Professional rural dweller's satisfaction with financial options of residential real estate developments in the rural areas of Limpopo, South Africa

Abstract

The purpose of the study is to analyze and understand current financial models or products available in the market in order to help finance new residential developments/building projects as well as property acquisition transactions in the rural areas, whether professional rural dwellers understand the process of housing finance and whether they are familiar with housing finance products in the market. The methodology employed in this study was a random sample of fifty (50) professional rural dwellers in the province of Limpopo in South Africa. The selected sample was professionals who are currently living in the rural areas and have built a formal residential property, either self-funded or aided by a financial institution. Questionnaires were designed, and professionals were interviewed on a one and one engagement to ascertain their knowledge on available financial products catering for residential rural developments and other questions such as the development costs, duration of the development were asked on their primary residential homes. Out of the projected fifty (50) professionals, a response rate of 60% was achieved. Both qualitative and quantitative data was analyzed on a case to case basis. The result of the qualitative study reveals that 43.33 % of the professionals in the rural areas of Limpopo have self-funded their residential property developments, while 6.67% used a combination of both equity and debt finance and 16.67% of the respondents used funding from a rural housing financier or unknown financiers to develop their residential properties. The study also shows that most of their bond applications with traditional banks were declined on the basis that there is no collateral or security since there is no secondary market in the rural areas and due to the fact that the land is not proclaimed. This market of professional rural dwellers is neglected by the private banking sector as no bank is willing to fund such developments unless they provide applicants with traditional home loan, provision of financial products to help develop formal housing in the rural areas of Limpopo. According to Landman and Napier (2010) there is a long tradition of aided and unaided self-help housing in South Africa and that there is still a huge debate on the potential of funded developments, with or without the assistance of government. The issue of financial support for the middle to upper class from the traditional banking sector will require not only their intervention but support from the government in developing the rural areas by improving infrastructure and ensuring that the land is proclaimed in order to promote rural residential properties as an asset class while creating wealth amongst the previously disadvantaged professional rural dwellers in Limpopo, South Africa.