Building

the future
starts with
a plan
Contents
Build your dream home with our Building Loan 05
How the Building Loan works 06
Your questions answered 07
Apply for a Building Loan 15
Approval of the Building Loan 17
Registration of the Building Loan 18
Building work completed 26
 Build your dream home
with our Building Loan
A building loan allows you to design and build your
home just the way you want it. It lets you finance
both the vacant land and your building project on
one account.
For your peace of mind and to ensure that you’re
happy with the building work, you’ll need to
authorise any payments to the builder. This allows
you to keep complete control over one of the most
exciting projects of your life – building your
dream home.

4 | Home Loans Home Loans | 5

How the Building Building Loan process
Loan works 1. Approval of Building Loan
2. Registration of Building Loan
When you apply for a building loan, the purchasing 3. Progress payments are made at various stages
of the vacant land is generally included in the of construction
total loan. If the loan amount is greater than 4. Building work starts
the contract price, payment is only made on
5. Interim interest payable
registration of the vacant land, with the rest of
the funds being retained to complete the building. 6. Final progress payment
7. Building completed
As the building progresses, payments are made to
the developer/builder/nominated payee by means
of progress payments. All progress payments
must be authorised (signed) by you, the owner,
Your questions answered
so you must familiarise yourself with the state
and progress of the building work on site before What’s the relationship between you,
authorising such payments. The final payment is the builder, and Absa?
only made once the work is completed in full and
an Occupation Certificate is issued by the local You and the builder
municipality.
The primary contractual relationship is between
A valuer appointed by Absa will visit the site
you and the builder/developer. The building
(on our behalf) prior to payout of each progress
contract stipulates the agreement on the building
payment to inspect building work progress against
to be erected according to the plan, including the
the contract that Absa accepted on application to
specifications, price etc.
approve the loan.
From your first progress payment, interest is You and Absa
calculated on the daily outstanding balance and is
capitalised to the account monthly. This is called We grant finance to you according to qualifying
interim interest and it’s added to the loan amount criteria and enter into a finance agreement with
– this interest is not paid during the building you. We manage the payments to the nominated
period. If you don’t make interim payments, this payee of your choice, e.g. the builder/developer, as
interest will be added to the total building loan building progresses, according to your request and
granted to you. The interest charged will then authorisation.
accumulate and might reduce the total loan
amount paid out to you.

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The builder and Absa
There’s no contractual obligation between the
builder/developer and Absa. The builder must sign a
Waiver of Builder’s Lien document to acknowledge
that he/she will meet the minimum building
specifications set out by Absa, and that they have
Builder’s All-risk Insurance.
What are your rights and obligations in
terms of the building contract?
Before you sign the contract with the builder/
developer, make sure that the work you want
your building contractor to do has been fully and
accurately set out in the contract (including the
plans and specifications).
Your obligation in terms of the contract is to
pay the builder/developer for work completed
satisfactorily, and the builder has to provide his/
her services to a satisfactory level as stipulated in
the building contract, and conform to the National
Building Regulations and Building Standards Act,
103 of 1977.
Don’t rely on verbal promises or agreements. If
you want to change the work to be done at a later
stage, you’ll have to reach agreement with your
building contractor, and your contractor will usually
be entitled to add a separate, additional charge as a
variation to your contract. In terms of the Building
Regulations Act, there are certain warranties on the
part of your building contractor, and these apply
regardless of what your contract says. Obtain a
legal opinion to get clarity on what these are.
8 | Home Loans
What are the contract requirements?
A building contract, signed by the contractor and
accepted by you, must be provided on submission
of the Home Loan application. The valuer appointed
by Absa won’t be able to complete the valuation if
he/she doesn’t have the fully completed and signed
building contract.
The building contract must contain a detailed
breakdown of all costs and work to be done for
the building of a fully completed dwelling or unit,
including all internal finishes.
No funds will be made available on the home loan
for the purchase of materials or payment of any
deposits.
Who’s responsible for appointing a
builder and signing the contracts?
When buying in a new development, the developer
and the builder might be two different parties. The
party with whom you sign the building contract (be
it the developer him/herself or a subcontracted
builder) is the party that you’re liable to.
Why doesn’t Absa protect you from
the builder?
The primary contract is between you and the
builder/developer – Absa is not a party to this
contract. The only contractual obligation that we
have is with you in terms of the Mortgage Loan
Agreement. Always be aware of the content of the
building contract that you sign and what you’re
agreeing to. Be aware of payment clauses, time
clauses and the specifications you signed for.
Home Loans | 9
What do you do if you’re not satisfied
with the quality of work done?
As a party to a binding contract, you have a right to
engage with the builder/developer directly.
You should always engage directly with the builder/
developer first, as he/she needs to respond to your
concerns and be given the opportunity to address
them and ultimately rectify the problems. It is
in your interest to note all complaints regarding
quality in writing to the builder/developer - this
ensures proof of your dissatisfaction with the
quality of the work provided.
If no resolution is reached, you can, as a last resort,
instruct us to make no further payment on the
building until your concerns have been addressed
to your satisfaction. You can also consult with an
engineer to obtain a professional opinion.
Can Absa intervene in builder-
customer disputes?
We’re not a party to the building contract signed
between you and the builder, therefore disputes
must be resolved between the parties to the
contract. The National Home Builders Registration
Council (NHBRC) gives you protection in case of
disputes and these can be referred to the Council.
The only step we can take is not to make payments
if you instruct us not to. Be aware of clauses in
building contracts that govern legal arbitration and
disputes.
10 | Home Loans
Can Absa recommend builders and
where to go for advice?
We can’t recommend any builders. Legislation
stipulates that all builders who build houses that
are subject to a mortgage loan should be registered
with the NHBRC.
It is therefore recommended that you contact the
NHBRC for references. Most reputable builders are
registered with the Master Builders Association.
What if you have a dispute with your
builder/developer?
First, talk to your building contractor. Many potentially
serious disputes can be avoided through good
communication between you and the contractor.
Your contract can have clauses relevant to dispute
resolution that can assist both parties in resolving
the dispute. If that doesn’t work, you may need
independent advice.
You might want to seek legal advice from a lawyer or
the governing body (NHBRC or the Master Builders
Association) where the builder is registered.
Some disputes can be resolved through negotiation.
Others can only be resolved by legal proceedings,
whether before the courts or by private arbitration as
provided for in building contracts.
Home Loans | 11
Is there a limit to the
completion period?
All building loans will be subject to a maximum
period of 9 (nine) months to complete all building
operations, calculated from the date of registration
of the mortgage bond. We won’t accept any open-
ended building contracts, i.e. all building contracts
must have a start and completion date.
Where the completion period exceeds 9 (nine)
months, the building loan application must be
reassessed by Absa based on the value of the
property as it stands after nine months of building.
What’s your contribution/deposit?
Where a building loan is approved and the purchase
of the land forms part of the loan application, your
contribution/deposit in terms of the loan-to-value
(LTV) policy must be provided upfront with the
land component of the transaction, or if the loan is
less than the contract price, you’ll have to pay the
difference to the builder before we’ll commence
with payments.
When you apply for a building loan, Absa will advise
you of the shortfall amount, as well as the amount
you require to complete the initial building to the
end of the agreed first progress stage, as per your
building contract.
12 | Home Loans
When must you inject your
own funds/equity?
Your own contribution has to be used prior to us
making any progress payments. Sufficient funds are
always held by us to complete the building.
No payments for the building phase will be released
from the mortgage loan for the purpose of
acquisition of building material by the builder.
The difference between the loan amount and the
contract price will first have to be paid by you to the
builder/developer on work done. You have to be sure
that you have funds available to pay this difference
to the builder/developer.
Your own contribution is the shortfall amount and
the amount of money required to complete the
building to the first progress stage, as advised by
Absa Home Loans.
What does the term
‘loan-to-value’ mean?
We grant a loan up to a percentage of the value of
the property after it has been completed, based
on your risk profile and the area of the property.
In the case of building loans, this varies from 60%
to 90%. So, in all cases, you have to provide your
contribution/deposit towards the land and/or the
first payment(s) of the building contract.
Home Loans | 13
 Apply for a building loan
What documents must you submit?
Document

• NHBRC Builders Registration Certificate

• Signed Waiver of Builder’s Lien (Absa form 1295BX)
• Schedule of Tender and Finishes
• Minimum Specifications (Absa form 1284EX)

• Plans that are submitted for approval (working

drawings) with measurements, or
• Municipal-approved plan
• Fully completed and signed building contract

Where do you get these documents?

• The NHBRC documents can be obtained from

the developer/builder.
• The Waiver of Builder’s Lien, Schedule of Tender
and Finishes and Minimum Specifications can be
obtained from any Absa branch for completion
by the builder/yourself.
• The provisional municipal-approved plan with
measurements (also referred to as the sketch
plan) and/or working drawings can be obtained
from an architect or the developer/builder.

14 | Home Loans Home Loans | 15

What’s the NHBRC? Approval of the
The National Home Builders Regulatory Council building loan
(NHBRC) was established mainly to protect the
interests of housing consumers, and to regulate the What documents must be submitted
home-building industry. after approval and prior to registration?
The purpose of the NHBRC is to protect you from
builders who either build to an unacceptable quality
Document When required
standard, or who refuse to get involved in the
rectification of defects in the home. • NHBRC Unit Enrolment
Certificate
• Municipal-approved plan
How are you protected by the NHBRC? • Specimen signatures,
resolutions for legal entities
Prior to registration
The NHBRC protects you by ensuring that all home and Power of Attorney where
or first payment
builders register with the NHBRC and that all homes applicable (normally provided
by the bond attorneys)
are enrolled prior to the commencement of building.
• Builders’ All-Risk Insurance
The NHBRC is mandated to provide protection for • Certificates as specified by
all new housing consumers against defined building the valuers
defects. • Civil Engineer’s Certificate
Various at different
confirming the completion of
By ensuring the builder is registered and the all services
stages of building
property is enrolled with the NHBRC, you’ll have
the assurance that a registered home builder has
agreed to abide by the rules and regulations laid Where do you get these documents?
down by the NHBRC.
This means that such a home builder has agreed • The NHBRC documents can be obtained from
to build the enrolled house to a minimum quality the developer/builder.
standard that has been set out in the NHBRC’s • The Municipal-approved plan can be obtained
Home Building Manual. from the builder/developer/yourself.
When you do a building extension and/or renovation • Builder’s All-Risk Insurance can be obtained
to your home, and you apply for a Further Advance from the builder/developer.
Building Loan from Absa Home Loans, it is advisable
to ask the builder to confirm with the NHBRC that
this property is enrolled with them. This will provide
you with the same protection from the NHBRC as
granted for a new home being built.

16 | Home Loans Home Loans | 17

Further conditions of grant

No subdivisions of the property to erect multiple

units will be permitted.
The subject property must be zoned as residential
and used for residential purposes only.

Registration of the
building loan
Building commencement and progress
at various stages

What is a progress payment?

A progress payment is a request from you to get

an amount paid for the work completed up to that
specific stage of a construction project. You can, on
request, indicate where the monies must be paid
and to whom.

What is interim interest?

Interim interest starts to accrue on your loan from

the day of the first payment made (normally on
the land portion) on registration. Interim interest
will be debited to the building loan account for the
duration of the building operations, subject to the
completion period of 9 (nine) months stipulated
above.

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How is interim interest calculated?
Interim interest is calculated on the outstanding
balance of the account during the nine months
allocated for building. It is calculated on the daily
outstanding balance from the day that the first
payment is made and gets accrued to the account at
the end of every month.
As the building process continues, and the number
of progress payments on the bond increases, the
outstanding balance and the amount of interim
interest on the account payable will increase. This
interim interest will be added to the loan amount.
It’s recommended that you make interim payments
to cover the interest.
Will I be advised of each progress payment and
the interim interest due?
You will receive an SMS confirming each progress
payment made to you or on your behalf to your
nominated recipient (e.g. builder/developer).
Logon to Absa Online banking (accessible to you
even if you don’t have a transactional account with
Absa) to view all progress payments made and the
interim interest due on your building loan.
What’s the process to request
a progress payment?
The builder will approach you with a Progress
Payment form when he/she requires funds.
The form must be completed in full and signed by
you. A copy of your specimen signature is kept on
record for security purposes. It’s very important to
note that you must not complete or sign several of
these forms in advance and no blank forms should
20 | Home Loans
be signed at all. This protects you against payments
being made without your knowledge.
You then have the opportunity to verify that
progress has been made on the construction and
that payment to the builder/developer is warranted.
The form to request a progress payment must be
submitted either via the branch or directly to the
valuation centre to enable the valuer appointed
by Absa to inspect the property, determine the
progress on the property and then approve the
release of the funds.
At what stages must progress payments be
requested?
We normally allow a maximum of 6 (six) progress
payments on a project.
Absa Home Loans will advise you of the progress
payment stages on receipt of your signed contract
with the builder/developer.
The final progress payment (the retained 10% of
the building loan granted) will only be made when
we receive the Occupation Certificate, issued by the
municipality, from you.
Home Loans | 21
What are the roles/duties
of the valuer appointed by Absa?
The main duty of the valuer appointed by Absa is
to conduct regular site inspections (on behalf of
the bank) to ensure that there’s work progress on
site, to check that the building is constructed in
accordance with minimum building requirements
and the plans submitted, to visit the site when a
request for a progress payment is submitted to
us and to ensure that sufficient funds are held for
completion of the building.
Note: Valuers appointed by Absa are not structural
engineers or financial advisers and therefore won’t
raise any opinion on your financial matters or the
structural integrity of a building. They inspect for
security purposes only.
22 | Home Loans
How is the amount payable calculated?
The original amount signed and agreed to as
the contract amount is used as the basis of the
payment. A valuer appointed by Absa will visit the
construction site to assess if the building meets the
minimum building requirements, is in accordance
with the plans submitted and meets the progress
payment stages agreed on with Absa. The valuer
will also determine what funds are still required
to complete the building. Taking all these factors
into account, a calculation is made for the amount
payable.
In this regard, we don’t take the building materials
on- site into account when determining the amount
to retain.
Can you apply for another loan if the first loan
hasn’t been paid out in full?
Yes, you can. A credit assessment will be done
for further funds. This is then treated as a new
agreement.
What do you do if more capital is required during
the building process?
You’ll need to submit a Further Advance Building
Loan or Re-Advance application (if a sufficient bond
is registered) for the additional funds. This will need
to be supported by up-to-date financial information
and any other supporting documents (e.g. amended
plans) and must go through a credit assessment
process.
If affordability isn’t demonstrated, the additional
loan won’t be granted.
Home Loans | 23
What do you need to do if you make changes
to your contract/plan or contractor during the
building process?
You’ll need to advise us if your plan or contract
changes at any time during the building process, as
this can affect the valuation of the property or the
loan that’s been granted/registered.
The valuer appointed by Absa will need to be
informed to reassess the property for security
purposes, and this could impact the finance
agreement that you’ve accepted. We’d also have to
ensure that the new contractor is registered with
the NHBRC. Note that no payments can be made
until we receive the approved amended plan and
contract.
Can you access the building site to satisfy
yourself of the building quality?
Yes. However, we recommend that you take
reasonable precautions when accessing the building
site to prevent injuries and accidents. Access to
the building site is also governed by the contract
between the builder and you.
24 | Home Loans
Are you allowed to withhold payment to the
developer if you’re not satisfied with the
building quality?
You need to be aware of your legal position regarding
the withholding of funds. It’s recommended that
you put all the reasons for withholding of funds in
writing to the builder/developer and to us for record
purposes.
What’s the process you need to follow if you
want to claim against a builder?
A complaint and claim need to be lodged with the
NHBRC and they’ll apply appropriate processes
to remedy the situation and handle the complaint
directly with you.
Contact NHBRC
Claims or complaints can be lodged by phone to
the NHBRC’s toll-free number:
0800 200 824
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Building work completed
On completion, when is your first
repayment due?
The first repayment is due on the repayment day
as chosen by you in the next month after the
final payment is made, or 9 (nine) months after
registration, whichever occurs first.
How is your repayment calculated?
If the property is completed before nine months, it
is calculated on the full outstanding balance of the
loan after the final payment has been made.
If the nine-month building isn’t complete, it is
calculated on the outstanding balance of the loan at
nine months.
This is then increased once final payment is made.
The final payment will only be made on receipt of
the Occupational Certificate.
What documents must you submit for the
final payment?
For any building loan, the following documents are
required prior to the final 10% being paid out:
Document When required
• Occupation Certificate
Prior to final
• Proof and cession of property progress
insurance if not insured with Absa payment
26 | Home Loans
Where do I get these documents?
The Occupation Certificate is issued by the local
authority/municipality to the developer/builder.
When do I insure my property?
It’s compulsory to insure the property for
comprehensive cover from the date that the
property is fully completed, or from the time that
occupation takes place.
You can either request insurance from Absa
Insurance Company, or provide a policy with an
insurance company of your choice. This policy would
then need to be approved by us to comply with
minimum requirements. A cession of the external
policy and noting of Absa’s interests is required.
Cession of outside insurance documents can be
obtained from your branch.
Contact
Contact Absa Insurance
To obtain information about Absa’s Homeowner’s
Comprehensive Cover:
0860 100 876
absa.co.za
Contact Absa Home Loans
To find out more or to apply for a Building Loan
contact Absa Home Loans on:
0860 111 007
absa.co.za
Home Loans | 27
Terms and conditions apply

Authorised Financial Services Provider

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Item number 5002227