Cape Town: A booming township property market has the potential to reinvigorate the economy, and is providing property entrepreneurs with vast opportunities to succeed, especially in the township rental market.
The size of the approximate R1 billion informal back room rental market across South Africa’s townships stands at about five to eight million rooms, and is growing every year as the rental market bounces back after a Covid-19–induced slump.
Modicai Mnculwan, the owner of RoomKing.co.za, a new online platform that seeks to formalise the market by connecting landlords and tenants in the townships through a secure, safe and centralised online platform, believes townships, could be one of the biggest sources of growth for the country’s economy.
RoomKing, his latest innovation, seeks to formalise the rental market and provide a win-win situation for both tenant and landlord.
The informal room rental business began to boom just prior to the pandemic of 2020 and 2021, with a new generation of property entrepreneurs and micro-developers emerging in the townships and building low-cost rental accommodation to let.
The business was dubbed, backyarding 2.0, or small-scale rental housing, by the Development Action Group (DAG), a leading non-profit organisation that seeks to deepen democracy by working as a facilitator of change in South Africa’s urban development arena. Why backyarding 2.0?
Because it takes the township backyarders to a new level of bricks and mortar as opposed to shacks in the backyard.
While micro units were being erected fast and furiously in the city centres in places such as Cape Town from 2019, they were also going up in the townships (although largely unregulated), a development trend that has remained in the country.
According to the DAG, developments in the townships include up to 10 units and are often double-storey, varying in size from about 10m² to about 40m². Rents range between R1 500 and R3 000 upwards.
The units mostly service gap market dwellers – those who earn between R3 500 and R15 000 a month.
The DAG says small-scale rental housing is certainly changing the character of South African cities and helping to solve the accommodation crisis.
On the plus side, homeowners and micro-developers are investing large sums of money in better quality brick and mortar flats, according to research published by the DAG and written by Dr Andreas Scheba, Professor Ivan Turok and Claire du Trevou.
“Brick by brick, these units are altering the physical fabric of townships and providing sought-after affordable rental units which neither the public nor the conventional private sector supply,” the study says.
“Small-scale rental housing offers wide-ranging public benefits and significant opportunities to spur a post-Covid-19 economic recovery, however the informal and unregulated character of the market poses some risks.”
Another entrepreneur who has jumped onto the success of the market is, Lindo Mnisi who, in 2020, started a side hustle called After12, where he began building rental units in townships.
It was there that he realised the townships were lacking hardware stores close by. That was when he began his business, Andura Hardware, bringing the tools of the trade to the doorstep of the property entrepreneur.
2021 SA Property Investor Network’s Property Investor of the Year, Darren Francis, has highlighted the affordable market, particularly in the townships, as the market to watch in 2023/2024.
No doubt, this is a boomtown that South Africa, beset by high interest rates, load shedding and an economy in distress, needs right now.