Poor households refuse to use their homes to secure loans, study shows

By Staff Writer

From Business Report

February 4th 2008

By Thabiso Mochiko

Owners of government-funded houses are not using their title deeds to
borrow money as they fear losing their homes over lack of payment,
according to the findings of a Wits University study released last week.

The research, conducted by the Wits Centre for Urban and Built
Environment Studies (Cubes), shows that a title deed has little effect
on borrowing and accessing credit, as many households fear putting up
their houses as collateral.

In addition, it shows that title deeds do not help households to save
money.

Margot Rubin, a researcher at Cubes, said the study wanted to test
whether title deeds would enable low-income households to access credit.

The study, which was conducted on 456 households at three different
areas in the Ekurhuleni metropolitan municipality, forms part of a
larger international research, involving UN-Habitat and the Norwegian
government. It was partly funded by local research funding group Urban
LandMark.


Rubin said the current property system was designed for more affluent
people.

Poor households lack access to the tools, instruments and systems that
will enable them to effectively use the legal system, the report shows.

Rubin said land titling had an effect on poor households, but did not
generate a better financial situation for low-income homeowners.

"Basically, the current land titling system is not working financially
for low-income households in the Ekurhuleni metropolitan area,"
she said.

The report recommends that the government consider that title in poorer
households and home ownership does not have financial implication, but
has social and communal implication, such as better access to service.
These should be encouraged.
 

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