Residential property players are becoming more innovative in their home financing offering to make property investment transactions more accessible.
Absa this week introduced the first lease mortgage finance product of its kind in South Africa to enable people to buy property on a 99-year leasehold basis in the much talked about Waterfall development, a massive mixed-use precinct taking shape between Johannesburg and Midrand.
Luthando Vutula, managing executive of Absa Home Loans, says that unlike many of their offshore counterparts, SA banks have been slow to bring creative mortgage products to the residential property market. "It's high time that we offer our clients mortgage products that support different forms op property tenure besides traditional freehold or sectional title ownership."
Vutula says the lease mortgage works no different to a traditional mortgage. It is also payable over 20 years and available at similar interest rates. In fact, there are costs savings involved for lease mortgage clients, as no transfer duties are payable.
Vutula says the product is tailored so that the mortgage bond is registered against a lease agreement between the lessor and the lessee. In this case, the lessor is the Mia family trust that owns the land in the Waterfall precinct.
Although lease financing is not an entirely new concept in SA, Absa's product is unique as it allows an existing lessee to sell their rights to the particular property for a full 99 years on a perpetual basis. With previous 99-year lease financing products, the new lessee assumed the rights only for the remaining number of years. Absa's 99-year lease product will be provided exclusively to buyers in various lifestyle estates developed by Century Property Developments within the Waterfall precinct.
Seeff Properties announced another first on the SA home financing front this week. The real estate group has introduced a way for buyers to delay paying their cash deposit until transfer, based on a product widely used in Australia, Europe and America.
The product is not a loan or bridging finance, but a deposit guarantee issued by an insurance company, says Ian Slot, member of Seeff's National Board and Legal Sub-Committee.
Slot says the product is particularly useful for people buying in off-plan developments, where one's deposit can often be sitting in a trust account for 12 months or longer before the property is transferred into the buyer's name.
It's not only a more cost-effective way to purchase a property but also convenient for investors who don't want to liquidate funds before transfer that may be tied up in a fixed deposit or shares portfolio. The product is issued by Deposit Advantage, a division of Lombard Insurance Group. – Joan Muller
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