Housing finance should be provided to lower income groups in South Africa, President of the International Union of Housing Finance, Cas Coovadia, said on Monday.

"There is a pressing need to extend housing finance to lower income groups particularly given South Africa's history. However we should be wary of creating portfolios of loans which are fundamentally unsound," Coovadia said.

He said loans should not be extended without taking into account the ability of the borrower to pay.

Access, debt and shortage

Finance providers and government needed to address the problems of access to housing finance, rising household debt and the housing shortage in the country.

Coovadia, who was speaking at the end of the annual international union of housing finance world congress, said government had a role to play in sharing some of the non-commercial risks and underwriting mechanisms to enable fixed rate products.

He said this would instil confidence in the market and enable investment from non-originating financial institutions.