Following the unrest in July 2021, the flooding earlier this year, and the continued threat of the ‘construction mafia’ in the province, the Durban CBD has been slow to recover. But this doesn’t mean property investors have lost their appetite for inner-city investing, according to Sershin Moodley, TUHF Regional Manager for KZN and Free State.
The human, social and economic impact of the July 2021 unrest have been significant in Kwa-Zulu Natal (KZN). Adding to the complexity of the situation has been the April 2022 floodings in the province which only exacerbated the challenges of repairing infrastructure and getting KZN fully operational. And then there has been the rise of the so-called ‘construction mafia’ that has seen a criminal element holding construction sites to ransom and demanding builders use only their people to cover a portion of the local procurement requirement.
It hardly comes as a surprise then that recovery has been slow, with individuals, local companies and multinationals opting not to rebuild their damaged properties within Durban. Furthermore, it has become more expensive over the past 12-months to put up new buildings in the province. This can be attributed to the shortage of materials and the continually increasing steel prices. For instance, between this time last year and now, builders can pay substantially more for a ton of steel resulting in a significant knock-on effect. TUHF customers must now invest even more from their own pocket, leaving them with precious little wiggle room to cover any unforeseen costs.
On the upside, however, TUHF is seeing new investors take up the opportunity to establish themselves in the industrial area surrounding the CBD. This speaks volumes to the resilience of the inner-city property market.
“Three major trends, and the fact that new companies are establishing themselves in the Durban CBD, could see KZN experience increased investment despite the perceived risk,” says Moodley. “Firstly, micro-units are still popular, as people are downsizing because of the economic impacts of the COVID-19 pandemic. Secondly, many are looking for more communal living areas with their families instead of staying at the outskirts of the city. And finally, there is a short supply of quality student residential offerings in and around Durban. With the city becoming a hotspot for tertiary education, there will be a growing need to house out-of-towners around the universities.”
“The regrettable events of the past 12-months have certainly given some investors reason to pause, but these three trends have not subsided and the demand for affordable inner-city housing remains on the rise,” he continues.
Tying these three trends together is the fact that the urbanisation of the CBD is expanding beyond Durban property. “Urban densification is a national imperative for South Africa. It has been for some time, and KwaZulu Natal is no exception,” Moodley says. “This is why TUHF has been expanding our offering in the province. We’ve recently extended our financing footprint in the Durban South Basin to include Seaview, Clairwood, Wentworth, and the industrial area of Jacobs, as well as additional parts of Durban North, Phoenix, the Bluff, and Montclair.”
TUHF21, though separate from TUHF, shares TUHF’s views regarding investment in KZN. TUHF21’s uMaStandi programme – which offers commercial property finance in targeted township areas based on freehold title – recently launched a pilot project in partnership with NOVAYA Labs in Kwa Zulu Natal. It’s using OneCity technology to map the infrastructure, activity, and land rights in Umlazi and KwaMashu, two of the largest townships in KwaZulu-Natal, and in so doing target its efforts to fund affordable housing projects.
“These communities were selected based on the potentially high demand for affordable housing investment,” Moodley says. “So, while we are not blind to the challenges that concern investors at this time, we are confident in the potential KZN offers investors, and are willing to put our money where our mouth is to back our clients and upcoming property entrepreneurs.”
Moodley acknowledges that post-pandemic and post-unrest economic impacts are not the only risks that need to be discussed when it comes to inner-city property investment. “Some investors are cautious about the commercial property industry in the CBD due to subdued performance in recent years,” he says. “Sadly, lack of service delivery in the inner cities has also become a deterrent. Though some municipalities are performing better than others, we’re seeing some degree of lack of delivery in all our funding areas. This means that investors are increasingly cautious about investing in urban densification or regeneration projects because, without reliable basic services, it’s harder to attract tenants and retain them.”
In many instances, especially in KZN, the communities have taken matters into their own hands, coming together, and using their own funds to repair infrastructure like roads. People are bouncing back despite government’s inability to effectively manage recovery in the province.
Even so, as the country seeks to rebuild communities and recover economically following the major political and health events of the last two years, collaboration on urban densification is key to ensuring inclusivity and sustainability.
“We are committed to engaging with local government to resolve the challenges around service delivery,” Moodley says. “We believe it’s part of our responsibility to our clients to put our weight behind these discussions.”
Moodley believes it is essential to take a long-term view of the opportunities. Entrepreneurs can capitalise on the new normal trends spurred on by the pandemic. “For example, provisioning units with work-from-home capability has become much more important. Good, reliable Wi-Fi is becoming a non-negotiable in development right now. Good lighting, good ventilation, cost-saving approaches to utilities and other facilities that are conducive to productivity are also important for property entrepreneurs who want to attract reliable tenants.”
“When you invest in a local economy, like TUHF does, you stimulate local economic development in a neighbourhood sense. As we invest in inner cities, we are more likely to create employment, stimulate spending, contribute support for small businesses and in so doing grow local micro-economies in an inclusive and sustainable way. Rebuilding in KZN must be done to protect the people and inspire confidence in the possibilities that still exist in our local economies and the country,” concludes Moodley.