BII makes follow-on investment in South Africa’s Divercity
British International Investment (BII), the UK's development finance institution and impact investor, has announced a follow-on investment in Divercity Urban Property Group. This additional investment is part of Divercity's latest fundraising round of around $30 million.
Divercity is a low-cost housing platform based in South Africa, focusing on providing housing in well-located but underinvested neighborhoods in major cities. BII initially invested in Diversity in 2021. Since the initial investment, Divercity has completed nearly 2,700 residential homes and has contracted more than 2,000 units.
In this fundraising round, BII is joined by new investors, including Proparco and 27four Investment Managers, highlighting the collaborative effort to support sustainable and inclusive urban development in South Africa. The follow-on investment is expected to facilitate the delivery of an additional 2,500 units by 2027.
Key Takeaways
South Africa continues to grapple with a persistent housing shortage, a challenge exacerbated by historical policies, including those from the Apartheid era. The housing deficit, estimated at 1.2 million units in 1994, has grown to over 2 million units despite government efforts, including initiatives like the Reconstruction and Development Programme and the Breaking New Ground Policy. Interventions like the First Home Finance subsidy aim to address affordability, but the housing stock remains limited. The Centre for Affordable Housing Finance in Africa (CAHF) notes that it is rare to see private developers constructing housing units priced below R750,000 (about $40,800) due to concerns about project viability and insufficient profit margins. In this context, supporting initiatives like Divercity and Johannesburg-based private equity fund manager International Housing Solutions (IHS) becomes crucial. These efforts aim to contribute to addressing the housing shortage and promoting inclusive and affordable housing solutions in South Africa.
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