BENEFICIARIES of the government’s subsidised housing programme have been deprived of the use of their assets — for example to raise credit — by the slow pace of registration of the title deeds for their properties, the South African Institute of Race Relations said this week in its latest annual survey.
It says the lack of progress in the issuing of title deeds might have distorted the township property market, as some beneficiaries had sold their state-subsidised houses for way below the cost price because they did not have the document to strengthen their bargaining power.
"Secondly, beneficiaries find it difficult to participate in the mainstream economy without title because they cannot use their properties as collateral to secure loans for businesses, private education, healthcare, and other necessities," the survey said.
The critical importance of having title deeds has been highlighted by Peruvian economist Hernando de Soto who has gained international renown for his academic work on the informal sector. Being in possession of title deeds, he argues, transforms "dead capital" (property that it is not legally recognised) into an asset which owners can use as security to raise capital and thereby foster economic development.
In an article published in Business Day earlier this month, Mr de Soto said he did not believe an economy could grow if it did not record and classify assets.
The institute’s 2012 survey noted that of all subsidy houses reported as completed or under construction between 1994 and 2009, just under half had been registered in the Deeds Registry. "Assuming that the 3-million houses reported by the Department of Human Settlements have been developed, this implies more than 1-million subsidy beneficiaries have received a subsidy house without the registration of formal title," the survey said.
It noted that the 2004 removal of the requirement that registration was required for subsidy payments to be made to contractors appeared to be a significant contributor to this trend. The removal enabled beneficiaries to move into houses in townships that had not been formally proclaimed but the process of registration took longer because of delays in establishing and proclaiming townships, largely due to the lack of capacity within local and provincial government. Complex legislation also hampered the deeds registration process while bottlenecks within the Deeds Office also contribute to the problem.
"Another causal factor leading to the low proportion of registered subsidy housing is the change in the project management and payment system of subsidy housing schemes. The subsidy programme makes available a final payment of R800 to the developer to register each subsidy house. It has been found the amount does not offer enough incentive and most developers would rather forfeit the amount than go through the title deed registration process."
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