Going Green

The demand for eco-friendly homes presents a unique opportunity to leap into a low carbon and resource-efficient future by building responsibly, incorporating energy efficient design and construction strategies.

These buildings typically don’t consumer as much energy as conventional homes and help meet climate change targets. In counties like China, Canada, Switzerland, and the UK green homes are becoming the new norm and as a result, new financial products like green mortgages are being offered by lenders. In South Africa, green homes have been in limited supply across the country, but we are quickly catching up.

Grappling with the green market

For a home to be deemed ‘green’ in South Africa, it needs to be awarded EDGE certification by the Green Building Council of South Africa (GBCSA). The certification confirms that the unit has been built to save on energy consumption, energy embodiment and water consumption of no less than 20% and has sustainability embedded into all of its construction processes. All of this leads to long-term financial and environmental savings.

Over the last few decades, the process of obtaining EDGE certification has been prohibitively costly and as a result, property developers have been reluctant to venture down the green development road. However, there’s an increasing call for governments, businesses, and civil society to support the United Nations Sustainable Development Goals and apply creativity and innovation to solve for sustainable development challenges. The ongoing loadshedding saga by Eskom has also forced the GBCSA to take progressive strides to lower these costs.

The start of the green revolution

Over the last two years, a greater number of property developers have been diversifying their offering to green but despite this shift, the South African green home loan market is still in its infancy with only two banks currently playing in this space.

Absa was the first to launch. It offered an Eco Home Loan in partnership with Balwin Properties in 2020. Currently, the product is offered at four EDGE certified developments: The Reid in Johannesburg, The Blyde in Pretoria, The Polofields in Johannesburg, and De Zicht in Cape Town.

A green home loan is similar to a normal home alone. Applying for one still requires that the bank conducts an affordability assessment so you still need to ensure that you have a satisfactory credit profile and can afford the monthly instalments. The Absa Eco Home Loan offers qualifying customers a rate concession, which is added to any existing Absa Home Loan benefits that they would qualify for, incentivising the value element of opting for a green home.

“We have recognised that sustainable living is a priority for our customers and so it must be a priority for us,” says Geoffrey Lee, managing executive of Home Loans at Absa Retail and Business Bank.

“The response since the launch of the Absa Eco Home Loan has been encouraging and we have received tremendous interest from developers who have the intention of building EDGE certified developments. This is encouraging as it suggests that developers realise the benefit of building energy and water efficient developments to support the sustainability global agenda,” he continues.

FNB is the only other bank with a green home loan product offering on the horizon. Their Eco Energy Home Loan will be on the market later this year, but unlike Absa, customers can qualify if they are purchasing any new or existing EDGE certified property in South Africa.

“EDGE certification ranges from level 1 to 3 so depending on the level of the certification, customers can get up to 0.5% reduction in their interest rate,” explains Mfundo Mabaso, growth head of FNB Home Finance.

The future is looking green

Buying a green property has many benefits continues Mabaso: “Not only does the property have added benefit of lower utilities due to reduced energy and water consumption, but once the property has been certified green, it is considered always green which means that the homeowner will not have to worry about losing their benefits.”

Experts anticipate that the trend of building green developments in South Africa will increase over the next few years, and Absa are already looking at how to help existing homeowners of non-EDGE certified properties.

“Loadshedding and upcoming electricity tariff increases have necessitated a need for homeowners to explore enhancing their homes with sustainable energy solution and homeowners are considering installing solar solutions such as Solar PV and batteries to keep the power on during loadshedding and to reduce energy consumption from the grid. Absa Home Loan customers have the option of using equity in their properties to access funds to purchase these solutions,” he concludes.

Although climate change is now firmly on the global agenda, it will be some time before South Africa is on par with international green trends but the green home loan offering by Absa and FNB is definitely a step in the right direction. As the market grows, homeowners (and developers) will probably require better guidance on the concept of energy efficiency and the financial benefits of going green.