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New Business Trends  Property Investment
Low-Cost Housing Becomes Entrepreneur’s Dream
The backlog in government’s development of low-cost housing is widely known and often criticized. It’s safe to say that once the final whistle blows at the grandiose 2010 FIFA Soccer World Cup, the country’s resources will be shifted towards fulfilling this national imperative.
Interest has sparked and entrepreneurs are cashing in on government’s shortcomings. One such company already benefiting from the need for affordable homes is RAB.
Specialists in ‘fully-bonded affordable homes’, RBA Holdings’ interim results for the six months ended June 2008 show that, despite challenging market conditions, South Africa’s property sector still offers enormous investment potential.
“With an estimated shortage of 600 000 affordable houses in South Africa, the demand for our homes is high and long-term prospects are good,” explains RBA’s CEO, David Wentzel.
Established in 1997, RBA is a supplier of fully bonded affordable homes, ranging between R250 000 and R750 000 and 40m2 and 80m2 in size, in Gauteng and Polokwane. The business model focuses on the acquisition of land, town planning, project management of services installation, marketing and construction of quality affordable homes. Most recently renting of affordable homes has also been added to RBA’s list of capabilities.
Despite challenging market conditions, RBA has delivered “robust” results. Financial highlights include a 6% increase in revenue ending at R105.9m, attributable earnings to ordinary shareholders increase by 14% to R18.2m and Headline Earnings Per Share (HEPS) increasing by 3%, now trading at 5.6 cents per share.
Wentzel said that the company was satisfied with its 6% growth in revenue. Growth in revenue was hampered by the delay in commencing construction in the Braamfischerville Ext. 14 project area in the south west of Johannesburg. Township establishment was held up in this area due to mineral prospecting rights, which needed to be waived by the holder before the residential housing development could commence. More than 220 sales with approved finance have already been made for this project and construction of the project will commence in February 2009 with the revenue being realized in the 2009 financial year.
RBA has invested extensively in operational expertise by strengthening senior management, increasing capacity at an operational level and entering into aggressive marketing campaigns.
Wentzel adds: “RBA’s growth strategies include introducing higher density housing developments, thereby reducing the land cost per unit, increasing rental stock, and continuing our acquisition strategy of purchasing land in areas along the urban edges to ensure that the land pipeline is maintained.”
In line with its listing strategy, the company is steadily building its land stock for future developments. At 30 June 2008 inventory consisting of land available for development amounted to 674 stand opportunities, 7511 stand opportunities were secured and 490 fully bank funded units were under construction in 14 project areas. These units will be completed before the end of 2008. The group had concluded 520 approved sales that were awaiting registration at the deeds office and had 782 stands that were immediately available for sale to prospective clients.
The group intends growing its rental book significantly, which will add an annuity income stream for the company as well as capital appreciation. The introduction of rental units will allow RBA access to clients who will in future qualify as purchasers of new homes via home loans when interest rates decline.
For more information kindly visit www.rbaholdings.co.za
new business trends  property investment |
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section specialist
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Jason Lee
Jason Lee has a BA LLB degree from the University of Cape Town and is an admitted attorney of the High Court of South Africa. He is the co-founder and a director of TCB Properties, a dynamic property investment and development company offering a range of property services. Since the publication of his bestselling book Making Money out of Property in South Africa , Jason has been featured in a number of magazine and newspaper articles and has appeared on radio and TV. He is also a regular guest speaker at property-related functions. You can visit his website at www.jasonlee.co.za. |
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