Rwanda is developing a strategy to provide subsidies for individuals seeking to purchase affordable housing instead of solely focusing on investors in this sector.
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The development was revealed on Monday, April 29 by Fidele Abimana, the Permanent Secretary of the Ministry of Infrastructure, as Rwanda Housing Authority (RHA) officials appeared before the parliamentary Public Accounts Committee (PAC) over issues in the Auditor General’s report for state finances for the fiscal year that ended on June 30, 2023.
He said: "A lot of subsidies are being put in affordable housing including unnecessary subsidies such as levelling or landscaping the plot for investment. The programme was providing subsidies in terms of infrastructure development such as roads, water, and electricity where investors seek to construct affordable houses.”
"We have proposed changes where individual buyers get subsidies to buy these houses,” he told lawmakers, noting that the revised subsidies’ strategy was "approved by the economic cluster” of the ministry and other stakeholders before going to cabinet for approval.
Later, on Tuesday, Abimana told The New Times that "under the previous policy, we were providing subsidies to investors by constructing roads, and providing water and electricity facilities inside settlements sites” but the new proposal is such that investors will get incentives in other forms including tax exemption.
"An investor has to construct roads inside a settlement site and access to the main road is handled by the government. The provision of electricity, and water will be supplied in general as is normally done in other water supply projects to residents in different settlement areas. The subsidies, under the new or proposed housing strategy, will focus on new models to support the buyers of these houses,” Abimana explained.
In general, a proposed new housing strategy will integrate new models to subsidise the cost of affordable housing such as social rental housing. The latter model aims to assist individuals earning below Rwf200, 000 per month, who are unable to find suitable accommodation in the private rental market.
Other models under the proposed strategy include incremental housing where residents buy incomplete houses and complete them gradually, and ’Rent-To-Own' scheme aimed at providing affordable housing for low-income earners. This ’Rent-To-Own' scheme is designed to empower low-income workers by offering them the opportunity to rent homes with the ultimate goal of full ownership.
The other model is to subsidize the cost of affordable houses by enabling individuals to buy them at lower interest rates.
There is also a rehousing model which involves the contribution of land by residents. The dwelling units are built where, for instance, seven families can contribute their plots of land on which to build units with floors that can house over 20 families.
The proposed models were prompted by a study conducted in 2023 by Rwanda Housing Authority (RHA), the Ministry of Infrastructure, and the Development Bank of Rwanda (BRD). The study revealed that approximately 30 per cent of urban households in Rwanda earn a net monthly income of Rwf100, 000 or less, while an additional 27 per cent fall within the monthly income range of Rwf100,000 to Rwf200,000.
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According to the Auditor General's report, Rwanda Housing Authority provided subsidies to some investors that were not included in the package. The report noted that levelling and landscaping a plot at over Rwf800 million for 290 affordable houses in Bumbogo was not part of the subsidies package for the investor.
"There is a land plot where we calculated subsidies for an investor to construct affordable houses. The team looked at the characteristics of the site and found that investors were not interested. That is why we provided an additional subsidy by levelling the plot as a government. Subsidies had to be limited to only roads, water, and electricity. This has to change,” Alphonse Rukaburandekwe, the Director General of RHA told lawmakers during Monday’s PAC session.
As noted, the subsidies have to be standardised.
"Some investors come seeking subsidies but they do not even deliver because they have no capacity, which delays the projects. Some abandon the projects. The new strategy will define what kind of subsidies we have to provide. We also urge local investors to invest in affordable housing,” he said.
The demand for affordable houses in Kigali is rising faster than the supply side, with various studies showing that the city needs at least 20,700 housing units every year or 310,000 units by 2032.
The City of Kigali estimates that 60 per cent of the population lives in informal settlements subject to natural risks or disasters induced by climate change.
This percentage is expected to be reduced to 20 per cent in 2035.
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Around 2,000 affordable houses were built in the last three years. Rwanda Housing Authority has earmarked 6,100 hectares where the private sector will construct affordable houses as part of a 30-year plan to fix Kigali’s shortage of affordable homes.
Countrywide, projects in the pipeline could help have 15,000 affordable houses built within six years.
Rwanda needs 5.5 million housing units, up from 2.5 million housing units in 2019, to accommodate an estimated 22 million people in 2050, according to RHA.