How can Rwanda deliver more affordable housing units and ensure low and middle-income earners acquire decent homes in the medium-term? This question becomes more pertinent particularly as the country’s urban population continues to grow rapidly while few houses are being delivered for this market segment.

However, the Rwanda Housing Authority (RHA), city authorities and other stakeholders say there is no cause for alarm "as there are new initiatives in the pipeline to bring more housing units on the market particularly affordable homes.

Leopold Uwimana, the affordable housing division manager at the Rwanda Housing Authority, said the government is, for instance, collaborating with developers and other stakeholders to bring down the cost of decent homes. He said they are working with Ministry of Local Government, districts, Rwanda Development Bank, and Rwanda Development Board to co-ordinate and attract investments into the sector.

He added that affordable housing developers and sector investors benefit from a range of incentives, including tax waivers, noting that the government supports them with basic facilities, like electricity, water, sewage, roads and other essential needs.

Uwimana said that an affordable housing development fund will also be put in place. The initiative, he said, will enable investors in affordable housing get low interest loans; buyers, too, will access mortgages at low interest.

Developers have for long complained about high cost of land and building materials, poor sector-relevant technology and high cost of financing for investors and property developers as some of the main challenges discouraging them from building low-cost homes.

According to a 2012 housing market study conducted in the City of Kigali, 340,000 new housing units are needed by 2022. Eighty-six per cent of these should be affordable housing and mid-range housing, 13 per cent social housing, and less than 1 per cent to be premium housing. At least 34,000 housing units are required annually to meet this demand.

Uwimana noted that the Ministry of Local Government is working with districts in the City of Kigali - Kicukiro, Gasabo and Nyarugenge - to help them build capacity and meet requirements of issuing municipal bonds to finance affordable housing projects and not to wait for public funds.

He said the affordable housing fund and land banks are key to finance and facilitate affordable housing investors.

Pascal Nyamulinda, the City of Kigali mayor, says they are working with developers, city engineers and one-stop centres to encourage them to invest in affordable housing as per Kigali and provincial cities master plans.

"We advise developers and constructors to consider affordable housing in their investment plan to ensure low-income earners are also catered for in terms of provision of decent homes,” he says.

More partnerships

Meanwhile, RHA said they are also partnering with sector players to deliver more affordable housing units on the market. "We have already partnered with the Abadahigwa ku Ntego, subsidiary of the Kigali Veterans Co-operative Society (KVCS), to build 56 affordable houses in Kabuga, Gasabo District.

The project targets first-time home buyers who are low-income earners,” according to Uwimana. He said government is negotiating with Moroccan investors who will invest $68 million for the construction of 5,000 affordable houses by 2018.

According to Uwimana, RHA is building affordable houses that will cost Rwf6 million for a self-contained unit with one bedroom, while those of three bedrooms will go for Rwf18 million. He said 2,700 housing units are being constructed at Rugarama in Nyamirambo, while construction works for another estate of 60 houses in Kabuga at Ndera sector start in June.

The houses will have three bedrooms at a cost of Rwf18 million each. About 560 housing units will be constructed in Batsinda and the project will also start by June.

The trends

According to Uwimana, most real estate developers target high profits (of up 40 per cent) of their investment which makes homes very expensive for the ordinary Rwandan. He added that the local investors do not have enough capital to invest in the sector, but noted that this problem would be addressed by the affordable housing fund that government will put in place.

Beatrice Chege, the head of mortgage finance at KCB Bank Rwanda, said most developers sell ‘affordable’ houses between Rwf30-50 million, which is out of reach for medium and low income earners. He said there is need for more incentives to the sector to encourage investors into the affordable housing market segment.

More challenges

Victor Ombima, an architect at Architectural and Allied Services Limited, said the cost of affordable homes depends on the location of the houses, adding that in Kigali one has to part with Rwf30 million for house with one living room, two bathrooms and a kitchen.

"However, affordability of houses in Kigali is largely affected by the many challenges developers face, including access to affordable building materials like timber, which is scarce in Rwanda. Though stones and aggregates are sourced locally, but other materials are imported which make houses expensive,” he added.

Ellie Habyarimana, the managing director at New World Construction, company that deals in the construction projects and house designs based in Kigali, said previously they faced problems with acquiring construction permits.

Stephen Milindi, the managing director of Misteph Company, a developer dealing in rentals, sales and management of commercial and residential properties, said is hard for developers to cut prices if the government does not provide them incentives like electricity, sewage systems, tax waivers and free land.

"It will be hard for private sector players to reduce prices of affordable housing units without government intervention,” he added.

John Nsabimana, the head of Urukumbuzi Company Limited Kigali, said high interest rates charged by banks push up the cost of houses, including those categorised as affordable homes.

He added that sometimes developers build houses at high rates and fail to get customers. "All this forces us to sell the houses expensively to make some profit and repay bank loans,” he said.

Vanessa Ingabire Olga, a resident of Gasabo District, says one shouldn’t rent or buy a house that costs more than 30 per cent of their income because that would be a burden.

She said the houses are costly in Kigali because the land is expensive.

How I did it

Vincent Sakindi Kayumba says he built his home in Kanombe, a Kigali suburb using a loan of Rwf30 million, repayable in 15 years.

The annual interest rate on the loan is 17 per cent. Kayumba, who earns Rwf1 million a month, says few people can secure such a big loan.

"Besides the principal loan, the bank also gave me other personal loans to finance my construction project,” Kayumba says.