Many first time buyers in South Africa who earn between R 3 501 and R 15 000 per month can now enter the property market and even save thousands on their bonds thanks to the governmentâ€™s Finance Linked Individual Subsidy Program (Flisp).
The programme was developed by the Department of Human Settlements, specifically to help South African citizens and holders of permanent residence permits who fall into the affordable market – also known as the gap market. People whose income is generally regarded as too low to apply for a bond, but which falls above governmentâ€™s requirements for free basic housing will benefit.
Although the subsidy was introduced in April 2012, uptake has been slow. According to the Centre for Affordable Housing in Africa, over 20% of South Africaâ€™s population earns in the income bracket defined by the new subsidy. Yet in its yearbook, the centre noted that between April 2012 and March 2014, only 1 696 Flisp subsidies were extended â€“ a fraction of what was available in the budget. This represents only 4% of total mortgages extended by the private sector in 2012 and 2013, or 11% of total mortgages reported as in the Financial Sector Charter (FSC) market by the Banking Association of South Africa (Basa).
You could qualify for the Flisp if youâ€™re 18 years or older, youâ€™re competent to legally contract, you fall into the designated earnings bracket, and you have already obtained a bankâ€™s approval in principle for a home loan.
Although the programme was initially available only on certain, designated properties – and only on properties that cost less than R 300 000, the Director General of the Department of Human Settlements, Thando Mguli removed these restrictions in August 2014 and qualifying buyers can now apply for assistance to acquire any formal residential property.
How it works
The size of the subsidy is determined according to monthly income from a minimum of R20 000 to a maximum of R87 000 and it can be used for the purchase of an existing, new or old residential property or a vacant serviced residential stand. You can also put it towards the cost of building a residence on a piece of land which you already own.
But you can only apply for a subsidy once youâ€™ve found a property that you can afford to buy – and a lender (bank) thatâ€™s prepared to finance the purchase.
The programme is administered by the National Housing Finance Corporation which accepts and assesses application forms, which must be submitted by a regional or provincial office of the Department of Human Settlements, a municipality, an estate agent, or a developer.
Payment is made according to your needs. If youâ€™re going to use it to make good any shortfall between the qualifying loan amount and the purchase price of the unit, itâ€™s paid into the transferring attorneyâ€™s trust account on notice of readiness to lodge the transfer documents. But if youâ€™re going to use it to reduce the principal loan amount to render the loan repayment instalments affordable, itâ€™ll be paid directly into your home loan account.â€
For more information visit www.flisp.co.za or www.nhfc.co.za.