FIFI PETERS: In today’s property feature we are looking at Flisp, the Finance Linked Individual Subsidy Program [sic]. It is a housing subsidy that helps qualifying first-time home buyers buy a home. There have been some changes to the regulatory environment to make it a lot easier for homeowners to do so.
For more on this conversation, I’m joined by Meyer de Waal, the attorney at MDW Incorporated. Meyer, thanks so much for your time. Just broadly speaking, what is a Flisp and what has changed concerning regulation?
MEYER DE WAAL: Good afternoon. Thank you very much. Yeah, indeed, amazing changes. Flisp stands for Finance Linked Individual Subsidy Program. It’s quite a confusing name, but it means a finance link, that you must have finance that is approved to enable you to access this subsidy. The subsidy is available to all South African first-time home buyers, so it means you must never have owned a property before, you must have between R3 501 and R22 000 – that is gross combined household income. You must also have a financial dependant such as a child or a spouse, and your finance must be approved.
Finance has always been kept or linked or ring-fenced to only the big banks, Nedbank, Standard Bank SEV……1:35, even as a home loans. And Capitec also came in recently. If you were approved, a home loan was one of these banks, you needed to qualify on the criteria, and you would then qualify for a subsidy. The subsidy starts at an income range of R3 501 [up to] when you earn R22 000. So in the middle, for example, if you earn R15 000 you would get a R63 000 subsidy. So it [meant] that you had to get the subsidy only if you could get a home loan approved.
Luckily from April 1 these subsidies were delinked from a home loan. The government I think realised that if you earn below a certain amount, let’s say below R12 000, then the banks don’t have a huge appetite to assist people who earn less and they only cater for people earning, let’s say, from R10/12/15 000 and up, because that makes the affordability match.
Now with de-linked finance, you are able to get a loan from, for example, an unsecured loan, a pension-backed loan, even employee assistance – and any type of loan that you can get that’s unsecured; rent-to-buy as well, plus instalment sales…… So all of a sudden the opportunity has opened up for South Africans that are first-time buyers that still meet the criteria to actually go for any one of these types of loan. Then, once the loan has been approved, you can contact the government and say, ‘Please can I get my subsidy as well?’
This is really an amazing change that has come about for South African citizens who want to buy their own first property.
FIFI PETERS: How impactful has this programme been historically for assisting home owners buying their first home?
MEYER DE WAAL: There are so many stakeholders in the ministry, for example, estate agents and bond originators and the banks. I started with this first service of ours about six years ago, because I saw that people shied away from Flisp and the reason for applications. The reason was it was very difficult to get actually approved for Flisp.
The implementation agencies that were processing the applications were really slow. They had basically almost no commitment to turnaround times. So you would submit an application and it would drag, and it would drag, so the estate agents didn’t want to touch applications linked to Flisp. The banks – we found that some of them advised their clients to apply for a subsidy. If you lived outside the Western Cape you could not apply for a retrospective Flisp application, only the Western Cape and KZN [could]. So it meant that if you didn’t know about a subsidy, or you tried to apply too late, they would deny that subsidy.
As from the 1st of April, you can apply retrospectively for Flisp subsidies. The date hasn’t been set yet, but your income at the date when you applied or when you took transfer should not be more than R22 000. Flisp has always been a very difficult thing to get access to. We recently negotiated a memorandum of understanding with the National Housing Finance Corporation, NHFC, the biggest implementation agency, almost like the distribution agency for Flisp countrywide. You also get the Department of Human Settlements in the Western Cape, and they kind of control the Flisp applications in the Western Cape.
Now, luckily NHFC has jacked up their game quite a lot. They now have an online application process, where you can go online. We tested it recently with the NHFC, where you get a message and an update as to where your application is progressing.
In the past people didn’t know about Flisp, and when they actually wanted to apply there was nobody to assist them. It’s quite a difficult thing to process your application, and then also submit your application. Then it was like almost your application got lost in a deep, dark hole because nobody gave you feedback.
Luckily that has changed now, big time, since the applications went online.
FIFI PETERS: So, other than the criterion of an income bracket R3 501 up to R22 000, and also the criteria in which you should have a financial dependant with you and be a South African citizen. Are there no other criteria that one needs to be mindful of in applying for Flisp?
MEYER DE WAAL: Well, it’s only [that] your finance must be approved. However, now I’ve got to bring this caveat in again. If you go to one of the existing banks, as I just mentioned, they already have the process of …….6:35 in place. And most of the banks are already on the approved list of suppliers.
However, I think the notification by the minister came a little too early for all the implementation agencies, like the NHFC and the Department of Human Settlements to have their plan of action in place. I reasonably spoke to one of the representatives of the NHFC, who told me that they only now had started with a two-month campaign to actually find a solution – or a protocol, rather – for institutions applying to them to say, ‘I want to be one of those suppliers – an unsecured loan, pension bank loan, or employee benefit – I would like to be on your list of approval’.
Obviously they’re not going to give this subsidy for any type of loan unless you have been vetted and pre-approved by the NHFC or the Department of Human Settlements. So we do find there’s going to be a lag in between for a two-month period, and then they’re only going to roll out the plan of action to get people to onboard or companies to onboard to apply for that. So there’s going to be a lag.
What we however propose at the moment is to start checking your credit score, checking your affordability [so] that you know that you can actually receive this subsidy. We actually went one step ahead and we know that, in terms of the policy, the NHFC must give you a certificate to indicate this is a subsidy that you can qualify for, because imagine if you are a first-time buyer and you’ve got a Flisp certificate or a voucher in your pocket, or in your hand when you go and apply for a loan, you’ll know that ‘I’ve got a R50 000 or R80 000 deposit already,’ and you can use this towards a reduction of your loan, which makes your loan-to-value much better, which gives you a better negotiation on interest rates.
We’ve already developed a service through the Flisp website, where you can go online, put in your income, and it takes you through very few questions to actually say, ‘Congratulations, you have met all the criteria, and therefore you can now receive your Flisp certificate’. They still need to validate it with all the checks and balances of the government, because they have access to the back-end to check with, for example, the Department of Inland Affairs, Home Affairs, and also check that your income and expenses are actually correct and that you don’t earn too much, and that you do also do have the financial dependants – that you are not fabricating financial dependants – because it’s critical that you meet all the criteria.
So there are couple of levels where you have a light check and then you have a full validation at the end.
FIFI PETERS: I suppose you could also use the subsidy that you get for the transfer fees or the bond costs – or not?
MEYER DE WAAL: Well, this is another amazing [thing]. I’ve been fighting with the NHFC for the last three, four years. They said to me, ‘Meyer, this is the policy and we are not going to change our policy, because policy is policy’. We fought tooth and nail to get that. I was so elated when the policy changes came through on April 1. Previously it was only in the Western Cape where you could get access, and also the sponsorship, one can call it, from the Flisp subsidy to pay your transfer and legal fees.
Now, this has been opened up to the entire South Africa, but every first-time buyer can use the subsidy as part of legal fees, which is really fantastic, because a lot of people don’t have that money in a savings account and buy a property and arrive at the attorney’s door and, ‘Oh, [I’ve] got to pay my legal fees, and I didn’t budget for that’. People rush out and take unsecured loans, and that sinks their application for finance again, because now they’ve become overburdened with debt.
So this is really amazing that you can now also use the ……10:32 fees and cover that under the Flisp subsidies.
FIFI PETERS: Meyer, thanks so much for that informed description of Flisp; quite extensive as well, in terms of enabling our understanding. But we’ll leave it there, sir. Meyer de Waal is attorney at MDW Incorporated.