Rand Merchant Bank (RMB) and property financial technology company INDLU have launched a R1 billion Blended Finance Programme aimed at formalising and expanding South Africa’s affordable rental housing market.
The initiative seeks to help address the country’s estimated 2.3 million-unit housing shortage by providing affordable finance to micro-developers who have traditionally struggled to access funding through conventional banking channels.
Expanding access to affordable housing finance
INDLU empowers landowners to build, manage and generate income from high-quality rental housing.
The new programme is designed to support small-scale property developers, particularly those who have historically been excluded from traditional finance because of a perceived lack of formal collateral.
Alessandro Scalco of RMB Sustainable Finance said the initiative demonstrates how financial markets can generate both commercial returns and meaningful social impact.
“The Indlu Blended Finance Programme represents a blueprint for how South African capital markets can drive large-scale, powerful social impact without compromising financial performance.
“This programme attracts capital to critical development areas like financial inclusion and affordable housing, empowering entrepreneurs to develop their own communities.”
Blended finance unlocks private investment
RMB acted as the programme’s structurer and one of its lenders, using a blended finance model to support affordable housing development.
A key element of the structure is catalytic funding provided by the FirstRand Foundation (FRF) and FSD Africa Investments (FSDAi).
The FirstRand Foundation has committed a R30 million concessional loan to establish the construction warehouse facility, while FSDAi is serving as the anchor funder and has also committed funding as a co-funder of the catalytic mezzanine tranche in the securitisation.
In addition, FNB has committed R400 million towards the programme’s long-term financing.
Anne-Marie Chidzero, Chief Investment Officer of FSDAi, said:
“Low-income affordable rental housing is one of Africa’s most overlooked, and most bankable, real-economy markets. With INDLU, we are using catalytic capital to do what FSDAi was built to do: anchor a new asset class, prove it to institutional investors, and create a replicable pathway that can finance dignified housing well beyond South Africa’s borders.”
Supporting property entrepreneurs
The programme is focused on expanding access to finance for small-scale property owners, particularly black and women entrepreneurs.
By reducing early-stage construction and tenanting risks, the catalytic funding from FSDAi and the FirstRand Foundation is expected to unlock additional private investment while lowering financing costs for developers.
INDLU CEO Cobus Truter said the initiative aims to transform informal settlements by creating formal, high-quality rental housing.
“Our bold ambition is to fundamentally change the landscape of informal settlements. By turning each tile in the urban mosaic into formalised, dignified infrastructure, we are building better African cities from the ground up.
“The R1 billion deployment is expected to have a profound multiplier effect on the economy through significant job creation and social upliftment.”
Proven model with ambitious growth plans
INDLU has already delivered more than 2,200 rental units in communities including Tembisa, Mamelodi and Cosmo City, demonstrating the commercial potential of the backyard rental market.
The company has facilitated approximately R311 million in financing to date and has identified an immediate project pipeline worth more than R915 million over the next 12 to 24 months.
Its goal is to raise R500 million for property entrepreneurs within the programme’s first year.
The model has already supported more than 1,000 short-term construction jobs and nearly 400 permanent positions through local small businesses.
Women also play a significant role in the programme, with 64% of INDLU’s current landowners being female.
Improving communities through technology
Beyond increasing access to finance, the programme aims to improve living conditions by ensuring rental units are connected to formal municipal infrastructure, including water, electricity and sanitation.
“By ensuring every unit is integrated into formal municipal infrastructure, including water, electricity, and sanitation, the programme significantly improves urban living standards and safety,” Truter added.
INDLU supports landowners through microfinance loans for construction, managed via a closed-loop digital ecosystem. Its software platform automates rental collection and loan servicing, helping provide transparency for investors while ensuring a reliable income stream for property owners.
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