The real estate sector was one of the key contributors to Rwanda’s economic growth last year, adding 8 per cent to the national GDP growth during the fourth quarter of 2017. According to GDP figures released by the National Institute of Statistics of Rwanda (NISR) on March 14, real estate services such as individual homes occupancy or sales on homes occupancy grew by 5 per cent in 2017.

The sector was also the main contributor to the expansion of the services industry, which grew 46 per cent during quarter four. This underlines the robust performance of the sector over the past five years riding on the back of more government support particularly to bring more new affordable homes to the market. Access to affordable housing remains one of the targets in the country’s development blueprint under the urbanisation and rural settlement segment.

Fidel Habinshuti, a developer and sector expert, said that incentives are a key component toward realising the affordable housing targets. Habinshuti, however, calls for a review of affordable housing to understand why the cost of housing is still high.

Last year, the government announced a Rwf290 billion Affordable Housing Fund that was approved by Cabinet on June 30, 2017 to help address this problem, among others. The Fund is a guarantee facility for developers, producers of locally made construction materials and other investors in residential housing and was implemented effective July 1, 2017.

It seeks to help fast-track construction of affordable houses for middle and low-income earners and bring down cost of homes by up to 50 per cent of the current market price, according to Infrastructure ministry officials.

The idea was that the Fund would help to put up houses for low income earners payable over a long-term period. According to the Ministry of Finance and Economic Planning, the Fund will enable Rwandans who cannot afford to build homes and yet cannot acquire long-term mortgage loans at low interest rates to own homes.

Housing needs

A 2012 housing market study by the City of Kigali showed that 340,000 new housing units were urgently needed by 2022. Out of these, 86 per cent should be affordable and mid-range housing, 13 per cent should be social housing, with only less than 1 per cent premium housing. This means the country needs to avail at least 34,000 new housing units every year over the next 10 years.

Changing trends

The good news is that real estate activities registering a positive trend, with different developers bringing to the market more affordable homes of as low as Rwf8 million.

Liliane Mupende, an urban planner and sector expert, said there’s increasingly "something for almost everyone”. "We are seeing more real estate developers getting interested in developing properties of, say below Rwf30 million per unit, which is a promising trend,” Mupende said.

But this is because of market forces rather than special status policy, according to Pascal Nsengimana, a developer.

"The market trend is ‘clear’ and points toward affordable homes. So, any strategic developer has to adjust to that trend,” he said, adding that few buyers cannot afford properties of Rwf60 million a unit or above.

‘Cost of land still a big barrier’

According to Habinshuti, the cost of land and that of construction materials (which is mostly imported) has been largely attributed to the rising cost of housing in the country, especially in Kigali. This fact was acknowledged by Finance minister Amb Claver Gatete while launching the Affordable Housing Fund last year.

"We also realised that land is expensive and most materials are imported, which increases cost of rent. Interest rates from banks are also high and paid in shorter periods,” Gatete said at the time.

"We are mobilising partners to raise the funds, we are working with local and international organisations, we are mobilising the World Bank to put in money and we are at a very impressive stage,” he added.

Innovation, product diversification

Experts say banks are also becoming more innovative "because they have realised clients often don’t raise participation fee, ranging from 20 to 30 per cent of the total value of the project. For instance, Bank of Kigali is soon unveiling a flexible new mortgage product, where borrower participation will range between zero and 20 per cent of the total value to enable more clients to access mortgages.”

"And from a policy perspective, you want to see a more active Rwanda Housing Authority, or even Rwanda Housing Bank investing in model projects to give private sector players a clear sense of direction,” a source at the bank told Business Times.

According to Dayo Ntwari, a sector expert, there is urgent need for diversification of the real estate industry to ensure all market segments are served.

He added that developers and realtors should always market and conduct awareness drives to educate the public, especially those seeking homes and other properties, on how they can get a better deal or financing.

Meanwhile, some experts have been urging government to work with private developers to fix the challenge of affordable housing in the country.

According to the experts, government is spending a lot of resources on feasibility studies, research and project expropriation instead of working with the developers to bring more affordable units to the market.

Bridging the gap

In 2016, a deal was inked between Pan African Housing Fund (PAHF) and Kigali Batsinda Estate Limited to construct 300 housing units. This was expected to play a huge role in helping the city authorities move toward meeting the growing demand for housing, experts have said.

Equally, KCB Bank Rwanda and Century Park Limited in 2015 signed a financial partnership deal to fast-track the multimillion dollar Century Park Complex in Kigali.

The bank pledged to invest more than $200 million (about Rwf145 billion) into the construction of the complex park hotel that will consist of 200 apartments, 16 supper luxurious villas, supermarkets, and two five-star hotels.

In addition, the Vision City 2020 mega project in Gaculiro, Kinyinya Sector in Gasabo District has so far delivered to the market about 504 housing units narrowing the current housing gap. The project is being financed by the Rwanda Social Security Board (RSSB) and will have the capacity to accommodate over 22,000 people.

Abadahigwa Ku Ntego Developers Limited, an organisation of Kigali Veterans Co-operative Society, is developing affordable homes worth Rwf18 million each in Masaka, Kicukiro District. Skat Consulting Rwanda, a Kigali-based Swiss firm, last year, unveiled model where one would be able to acquire a self-contained two-bedroom home, ranging from Rwf8 million to Rwf15 million.

JS International, an American construction firm that specialises in prefabricated housing, is developing affordable housing projects in different parts of the city. The firm sells three-bedroom units at $30,000 (about Rwf25 million each. Others that are building affordable homes include Rwanda Housing Authority and City of Kigali.