The pre-existing and current racial inequality that lower-income earners in South Africa have and still experience has created economic and social hurdles in buying property. This, however, is not to say that there has not been an increase in the buying of property by the lower-income earners of South Africa.
The current transfer duty exemption on properties below R1 million has indeed made it practically accessible for lower-income earners to buy property in South Africa, coupled with The Financial Linked Individual Subsidy Programme (FLISP) you can’t deny that this is the right direction in giving effect to Section 26 of The Constitution of South Africa (the right to access adequate housing).
FLISP is a government-backed initiative that seeks to promote and secure first-time homeownership for lower-income earners in South Africa making it possible for people to own the home they want. FLISP was introduced by the Department of Human Settlements in 2012 and in July 2018, the applicable income threshold for the programme was increased.
This initiative places the low and middle-income earners of South Africa one step closer to buying property and owning something tangible that they can pass on to their children. This initiative opens the property market to a clientele that has previously not been fortunate enough to break into the sphere of buying and selling property.
The housing subsidy is paid to their bank or financial institution and will reduce their monthly loan instalments, making it more affordable to purchase a home.
There are a number of requirements that one has to meet before submitting their application at the Department of Human Settlements and subsequently being granted financial assistance therein, these include;
- Earning between R3 501 to R22 000 per month.
- Being a South African Citizen or have permanent residency.
- Must have not received government housing subsidy before.
- Must be a first time home buyer.
- Can be married, cohabitating or single (with dependents).
Another important requirement is that one must have an approved home loan from one of South Africa’s financial institutions or banks.
The FLISP housing subsidy may be used to assist in purchasing existing residential property for the first time, purchasing a vacant serviced residential stand that is linked to a house-building contract or building a new house with the assistance of a builder registered with the NHBRC that one already owns. The housing subsidy amount that one receives is dependent on the income of the applicant and ranges between R27 9660 – R121 626. With the seemingly straightforward process of applying for the programme, one cannot shy away from FLISP’s criticisms, one being that there is a lack of education regarding the programme. It is not enough to simply state the requirements of the program and provide the application form. Those who are interested in making use of the programme need to be thoroughly informed of the processes which include bond applications, the process relating to the transfer of the property as well as the FLISP Application itself (everything that is linked to the application).
The frequently asked questions on the above-mentioned issues shown on websites such as the FLISP program site, the National Housing Finance Corporation’s website, on the Centre for Affordable Housing Finance in Africa’s website, as well as questions asked by day to day clients, is an indication that the above mentioned needs to be explained to the potential applicant in a manner that is understandable, before making the decision to buy a property or to Apply for FLISP.
This is where STBB Attorneys steps in with our extensive knowledge in property law and with personnel who are equipped with the required knowledge and communication skills. We make the transfer process and FLISP Application process as transparent and simple as possible.
The information available to low-income market segments about the availability of cheaper housing stock on the market is a barrier to entry. Information channels to poor households are weak which inhibits their capacity to access such housing. Despite these challenges, some research suggests the formal housing market is on the rise. There is increased bank finance for historically disadvantaged households.
Furthermore, there are instances where people have the challenge of credit eligibility. Problems of credit eligibility have previously arisen for many South Africans and this has been unique to certain clients who submit applications and these clients fail to qualify for mortgage finance due to poor credit histories or due to limited capacity to take on additional debt. The Department of Human Settlements reports that the two main reasons banks decline home loan applications are lack of affordability and unacceptable credit records.
Needless to say, the FLISP programme may have a number of hurdles, but we cannot ignore the assistance that it brings those who fully meet the said requirements to own property which will lead to the curbing of the very dangerous social inequalities that still subsists in South Africa 25 years after its democracy and STBB Attorneys wants to be in the forefront of ensuring that this happens.
For more information about the Financial Linked Individual Subsidy Programme (FLISP), please contact: