SOME of the most expensive houses on the Rwandan market today costs a staggering Rwf700 million (about $1 million) while the lowest decent ones go for Rwf25 million, according to Evelyn Uwera, an estate agent with Century Real Estate.

Between the two categories, there are several price tags that are shocking to some but affordable to others. In other words, ‘affordable housing’ is a relative term; what may be affordable to a doctor may not be affordable to a nurse.

Nonetheless, Charles Haba, the director of Century Real Estate – a company that buys, sells and manages property, says he hardly knows of a housing project that has "failed to get buyers, there’s a buyer for every house on the market.”

Unfortunately, while there’s ample supply of high end houses, there’s consensus that the ones for people in Rwf400,000 to Rwf700,000 monthly income bracket are few, yet demand is ever souring.

It’s still an equation planners are struggling to balance; how do you provide low budget houses in the face of high construction costs?

Skirting financing

Geoffrey Byegeka, a retired military General who is less than two years into his retirement, has found a new job—building "affordable houses” for middle income Rwandans.

At Rwf48million, his houses are some of the least expensive decent homes available on the market.

The Sunday Times visited one of his project located off the Kabeza-Rubirizi road in Kicukiro District and the site reveals innovation and meticulous organisation.

Innovation because on 375-Sqm plots of land, Byegeka has managed to construct about 10 beautiful houses of three bedrooms each with modern-fit wardrobes, two bathrooms, a standard kitchen, tiled floors, house-keeper’s quarters and parking space for three cars.

Byegeka builds on order so that he has little trouble finding buyers. It’s the same model used by Region Holdings, another property developer.

In a previous interview, Kefa Angwenyi, Region Holdings Managing Director, who is an architect by profession, said that the biggest constraint in construction is balancing financing cost.

A discussion regarding financing directly concerns banks that for a long time have been on the spot for making it hard for both developers and buyers to access funding, mainly because of high interest rates on credit.

But both Byegeka and Angwenyi are working with Kenya Commercial Bank (KCB) which is now aggressively selling mortgage products to a market that is yearning for affordable housing.

The arrangement works in form of a tripartite agreement involving the developer, buyer and the bank which provides 100 per cent financing to the developer on behalf of the buyer.

On Friday, Byegeka signed a new memorandum of understanding with KCB to construct about 30 affordable units on behalf of KCB clients with a 100 per cent financing.

"Funding is assured and better still, we involve the house owner especially in making design decisions which ensures there are no modifications on entry” said Byegeka shortly after the signing ceremony.

This arrangement works for clients with no land of their own; they book into an estate where the developer has units, the buyer deals with the bank for a mortgage of their worth, the bank funds the developer to put up the houses until the point the owner moves in.

At that stage, the developer exits and the home owner continues his relationship with the bank which gives clients up to 20 years to pay the mortgage at an interest of between 13.5 and 17 percent.

This way, a developer skirts the cost of interest on the bank’s finances which is shouldered by the client under the mortgage terms agreed upon.

The New Times article on Wednesday reported about KCB’s 100% mortgage product, a story that drew mixed reactions.

While the public largely applauded the product as innovative, a few critics accused KCB of engaging in ‘very risky lending’ allegations dismissed by Maurice Toroitich, the bank’s managing director.

"Mortgage lending is not rocket science; it is class one basic, we have 50 years of mortgage handling and we know exactly what we are doing,” Toroitich said.

Toroitich’s bold confidence could be what the market needs to drive competition among banks to get more innovative and provide favorable options for home buyers.

Eliminate rent

Toroitich believes that if one can afford to pay rent of over Rwf150,000 for over ten years, then such a person can afford a mortgage to buy an affordable house of at least Rwf25million.

"So we are simply helping Rwandans who are losing value through costly monthly rental fees to own that value by paying to own their own houses,” he said.

If it’s as simple as it sounds, then it makes plenty of sense.

Théogène Kayiranga has paid Rwf 120,000 a month for a two bedroom basic house in Kacyiru for the past eight years and he has no plans to leave because ‘it’s hard to find another affordable house to rent.’

In eight years Kayiranga has already given Rwf11.5 million to his landlord and if he stays another eight, it will be Rwf23 million almost enough to buy him a home at Rwf25 million.

But there’s the unfounded phobia for bank mortgages that if you fail to pay your dues, you lose the house but most experts say such fears are illogical.

For example, in Kairanga’s case, if he failed to pay his rent, the landlord could throw him out so he pays to avoid such a scenario…but given the long relationship and trust the landlord has in him, he could be tolerated for a few months of trouble.

"Banks too work that way for good customers,” says Béatrice Chege, a mortgage expert.

No housing bubble

The sensation regarding demand for housing reflects a healthy and rejuvenating economy but doesn’t mean Rwanda is experiencing a housing bubble as a few might fear.

Housing bubbles usually start with an increase in demand, in the face of limited supply which takes a relatively long period of time to replenish which attracts speculators into the market, believing that profits can be made through short-term buying and selling.

This further drives demand but at some point demand decreases at the same time supply increases, resulting in a sharp drop in prices - and the bubble bursts.

Toroitich says that Rwanda is far from having such a situation much as the demand is high; the rate at which supply is responding is very slow.

On the one hand, speculators haven’t found their way yet on the Rwandan market, according to Haba. The central bank also says no danger signs have been detected to warrant concern.

In the meantime, mortgage assets are earning banks handsome returns, at least according to KCB boss who says all three major banks doing mortgages "are not complaining.”

Bank of Kigali and I&M are two banks that enjoy a large market share.

At KCB, mortgage assets currently account for 20 per cent of the total loan book; "this is still lower than the 25-30 per cent ideal so there’s still room to lend.”

Toroitich says KCB’s bad loans stand at 4per cent yet these are clients the bank says, ‘are experiencing challenges and can’t be classified as ‘bad loans’ yet.

Under the bank’s 100 per cent mortgage, KCB says it’s ready to work with developers who can develop even lower budget homes than the Rwf48 million units and make home owning dreams of hundreds of thousands of Rwandans come true.