Overseas Private Investment Corporation (OPIC)’s board of directors has approved an $80 million finance for the provision of quality, affordable housing across sub-Sahara Africa.
The U.S. Government’s Development Finance Institution is channelling the fund through private equity fund, International Housing Solutions (IHS) Fund II which will build and sell houses to the rising middle class of the region as form of social impact investing.
“It is encouraging that there is such strong interest in the region and this asset class from both local and international investors,” said Soula Proxenos, Managing Partner at IHS.
The international fund manager, with operations in South Africa, had successfully floated its first fund for SA Workforce Housing Fund, which enabled the development of more than 28 000 housing units worth $803 million and showed it was capable of giving global institutional investors good returns on affordable residential developments. IHS plans to replicate this success in IHS Fund II.
Proxenos expressed IHS’ pleasure that the new fund’s strategy was incorporating an environmentally friendly component, as it is largely believed that ‘green’ components are way beyond the scope of affordable developments.
“We believe we are breaking new ground and hope our approach will become a model of how to effectively use green building technology in the gap housing sector without the financially prohibitive aspects, she adds, stressing that new developments need to be affordable.
The managing partner noted that IHS would use its capital, expertise, and influence to help end poverty in Africa and promote shared prosperity. She also expressed the fund manager’s belief that including the incubation of green technology in future developments will lead to a new approach to affordable housing construction on a global scale.
IHS Fund II will invest in both multi-unit and stand-alone housing developments in West and Southern Africa, including Ghana, South Africa, Mauritius, Namibia and Botswana. The fund has a target capitalization of R3 billion ($280 million).
Proxenos explained the choice of the countries chosen for the development, saying several houses in those countries require replacement or refurbishment. More so, demand in these markets dwarf supply in the affordable housing segment of the markets.
She said further that HIS Fund II focuses on the gap left by the government and private sector when they go into housing developments. While government focuses on the poorest segments of the society, while the private sector focuses on the luxury end of the market, leaving the missing middle’, often overlooked in the housing market of sub-Saharan Africa, a region Brooks Preston, OPIC’s Investment Funds VP said has become a priority.
OPIC’s strategy would be to identify smart investment managers that can deliver both development impact and profits, which was why IHS was perfect for the new funding as it “delivers near term economic growth, community development, and attractive returns.”
