South Africa's institutional financial infrastructure is actually a strength for international investors.
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Inner-city yields in Johannesburg and Cape Town range from 10% to 18%, depending on the asset and location.
That is not frontier market speculation-that is a premium that exists because the operating environment requires real expertise, says Jeremy Berman, the chief investment officer at Consolidated Urban Corporation.
He says the complexity is the filter. “Most operators can't navigate it, which is why the returns remain attractive for the ones who can. Currency risk is real, but it's manageable. South Africa has a developed swap market, and you can hedge your rand exposure effectively when you come in as an international investor.”
The company acquires distressed properties and city blocks in urban CBD’s and transforms them into neighbourhood communities, cultural hubs, student accommodation, affordable housing and commercial work/retail spaces.
It says the narrative around South African urban development and international capital usually goes something like this: too risky, too complicated, too hard to get your money out.
It argues that getting capital out is also far more straightforward than most offshore advisors will tell. It says foreign dividends are paid routinely, the process is well-regulated, and there are no extraordinary barriers to repatriation that would not exist in any comparable market.
“South Africa's institutional financial infrastructure is actually a strength for international investors. Our banks are among the most rigorously governed on the continent. The compliance and reporting standards required to access local debt financing are comparable to European benchmarks.”
The genuine risk in South African inner-city development is not the market, says Berman. He says it is choosing a partner who does not understand the specific operating challenges-the municipal dynamics, the infrastructure complexities, the community requirements.
“Get that right, and the risk profile is very different from what the narrative suggests.”
Africa's cities are currently experiencing growth at a faster rate than any other location on the planet at any point in recorded history, a consequence of rapid urbanisation and high population growth rates.
This finding is highlighted in the paper, "Promoting Investment in Affordable Housing in Africa: the role of the state in blended finance (April 2026)," which was prepared by the Centre for Affordable Housing Finance in Africa for the African Development Bank.
However, the supply of affordable, well-located housing has not kept pace, resulting in a growing affordability gap, characterised by informal housing, overcrowding, and increasing spatial inequality.
The paper says that while capital shortages are often cited as the primary constraint, it says the more binding problem lies in the structure of risk across the housing delivery value chain, which inhibits private sector investment and makes housing which is developed more expensive.
It adds that much of this risk is shaped by public systems related to land, infrastructure, regulation and urban governance.
In recent years, blended finance has emerged as a promising approach to mobilising private capital for development outcomes, the paper notes. However, it says its application to affordable housing in Africa has been limited.
Convergence and the Centre for Affordable Housing Finance in Africa (CAHF) identified only 25 transactions in the Convergenceglobal database related to affordable housing in Africa, far fewer than in sectors such as energy, agriculture or health.
This reinforces the notion that investors see affordable housing as a less desirable investment target than these other sectors and reflects the substantial and interconnected risks associated with affordable housing delivery.”
According to the paper, investment interest in affordable housing in Africa has been growing in recent decades, as investors, both impact and commercial, recognise the significant potential to be found in delivering to an underserved market.
It adds that while market challenges have been well articulated, lenders and investors, as well as the capital markets, have experimented with interventions, testing their application in different contexts.
The Centre for Affordable Housing Finance in Africa says that successful blended finance in affordable housing emerges where private capital and governments work in partnership, each playing to their strengths in ways that overcome the other’s weaknesses.
It adds that Governments set the vision, rules, and public purpose and create an enabling environment that is efficient and developmental.
“They may also offer concessional capital (sometimes land), which improves the overall financial structure of the transaction. DFIs, working within the private capital space, bring financial discipline, structuring expertise, and credibility, which, over time, should encourage even more commercially focused investors to participate.
"Together, they can create the conditions in which private and DFI capital can participate at market rates and at scale, and affordable housing can be delivered sustainably.”
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