable and energy-efficient housing.