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In this interview with Chris Steyn, Alessandro Scalco of RMB Sustainable Finance shares the details of a R1 billion Blended Finance Programme to formalise and scale South Africa’s burgeoning affordable rental market. Rand Merchant Bank (RMB) has partnered with INDLU, a property financial technology company that empowers landowners to build, manage, and earn from high-quality rental housing. The programme aims to bridge the national housing gap—currently estimated at 2.3 million units—by providing sustainable, affordable credit to micro-developers who have historically been excluded from traditional banking sectors due to a perceived lack of formal collateral. Scalco says theprogramme represents a blueprint for how South African capital markets can drive large-scale, powerful social impact without compromising financial performance. Already delivered are over 2 200 high-quality rental units in areas such as Tembisa, Mamelodi, and Cosmo City. “From a pure sort of job creation perspective, there’s quite a few local contractors that have built up teams and businesses. One of the success stories is one of the local contractors actually now does work across Sandton, Four Ways. So they’ve actually kind of branched out of just focusing on working with the INDLU team to build those units to building across South Africa, or building across Gauteng – and that’s actually such a great story. It just shows you the power of getting an opportunity.”
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Edited transcript of the interview
Chris Steyn (00:01.097)
A R1-billion rand blended finance programme has been launched to bridge the national housing gap. With me is Alessandro Scalco of RMB Sustainable Finance. Welcome, Alessandro
Alessandro (00:13.9)
Thank you very much for having me.
Chris Steyn (00:16.231)
Who are you partnering with?
Alessandro (00:19.498)
We’ve partnered with the actual implementer being INDLU. INDLU’s been around for a number of years and have been focusing on funding the rental market in the informal communities. And so we’ve managed to partner with them on this transaction.
Chris Steyn (00:40.339)
So how will this programme work exactly? Or how does it work? It’s already happening, isn’t it?
Alessandro (00:46.666)
Yeah, Where INDLU started was they started to look at the backyard rental market in these informal communities in South Africa. And in particular, they saw a need for financing housing and actually improving the type of quality of housing that people would put into their backyard units to rent out. And often the reason for that is that those properties are the only asset that they have, and so they need to somehow make a return off of it, and this is how this sort of market has developed over many many years.
And it’s not a traditional space for banks to fund, and banks can’t quite understand it. INDLU then also saw that market evolving over time, and they saw the need where people are identifying that there’s properties that are not being lived on and could be bought, or properties that they could be transformed into full rental properties.
And they then approached…looking for a way of funding the sort of growth of their business and in particular this new area which they call independent property partners. And that looks at almost property entrepreneurs who identify pieces of land in these informal communities and decide to buy the land and then put a six to eight dwelling unit on and rent out those units.
And so what we basically did was we looked at the model and we said, well, how is this different to a home loan securitisation that the banks do anyway. There is no difference. And why can’t we replicate something like that, which is tried and tested in the market in this space?
Alessandro (02:30.536)
And that is kind of the genesis of why we went the route we did. So we developed a blended finance model using securitisations as the ultimate vehicle, and in that replicated very familiar models in the commercial markets that are used by banks.
And the first part of the transaction is a warehouse component, which essentially provides the financing to do the construction of the unit or renovation of the unit. And once those units are ready and they are what we refer to as stabilised meaning that there is rental income being generated from those units, those units are then sold into the securitisation structure and again this is a common common structure in the South African market.
And I think a really important point is we went that route because we actually want to show that there is no difference in how we fund the commercial market and what is traditionally done and why can’t you apply it to you know areas of the market like this. And I think it was a very big point for us to demonstrate that you can take this mainstream. And it’s actually quite easy to take it mainstream. It’s just you have to be quite thoughtful in how you structure them within using these mainstream types of vehicles.
Chris Steyn (03:46.941)
Who are your main beneficiaries?
Alessandro (03:50.627)
The main beneficiaries are the actual property entrepreneurs who get the financing to build the units and then rent out the units and earn an income.
But there’s also a lot of other beneficiaries. So obviously, there’s beneficiaries in that there’s more available units to be rented in these areas. Now that benefits the tenants, and the reason that benefits the tenants is number one, the units are built to a certain level, so the quality is really good for rental.
Also just from their perspective, a lot of the people who rent these units do so because of the proximity to work. So it lowers the cost of transport for them. So it’s really kind of benefiting them from that perspective.
But also, there’s other beneficiaries in this in that local contractors are used to actually build the properties. So you’re benefiting local contractors, you’re creating jobs and expertise in those local communities for the people, not just the property entrepreneurs, but also.
Chris Steyn (04:52.883)
How big is the national housing gap at present?
Alessandro (04:57.166)
Currently it’s sitting at approximately two point three million units. I mean that can vary, I guess, on a day-to-day basis, but currently that’s the estimate, about two point three million units.
Chris Steyn (05:09.593)
And what has this programme delivered? How many units has this project delivered thus far?
Alessandro (05:17.794)
So the project’s just started. So we are in the first sort of cohort or series of building units.
The aim would be to, you know, and again, it’s hard to estimate how many units because each property entrepreneur, depending on the size of the land, depending on the architectural design, depending on the approval from the municipality for zoning rights and things like that, each property can be between two to even eight units on a on a piece of land that could be built.
We estimate approximately two thousand, above two thousand units will be built from this, from this programme over the life of it, so once it gets to full scale. But it could be significantly more. It could be double that depending on the opportunity, depending on the size.
But I think what’s really important from this is actually that this is a blueprint and the idea is not to do this as a once-off transaction. The idea was to actually build this capital market vehicle to allow INDLU to go into the market again to raise more funding to build more units…
I think that’s a far greater need across South Africa and I think the need will probably keep on growing and probably outpaced by just population growth versus the actual ability to build.
Chris Steyn (06:56.85)
You mentioned job creation. Can you give us an idea how many jobs have been created thus far?
Alessandro (07:03.784)
From our project specifically, we haven’t started to measure that because it’s a little too early on. But I mean INDLY have created quite a few jobs just through the current sort of model that they have and that really speaks two aspects to it. So I wouldn’t classify the entrepreneurs as a job created, but it is an income that they are earning. So in the traditional sense it wouldn’t be a job, but it is a source of income that they are now going to generate.
But from a pure sort of job creation perspective, those local contractors, there’s quite a few local contractors that have built up teams, built up businesses. One of the success stories is one of the local contractors actually now does work across Sandton, Four Ways. So they’ve actually kind of branched out of just focusing on working with the INDLU team to build those units to building across South Africa, or building across Gauteng and that’s actually such a great story. It just shows you the power of getting an opportunity.
Chris Steyn (08:12.198)
Are you inundated by interest from various parties?
Alessandro (08:19.014)
Yes, we’ve been approached quite a bit recently from people asking us can we replicate this? Not only in the sort of housing space, but also just generally across what we could look at in the sort of informal communities and is there a sort of model that can be replicated in other spaces…yes…it’s definitely gathered a lot of attention and is something which we’re very excited about.
Chris Steyn (08:46.576)
Mm, and people who are hearing about this now for the first time, what procedures should they follow?
Alessandro (08:53.088)
So I think the initial conversation with us is always useful to understand, you know, what are you looking at, what is your business model. The fortunate thing with INDLU is, INDLU had a track record and had built up a couple of years of experience and it was really, really data driven.
So one of the things about INDLU, which I think is often missing and why I think that actually a lot of financial institutions don’t haven’t really got to grips in this space and in this economy, is because they had at least, you know, almost maybe 10 years worth of data from the property rental market and understanding the behaviour of you know tenants and you know property entrepreneurs in this community.
So when we started to kind of scratch underneath the model and look at what they were asking for and understanding what we could do with them, we had a lot of data to work with. Now having that data is really really important. So I think one of the sort of gaps is you know we found quite a mature operation operator or implementer that had the data that was easy to work with. They also had a track record on the business that had been established for a number of years. That’s always going to be to the benefit and will always be easier to do something with because you do already have someone who has a track record and has that data.
I think if someone is thinking about this, they would need to be able to demonstrate that they’ve been doing it for a few years.
And it also just speaks to the softer side of things a little bit. Yeah, it’s not just about the data, it’s about the lessons that the INDLU team will tell you they learnt about rolling out their projects in these communities, you know, like for example…
Alessandro (10:36.694)
…the use of local contractors. I know I’ve mentioned this a few times, but when they first started, they didn’t use local contractors and that had caused issues… the fact that you know they paint their buildings in a certain branding colour, and initially that wasn’t well received, but now that’s exceptionally well received because it kind of identifies it as this is INDLU units within this community, and that’s actually worked in their favour.
So there’s smaller aspects and softer aspects to this which don’t come out in the data, but they come out from someone who’s been on the ground for a while and understands those communities. And those are the softer aspects of these transactions which you can’t quantify in a financial model or in a legal agreement, but you take that view on the sponsor or the implementer because you know that they actually understand the market they’re working in.
Chris Steyn (11:31.898)
In which areas can these units be viewed?
Alessandro (11:36.131)
So the main sort of region right now is Tembisa. If you go into Tembisa, you’ll see quite a few of the units. It’s white and green. So they’re mainly white and have a green stripe across the building. I almost say …they do look like… these large estate-type properties where they keep this format kind of the same. So you’ll notice it a mile away and they actually stick out across. Tembisa’s a great example close by in Johannesburg.
Chris Steyn (12:14.578)
What else can you tell us about this programme going forward?
Alessandro (12:19.458)
Yeah, so I think the programme going forward, the intention really is to grow this. From the start, we were very fortunate in that we had partners not just in the INDLU space but across the First Rand group. Our group supported us in various formats from FNB to our treasury team to our own foundations, but also the capital markets, FSD Africa as an anchor investor into the warehouse was hugely catalytic.
So we’re looking to grow this. We’re looking to grow and help INDLU use this platform and this capital markets platform as a way of growing their business… growing the impact from their business because I mean at the at the core of what a lot of… it’s about the impact, it’s about the what… has been able to help people in those communities whether it’s from an income perspective because they can rent out their their units now or whether it’s from a local contractor who now is able to employ three or four people and feed their family…
And that aligns and resonates with RMB as well in the sense that we’re also looking to be impactful with the way we use the resources that we have at our disposal.
…trying to grow this into a much bigger programme and try and to work alongside the INDLU team to scale this up to the ambition that they have of reaching a sort of five billion rand funding platform…
Chris Steyn (13:53.448)
Do you think RMB will inspire other financial institutions to follow in your social responsibility footsteps in this way?
Alessandro (14:02.97)
I I hope so. I mean I can only speak on RMB’s behalf and say that, you know, it’s part of what we do is looking at all aspects of a transaction from the commercial aspects to the impact and the social and sustainable side of it.
And I hope it does set a blueprint for the market to also replicate and do more.
…we’re very open and and happy for more of these types of vehicles to come to market because it ultimately is addressing a need in the country.
So it’s not about the one doing it and not and another not doing it. It’s about we see that opportunity, we see the need, we’re going to address it. If others replicate it, well it’s addressing a need in the country and that’s a good thing.
Chris Steyn (14:54.6)
Thank you. That was Alessandro Scalco of RMB Sustainable Finance. Speaking to BizNews. I’m Chris Steyn. Thank you.
Alessandro (15:04.463)
Thank you very much.
RMB and INDLU Launch R1bn Blended Finance Programme to Transform South African – Real Estate
JOHANNESBURG – Rand Merchant Bank (RMB) and INDLU have announced the launch of a R1 billion Blended Finance Programme, to formalise and scale South Africa’s burgeoning affordable rental market.
INDLU is a South African property financial technology company that empowers landowners to build, manage, and earn from high-quality rental housing.
The programme aims to bridge the national housing gap—currently estimated at 2.3 million units—by providing sustainable, affordable credit to micro-developers who have historically been excluded from traditional banking sectors due to a perceived lack of formal collateral.
Alessandro Scalco of RMB Sustainable Finance said:
“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.”
RMB acted as the structurer and one of the lenders for the programme, utilising blended finance to support affordable housing. A key component of this structure was the catalytic funding provided by the FirstRand Foundation (FRF) and FSD Africa Investments (FSDAi), with FRF providing a R30 million concessional loan commitment to establish the construction warehouse facility and FSDAi acting as the anchor funder of this facility. FSDAi has also committed funding as co-funder of the catalytic mezzanine tranche in the securitisation. In addition, to FRF commitment, FNB have committed a sizeable R400m for the long-term financing of the programme.
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.”
This programme expands access to affordable housing finance for small-scale, primarily black and women property owners. By addressing early-stage construction and tenanting risk, FSDAi and FRF’s catalytic funding unlocks private capital and ensures cost benefits are passed directly to developers and communities.
Cobus Truter, CEO of INDLU said:
“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.”
To date, the model has already delivered over 2 200 high-quality rental units in areas such as Tembisa, Mamelodi, and Cosmo City, proving the commercial viability of the “backyard” real estate sector. While INDLU has successfully facilitated approximately R311 million in financing to date, the new platform is designed to meet a massive surge in demand.
INDLU has identified an immediate project pipeline exceeding R915 million over the next 12 to 24 months, with a specific goal to raise R500 million for property entrepreneurs within the first year.
The model has already supported over 1 000 short-term construction jobs and nearly 400 permanent roles through local SMEs. Furthermore, it serves as a powerful tool for gender equity, with 64% of INDLU’s current landowners being female.
“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 provides landowners with microfinance loans for construction, managed through a “closed-loop” digital ecosystem where the Indlu software application automates rental collection and loan servicing.
This ensures transparency for investors and steady income for property owners.
About RMB
RMB is a leading African Corporate and Investment Bank (CIB). We partner our clients to deliver advisory, lending, trading, securities, corporate banking, private equity and investment solutions. A presence in London, New York, Shanghai and Mumbai provides our global clients with a network to access African markets. We have a deal footprint in 35 African countries and facilitate cross-border trade and investment on the continent. RMB represents the CIB activities of FirstRand Limited – one of the largest financial services groups in Africa.
RMB is made of Africa – our commitment to our clients, our continent and our people is evident in our successful track record. We create new opportunities where others see challenges.
For more information visit www.rmb.co.za
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