Rent-To-Own

Posted by Rent-To-Own on 02 Sep 21

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Estate Living
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Creating Pathways to Home-Ownership

The housing crisis in Namibia is a fervently debated topic. Iinadequate housing allowance, rental allowance, taxable subsidies and housing shortages in developing countries are some of the most pervasive challenges of the 21st century and Namibia is not immune to their reach.

With the Covid-19 pandemic in our midst, the challenge of housing has been expedited significantly, requiring concerted efforts from People-Public-Private Partnerships within the housing sector.

According to the Centre for Affordable Housing Finance report (CAHF), 2021 the housing backlog in Namibia is estimated at 300,000 with 84 000 in Windhoek alone. The backlog in the capital continues to grow given the predicaments associated with urbanization and people searching for working opportunities in the city.

The National Labour Survey Report 2018, estimates Windhoek’s population at more than 400,000 residents with a growth rate of 4.4% per annum. In fact, the City of Windhoek estimates the population to grow to 800,000 residents by 2044. About 110,000 residents in the city are renting, resulting in an expenditure of about N$6.1 billion annually. This translates to 28% of Windhoek’s residents pumping billions into the local economy every year, in the form of rental. Nonetheless, besides the opportunity to occupy space on a month-by-month basis, these billions do not translate into acquisitions or assets for the renters. So, in truth, the pertinent question is what do these figures mean to you and I?

Interestingly, government has a total labour force of 87,567, of which 67% reside in urban areas. Governments’ housing subsidy is the best in the country, where on average, 66% and 34% of the monthly instalment for a property is contributed by the government and civil servant respectively. However, despite the above benefit being offered, only 18% of civil servants use the subsidy. Therefore, more than 80% of the labour force have no house of their own and they simply rent.

Unfortunately, Namibians – despite their best efforts and commitments to gainful employment – largely rent due to necessity. This state of affairs endures for years on end and it places us at a fork in the road, do we continue on our present path and hope the market will miraculously resolve itself in favor of the masses? Or do we actively and directly attempt to deviate from the status quo?

Intuitively, the latter option is the only truly feasible one. The next logical step is the matter of how we resolve the present issues and change the status quo. In this, we must be cognizant of the fact that we cannot continually employ the same strategies, with little to no success, persist with such strategies and hope for different outcomes.

Innovation is integral to the resolution of this matter but it demands more than simply thinking outside of the box, this matter demands we think outside the building within which the box is confined.

In the words of Rosebeth, Moss and Kanter, 2020

“As Namibia moves from complicated to complex, those who strive to be great leaders cannot limit themselves to thinking inside the building. We must instead become advance leaders who think outside the building by stepping outside, knocking on other doors, creating new ways to deliver innovative solutions Namibia needs and providing promising entryways for the people of tomorrow to enter.”

We heeded these words and in so doing came up with the revolutionary Rent-To-Own Programme.

The Rent-To-Own Model was born from the need to provide alternative financingfor individuals thatdo not qualify for a traditional home loan, but will be able to so with a financial institution in the medium term. The model is an innovative and affordable way that allowsyou to become an entry-level homeowner.

So how does Rent-to-Own works?

Quite simply, below is the explanation of the Rent-to-Own model:

    ¨ A Rent-to-Own contract is a deed of sale agreementin which transfer is deferred for 5 years. During the 5 years, you commit to pay a monthly instalment fee which serves as“rent”for your own property, while working on rehabilitating your financial record in order to purchase the home.

    ¨The purchase price of the property remains locked for the five years. You have not seen any deal like this before!

    ¨You pay a commitment fee of 3.2% of the purchase price. This amount serves as our only security.

    ¨You pay a monthly instalment fee equivalent to 1% of the purchase price. This amount is only paid upon occupation of the property and excludes levies such as water, electricity, rates and taxes.

    ¨You have a pre-payment option that allows you to make additional payments that go towards the reduction of the purchase price. Therefore, any payment done in addition to the monthly instalment will reduce the capital amount at the end of the period.

    ¨We offer financial literacy to all our clients. The main objective of the Rent-To-Own model is to improve the credit record/score and ensure our clients become bankable again. Together with our partners and your commitment to the course, the objective is to see you become an entry-level homeowner and transition successfully at the end of the rent-to-own period.

You may want to ask, what is the actual difference between renting and Rent-To-Own product?

Well to answer your question, the two are totally different in the following manner: Firstly, renting is an agreement you sign, where a payment is made for the temporary use of a property owned by another. At this level you pay a flat rental amount and the landlord subsequently pays for all the property charges regularly incurred by the owner. At the end of the contract, you each go your separate ways. Its done.

On the other hand, Rent-To-Own is an alternative way to purchase a home when you do not meet the traditional requirements of mortgage financing, while working towards improving your credit score and financial capacity. You essentially rent a home of your choice, your own home and within your abilities with the obligation to secure the financing for the property only at the expiry of the contract. In doing so, exercising all the powers of a property owner.

In most cases, when you want to buy a home you will need a mortgage to finance the purchase of a new house. To qualify, you must have a good credit score and for those seeking multiple properties, cash for a down payment. Therefore, without these, the traditional route to home ownership may not be possible.

What are the benefits of Rent-To-Own Model in the Namibian context?

Some of the benefits are listed below:

    1.The price of the property remains fixed for 5 years - upon signing the deed of sale agreement, the price of the property remains fixed until the end of the rent-to-own period, there after you will be able to qualify for traditional mortgage financing with a financial institution.

    2.The property will generally appreciate in value and this is to your benefit, because the price is fixed.

    3.Financial literacy – together with our partners, we offer financial education to all our clients to improve their financial position. Ensuring that our clients understand the importance of budgeting, assets, liabilities and expenses. Moreover, they will comprehend that any additional payment made to a loan, has a positive effect on the loan-term.

    4.A place to call home – for all intents and purposes, the property is yours. The Rent-To-Own model gives you the sense of homeownership.

    5.Transformative living – as a member of the Ongos Valley community you will be valued and respected for what you are and how you live.

Finally, as nature would have it, people do not make big decisions during a crisis. As observed during the Covid-19 pandemic. However, I urge you to think beyond the pandemic and make the right decision about your housing needs. I therefore implore you to visit our sales hub at the corner of Kreuzberg and Andes Street in Eros or visit our website: www.rto.com.na and call us on +264 83 388 3388 and speak to our sales consultants.

“Why just rent, when you can Rent-To-Own?”