PRESENTATION TO THE PORTFOLIO COMMITTEE ON HOUSING Wednesday, May 14, 2008

Contents Mandate Strategic Objectives Financial Performance Business Performance 5. Business Plan 2009-2011 6. Retail 7. Strategic Partnerships 1

1. Mandate The National Department of Housing established the National Housing Finance Corporation Limited (NHFC) as a Development Finance Institution in 1996 with the principal mandate of broadening and deepening access to affordable housing finance for the low to middle income households The Corporation achieves that mandate by : Making housing finance accessible and affordable for the low to middle income households Supporting the Breaking New Ground (BNG) Strategy by facilitating the development of sustainable human settlements Facilitating the development of a viable and sustainable low to middle income housing finance market 2

1. Mandate (cont.) Mission Providing innovative and affordable housing finance solutions to the low to middle income market. Vision To be the leader in the development finance of the low to middle income housing market. 3

2. Strategic Objectives 2.1 Effective delivery of housing finance to support the Government’s strategy in reducing the housing backlog through: Financing an amount of R726 million for the provision of low income housing for both rental and ownership; Attaining an impact of 25,025 housing opportunities (Retail included); and Facilitating and providing technical assistance to various tiers of government in the drive to deliver affordable housing at the required scale. 4

2.Strategic objectives (cont.) 2.2 Implementing the Retail Home Loan Business by: Providing loans directly to target market; Facilitating housing delivery through provision of financial products and services; Developing appropriate products and educational material to address the needs of the target market; and Developing appropriate credit scoring system to support roll-out of new products. 5

2.Strategic objectives (cont.) 2.3 Intensify delivery through strategic partnerships evidenced by: Entering into risk sharing agreements with Banks and other financiers active in the low to middle income housing market to leverage the Corporation’s resources to deliver homes at a greater scale; Entering into joint ventures with private sector players such as PACH to develop innovative products for the housing market; Partnering with other public sector entities in achieving impact in the housing market; and Sourcing and mobilising funding to support the needs of the low to middle income housing sector institutions. 6

3. Financial Performance 2008 to Budget Summary Income Statement 7

3.Financial Performance 2007/2008 to Budget Operating Expenses Delay in cost mainly related to new retail business (marketing, advertising and consultancy costs) (23% below) Key expense items Employee cost R45m Outsourced services R7m Professional fees R4m Financial Performance Profit after tax (23% above) Net Lending Income Lower disbursements Lag between approvals and disbursement Increased impairments High interest rate environment NCA (41% below) 8

4. Business Performance 2008 - Housing Impact ACTUAL: 14 121 BUDGET: 17 192 9

4. Business Performance 2008 Provincial Spread 10

4. Business Performance 2008 Quarterly Approvals 11 12

5. Business Plan 2009-2011 Overview Housing Opportunities Disbursements Funding Requirements R1billion R1,237m R1,191m R726m R500 million 39,097 31,562 25,025 nil 2009 2010 2011 2009 2010 2011 2009 2010 2011 12

Commercial (Loans/Units) 7,576 11,967 8,482 10,362 Retail (Units) 5. Business Plan Impact 2008 and Plan years 2009-2011 2008 2009 2010 2011 Projects (Units) 6,545 7,649 13,417 11,390 Commercial (Loans/Units) 7,576 11,967 8,482 10,362 Retail (Units) 5,409 9,663 17,345 TOTAL IMPACT 14,121 25,025 31,562 39,097 Disbursements (R million) 369 726 1,191 1,237 13 14

5. Business Plan Income & Expenditure Projections 14

5. Business Plan Key Income and Expense items 15

5. Business Plan - Balance Sheet 16

5. Business Plan - Funding Capital requirements are as follows: The Corporation has established a funding committee to deal with the funding programme. Discussions are underway with multi-lateral institutions European Investment Bank (EIB) French Development Agency (AFD) The credit rating of the Corporation was confirmed by Global Credit Rating Company in November 2007 as AA- and A1+ for long and short term respectively. 17

6. Retail Pilot MOU signed with SAPO. Pilot offering mortgage loans commenced on 23 May 2007 through five SAPO branches in Gauteng targeting Post Office staff. Additional distribution channels introduced in August 2007 due to low number of applications received from SAPO. Building and renovation loans added to product offering in September 2007. Rolled out to Kwa-Zulu Natal, Western Cape and Free State in November 2007. SAPO staff trained and borrower education material developed. 18

6. Retail Roll-out Plan Development of infrastructure (people, processes, technology and governance) underway. Envisaged to be in place for roll-out to public from end of July 2008. Distribution channels: SAPO Mortgage originators Loan officers Developers Call Centre Internet 19

7.Strategic Partnerships JV with PACH to introduce the Income Linked Home Financing Instrument. MOU was signed with ABSA on 26 November 2007 that will result in R1.3bn released towards affordable housing. Mou with Basil Read - Mixed income intergrated projects based on Cosmo experience Agreement with DBSA consortium (DBSA, NHFC, French Development Agency and Gauteng Partnership Fund) Intergrated developments projects on certain land parcels managed by JPC; and Provinces – Facilitation to fast track housing delivery including pre-project funding, bridging finance and project management. 20