Shelter Afrique Development Bank (SHAFDB) in partnership with the government of Rwanda plans to establish a Rwanda Mortgage Refinancing company to address the issue of financing and achieve affordable housing in the country.
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Thierno Habib Hann, Managing Director, SHAFDB, said that while it is still at a preliminary stage, the goal is to help set up institutions that would strengthen the market.
"It’s not about financing one time and stop, the challenge is huge and continuous. You have to create institutions that will be capitalised by Shelter Afrique and go to raise funding in capital markets and banks to create long-term funding in housing sector.”
Shelter Afrique has worked with African nations to create such institutions including in Nigeria, Tanzania, and Kenya.
The issue of affordability in the housing sector, he said, stems from the short-term maturity period of mortgage loans in banks because they don’t deal with long-term funding. This is a gap that would be filled by the Rwanda mortgage refinancing company, he added.
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In 2020, the National Bank of Rwanda (the Central Bank) adopted regulation n° 33/2020 of 08/06/2020 governing mortgage refinance companies, providing a legal framework for a new form of business structure whose purpose is to promote sustainable mortgage refinance business and setting regulatory requirements for mortgage refinance companies.
The regulation defines a mortgage refinancing company (MRC) as a non-deposit-taking financial institution licensed to conduct mortgage refinancing businesses.
The Rwandan mortgage refinancing solution was announced at the 43rd Annual General Meeting and Symposium of Shelter Afrique Development Bank, taking place from June 11 to 13.
The three-day meeting brings together key stakeholders from across the continent to discuss and explore sustainable partnerships in the affordable housing finance value chain.
Africa is facing rapid urbanisation as cities grow to become hubs of economic activity, cultural exchange, and innovation. However, one key concern that comes with this growth is the critical need for affordable housing.
By 2050, Africa’s population is projected to double, with two-thirds of this growth occurring in urban areas, and Eastern Africa, in particular, is experiencing the world’s fastest urbanization rate, averaging annual growth rates of 4.5 percent.
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While affordability is relative, in Rwandan context, it is when a household doesn’t spend more than 30 percent of the income on rent or mortgage repayment, explained Jimmy Gasore, Minister of Infrastructure.
"It is extremely urgent to scale up the construction of affordable housing including also the existing housing and to do so in a sustainable way. It requires robust and inclusive housing finance systems that withstand the current inflationary environment,” he said.
By mid-century, it is projected that Rwanda will host a population of 22.1 million, growing steadily at a rate of two percent. the master plan estimates that the country will require 5.5 million dwelling units and intends to build an average of 15,000 new units annually from 2020 to 2025.
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The affordable housing agenda should remain at the front of economic recovery due to the need to provide decent accommodation and essential infrastructure to all, Gasore said.
Chi Patience Akiporji, the Chairperson of Shelter Afrique, commended Rwanda’s journey in promoting affordable housing through various interventions cemented by public-private partnerships.
According to her, the high interest rate regimes in Africa are drawing down on private developers in real estate and the regulatory environment needs to be availed to incentivize growth in the housing sector.