Commercial

Townships: Backroom boom

Townships: Backroom boom

The township property market is very much alive with keen interest in everything from residential to commercial real estate. Investing in backrooms is especially popular and lucrative as a first step on the property ladder

The township property market is very much alive with keen interest in everything from residential to commercial real estate. Investing in backrooms is especially popular and lucrative as a first step on the property ladder

WORDS: ATLEHANG RAMATHESELE – IMAGES: GETTY IMAGES & SOURCED

Townships have a specific vibrancy about them – its effervescent lifestyle and culture create a hub for community, lively subcultures, food, art, family and music. While townships may have been associated with high concentrations of poverty in the past, continued investment and development in these areas are turning the tide. Increasingly, they are becoming sites for innovation and commercial gain with the property market no exception.

A WAY OF LIFE

According to GG Alcock, a marketeer, entrepreneur and the author of Kasinomics and Kasi Revolution, books that shed light on the transformation of South Africa’s townships, many people choose to continue living in townships because of the sense of community. “Suburbs can be rather lonely. Many people are happy in these spaces because of its community base in a real African culture way,” he says. “Kids in the suburbs are told to get off the streets while you’re encouraged to play on the streets and get out of the house in townships. It’s a particular way of life.”

To develop these spaces and examine how urban culture has evolved, Alcock recommends looking at it all through an African-relevant lens. “Whether you’re in Khayelitsha, Umlazi or Soshanguve, the reality is that there’s a certain way of living in these spaces and we should be adapting our business models, our municipal bylaws, investment criteria and our planning to the realities of these places because many people want to live there,” he says.

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SOWETO CONNECTION

Sebolelo Gebhardt is an advisory board member at the Mamo Group. This South African investment group primarily focuses on the property development sector and has an impressive retail and commercial portfolio including several petrol stations in Soweto. Gebhardt is positive about the future of economic development in the townships but admits it needs more work.

Having recently taken over the family business with her sisters, Gebhardt wants to continue her father’s legacy by investing in Soweto and surrounds. “We love Soweto; our father grew up there, we spent parts of our childhood there and we will never give up on it,” she says. “We need businesses that don’t have to run on generators and residents with jobs that can put money back into the economy. The Soweto Theatre, Wandi’s, Maponya Mall and Diepkloof Extension are some of my favourite parts of Soweto because they show a level of development that Soweto deserves.”

The Mamo Group is making a concerted effort to be a part of this growth with an investment strategy of buying, developing, and leasing commercial properties. “I want to see more formal housing being built, more shopping centres, more places where residents can work, eat and sleep, such as fancy restaurants, good schools with proper infrastructure and prestigious gated communities. It should be a self-sufficient town,” she says.

BACKROOM OPPORTUNITIES

The backroom, generally a bachelor or studio apartment in a landowner’s backyard, is rather synonymous with township culture. According to Indlu Living CEO Cobus Truter, more than 10% of South Africans live in backrooms, making it a viable and thriving market, especially as more is being done to formalise it. Through Indlu Living, a property portal that predominantly operates via an app, you can upgrade or build properties to supplement your income. Focusing on backyard properties, the portal allows landowners to manage rental units and tenants. “We’re enabling access to finance and part of our service is to act as an intermediary,” says Truter. “We also facilitate and fund the construction for potential landlords to help them build something that is feasible.”

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In a nutshell: Indlu Living finances backrooms for landowners who battle to do it themselves. They assist with loans to design and build the backrooms and then link them with potential clients. The loan is then repaid with the income from tenants. Indlu Living has developed about 1,000 properties this way with no sign of slowing down as they handle the financing, rental management, design and loan book management. An alternative is to buy property or backrooms and use Indlu’s functions for management and payment collection. “The market is very big. There’s a lot to be done in terms of compliance and bylaws to bring the backyard properties into the forefront and create more capital flow,” says Truter.

START SMALL

Another way to get started is to do it yourself. Boitumelo Kuzwayo, a property enthusiast and aspiring developer, has found a way to bring buoyancy into the backroom market in townships. Currently focusing on areas in the East Rand such as Phumula near Leondale, she is creating backroom compounds by targeting properties that have building space to add more rooms and letting them out to multiple tenants.

“Investing in property can be very capital intensive, particularly in the suburbs,” she says. “The risk is higher when you’re relying on one tenant whereas multiple tenants diversify your risk. The amounts for backrooms are smaller, so you can handle potential shortfalls better.” According to her, it’s also easier to find tenants because the rent is affordable.

The way Kuzwayo goes about her business is first to buy the property and then self-fund the building of backrooms with cash instead of loans. She’s now looking into a collective building and buying model with other investors.

Her latest property conversion was to turn a three-roomed home – consisting of a living room, bedroom and bathroom – into a fully fledged backroom complex. She added rooms and a shared paved outside area, all complete with tiling and plumbing. Some rooms have en-suite bathrooms whereas others share a bathroom. “I also offer a place where people can do their laundry on site, ensuring an exciting co living situation,” says Kuzwayo. “It’s about helping people transition out of shacks and into their own spaces, comfortably.”

FILLING THE GAP

A key concern in the affordable housing and informal human settlement sector in South Africa is that people whose income is too high to qualify for subsidised housing, yet still not enough to afford property in the private market, are overlooked. This inevitably results in them remaining in unsafe and insecure housing, without the prospect of building up. Nhlanhla Ndlovu, founder and director of Hustlenomics, a social enterprise that focuses on creating sustainable housing solutions in townships, addresses these issues.

Hustlenomics replaces backyard shacks with safer durable units that have electricity and running water. Furthermore, the cost to build the backrooms is paid off through rental income once the unit is complete, effectively making the construction thereof free for homeowners. Once the unit is paid off, ownership of the unit is returned to the landowner for them to rent out themselves, which empowers those who don’t typically have access to traditional capital. The structures are made with sustainable materials by using alternative interlocking brick technology.

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