Next generation home loans
In South Africa, 2020 has been a milestone year for the property industry in many respects, with the launch of the country’s first green home loan, new disruptive players entering the market, and rapid development of digital solutions on the back of social distancing, among others.
Facilitating green home ownership
With climate change now firmly on the global agenda, the interest in green buildings continues to grow. The Absa Eco Home Loan, launched in partnership with Balwin Properties, makes buying and owning a green home possible for more South Africans.
Balwin Properties made history in June 2019 when announced it had registered over 16,000 units as EDGE-certified by the Green Building Council South Africa (GBCSA) across seven of its built-to-sell and three of its green developments. The International Finance Corporation (IFC), a member of the World Bank Group, confirmed this as a global first that covered more homes than any single property developer in the world to date.
Qualifying homebuyers at select Balwin developments, The Reid, De Zicht, The Blyde and Polofields, can now get a reduced interest rate on their mortgages through taking out an Absa Eco Home Loan.
Lisa Reynolds, CEO of GBCSA, believes this will help to meet market demand for green homes. “The first building to be Green Star rated and certified was an office in 2009. At that time, to achieve a 4-star rated building took effort and was regarded as a massive achievement. Fast-forward to 2020 where a 4-star rated office building is considered the norm of well designed, well-built and well managed building. This is a sign that GBCSA needs to move the goalposts for aspirational Green Star rated buildings. This reflects the global trend. Many of the International Green Building Councils are moving to NetZero Carbon buildings and beyond to Net Positive buildings,” she says.
GBCSA partnered with IFC to introduce the EDGE rating tool to the residential sector with that view – to set an aspirational target of how and what a green residence should look like and be made of, to bring it to the residential sector and encourage it to become the “norm”.
Reynolds says that a green building should be valued more than a non-green building, and green homeowners should be valued too. “A green asset should be valued at a better rate than a non-green asset and financial houses must not only recognise these factors, but also find ways of encouraging home-owners to follow this resource efficient, healthy building path,” she says. “The green home loan is one of those vehicles. The link to a certification process brings the peace of mind that the green home loan is not being used to finance greenwashing. An independent third party is saying to the bank that they can award a green loan with confidence that this is an energy efficient, water efficient, well designed residence. The benefit to the homeowner is not only in living in a home that is cost effective in utility bills, but they are recognised by their financial institution for being the leaders in green homes.”
Given the increasing cost of electricity and the prospect of continued loadshedding, green homes are more appealing than ever.
Beyond this, she says developers of green properties will also enjoy benefits, such as a higher tenancy rate and easier-to-sell homes (because they have low running costs). “We need to be enlightening homeowners and tenants regarding the benefits of living in a green space, as well as guiding and educating them in the options and steps of going green – the journey to green homes,” she says.
Absa believes that partnership is a key ingredient of any recipe for innovation, and the Eco Home Loan is no different. The concept was pitched to the bank by Steve Brookes, CEO and founder of Balwin Properties.
“The idea of a green home loan was inspired by the IFC’s Green Bond,” he says. “I was impressed by how much they have achieved in driving climate-smart investment and saw an opportunity to extend this philosophy to our customers. So, my team and I set out to find a like-minded, innovative partner with the right technical expertise and delivery capabilities to develop such a product. Absa was an obvious choice for us.”
IFC was one of the earliest issuers of green bonds, launching its Green Bond programme in 2010. As of 30 June 2020, IFC had issued USD10.387 billion across 172 bonds in 20 currencies. EDGE is also an innovation of the IFC and was created to respond to the need for a measurable solution to prove the financial case for building green. [Understanding EDGE]
Geoff Lee, Managing Executive of Absa Home Loans, says the bank was excited by the idea from the start, seeing the potential immediately. “We have recognised that sustainable living is a priority for our customers and so it must be a priority for us,” he says. “We saw this as an opportunity to provide a solution for customers that is eco-friendly, while also leading the industry with this new product. We recognise that we must develop innovative propositions that serve the evolving needs of South Africans and align with our role as a responsible corporate citizen.”
He adds that Absa’s Eco Home Loan enhances the benefits of EDGE certification by lowering the cost of finance for customers. Other customer benefits include 105% loan-to-value for young professionals, cashback for rewards members, and access to financial planning. And Lee says Absa is already thinking about working with Balwin on other EDGE-certified developments.