Turning backyard rentals into a major township market

The Gauteng department of economic development (GDED) has partnered with Indlu Living to help township landowners unlock the earning potential of their properties by building residential property rental businesses.

Indlu Living offers landowners loans to fund additions and new builds or finish existing builds on their properties, and subsequently manages the rental of this additional accommodation. This includes affordability assessments and building plan approval. 

About 10% of the revenue goes to the landowner during the loan repayment period, as a caretaking fee, to place them in a cash flow positive or neutral space during the development.

“Landowners can expect to make anything between R10,000 and R30,000 per month out of an Indlu Living building once it's paid off,” says Indlu Living CEO Cobus Truter. 

For instance, the building that landowner Mavis Shakoane is developing in conjunction with Indlu Living on her property in Kaalfontein, outside Midrand, will eventually bring in about R15,000 a month. This could be about five times the average of what she is used to earning as a domestic worker. 

“I have always looked down on myself, wondering what kind of life I have built for my children, but Indlu Living has given me dignity,” says Shakoane. “I have hope that after five years when I am done repaying my debt to Indlu Living, I am going to have a better future.” 

Truter says landowners usually use the income from their rental properties to build a business, send their children to school, or increase their investment portfolio. He says the company brings capital into a space that has long been informal but important, covering about 10% of all South African households and comprising a market of about R20bn a year.

Indlu Living registers a lease with the landowner, but not a bond. Truter says: “[This makes] it a very safe product in that, first, you can't lose your land; second, it's modelled to be cash flow positive; and number three, we only ever recuperate the investment through rental income.”

“Every single property in the township is an investment property. People rent out accommodation ranging from shacks to very nice multistorey apartment blocks,” he says. “However, there's a big mismatch of supply and demand in the market.” 

Indlu Living is filling this gap by helping landowners fully utilise their properties and offers both landlords and tenants a rental management solution. The Indlu Living app, available via the Apple App Store and Google Play Store, allows for leases, payments and statements to all be generated electronically. 

The company is also trying to support the wider township economy. It aims to use local contractors and material suppliers in its developments, providing opportunities for upskilling. It also offers all its enterprise resource planning tools — from construction to property management — as a software service to micro developers who already have properties, but need some assistance.

'Creating value where it's needed most'

Indlu Living has received investment through the GDED’s South African SMME Crisis Fund, with the possibility of additional funding in the pipeline. This fund, which raised R300m last year, is aimed at reigniting township-based SMMEs that have previously had restricted or no access to capital.

“By helping to formalise an important informal market, the department's partnership with Indlu Living has the potential to create opportunities for entrepreneurs to secure additional finance,” says GDED MEC Tasneem Motara.

“If someone is outside the mainstream and is unable to gain access to long-term finance from banks for property, you [Indlu Living] have provided a solution for a ready market. One can have a registered property and income that can be tracked and can stand as collateral [to secure finance] for other avenues and for different improvements outside their property,” she says.

She is also in support of how this partnership addresses a vulnerable and under-resourced demographic. “Young and female is a big demographic in Gauteng. And if we are responding to that demographic, we are ultimately responding to the big crises that we have, which are unemployment, poverty, and inequality.”

Motara adds that the GDED’s investment in Indlu Living is one of several programmes aimed at addressing the large scale of unemployment of young people in the province, both those born here and those who have moved to Gauteng. Facilitating economic opportunities is also a way to intervene in, or help lessen, other socioeconomic problems such as high levels of crime and drug usage.

Mathopane Masha, the GDED’s director for inclusive economy, says the department is focusing on about 22 areas where it is driving investments, particularly in townships. 

The acceleration of these economic interventions follows the passing of the Gauteng Township Economic Development Act. The GDED is set to announce and roll out a variety of other opportunities in this regard over the next weeks, with several focusing on the building industry. 

“When you drive investment, you’re developing skills in the townships. Once you drive that, you’re also creating a value chain in terms of opportunities,” says Masha. 

“The department is working with people in the cement and brick manufacturing space to be upskilled and to work as suppliers for Indlu Living. So, the project is not just about helping the landlord, but also about stimulating the local economy.”

Indlu Living is currently focused on the wider Thembisa and Mamelodi areas, with further expansion in the works.  

“I believe townships could be the biggest sources of growth for the country's economy going It creates value where it's needed the most. It injects revenue generating capital right at the bottom of the economic pyramid, creating stability in the economy,” says Truter

Landowners who are interested in partnering with Indlu Living to build a residential property rental business can visit the Indlu Living website. While funding applications are done specifically on the website, prospective tenants and those leasing properties can use both the website and app. For queries, contact Indlu Living via the company’s centre at 087-135-5014 or via WhatsApp at 066-138-4500.

This article was sponsored by the Gauteng department of economic development.