The Light at the End of the Tunnel

A new product aimed at helping developers has been launched.

It’s common knowledge that the construction industry has witnessed some hard times over the past eight years or so and while it’s evident that South African builders aren’t quite out of the woods yet, there are signs that the construction tide may be turning. A recent report released by FNB’s property economist, John Loos, notes that activity at the start of the building process is gaining momentum and that the volume of work of both architects and quantity surveyors was markedly higher during the second quarter of 2015.

“This should bode well for the rest of the building sector towards the end of the year and in 2016,” said Loos. “However, it is not to say that the rise in building planning activity will automatically translate into building construction as there are a number of potential stumbling blocks in between.”

Let’s face it, those involved in the construction industry have a number of challenges to overcome including miles of red tape and other delays that can have a serious impact on the cash flow needed to complete a project. However, thanks to a new product recently launched by Prevance Capital, lack of funds should no longer play a part in the failure of a development.

Prevance property bridging finance services now provides loans to experienced property developers who have a proven track record. “The initiative is set to provide a strong means of financial support for those who focus on building much needed homes around the country,” says the group’s marketing manager, Christo Jonker.

Strict criteria apply to any loan. The developer must have invested some of his own money in the development concerned and security in the form of a first mortgage bond is required. The loans are provided for up to 12 months for developers who have Section 82 or Regulation 38 documents in place.

One of the advantages of using bridging finance to shore up an ongoing building project is the ease and speed of securing the required funding. “The amount of the loan depends on a number of factors including the developer’s requirements which have been based on the projected cash flows,” says Jonker. It is worth noting however, that the loan amount will not exceed half of the realisable value of the security property.

The interest rate attached to each loan is negotiable for each client, but generally averages between three and four percent on a monthly basis.

“Prevance Capital has been helping South Africans realise their property dreams by offering bridging finance for years and we are tremendously excited about our latest product. Developers in this country have to face enormous obstacles, often before the first brick has been laid. We believe that having access to bridging finance from a highly respected, well-established company will go a long way towards helping those involved complete their current projects, paving the way for bigger and better things in the future.”