Government turns to capital markets to develop affordable housing

To break the cycle of private sector faltering in venturing into affordable housing projects, government must set up subsidies in land and basic infrastructure to attract capital markets investments with the overall aim of making housing more affordable for the population. This was said yesterday by the director-general of Rwanda Housing Authority (RHA), Esther Mutamba, during a session at the just-concluded international conference on East African capital markets, hosted by government and the International Finance Corporation. The panel discussion, dubbed “Developing housing markets,” was discussing ways into how capital markets can provide funding for infrastructure development and the appropriate approaches to solving the shortage of affordable housing. Mutamba said government was making the sector attractive for capital market investments through incentives in the sector such as regulations and subsidies. “We are putting in place regulation and a legal framework that that are attractive to investors in affordable housing,” she said. Mutamba added that they had also set up subsidies in land and basic infrastructure such as roads, drainage systems and electricity with the aim of cutting the cost of housing and, in the future, they would employ more private-public partnerships for developers interested in partnering with the government. The RHA chief said the only way to make the initiative sustainable is by developing robust capital markets and making them attractive to enable the sector to raise money to fund development of affordable housing that would benefit a large section of the population. “We want to make sure that the initiative is sustainable and ceases to depend on the treasury every year as we do,” Mutamba said. Affordable housing units in Rusheshe, Kicukiro District. (Timothy Kisambira) Priority as population booms Mutamba said affordable housing was among the priorities of the government as urban growth is blooming, currently at 17 per cent and is projected to reach 35 per cent by 2020. “This means that we will have about 2.8 million people living in urban areas, which calls for development of affordable housing,” she said. Speaking on the panel discussion, James Mugerwa, the chief executive of Shelter Afrique, said to solve the affordable housing challenge, there was need to utilise funding from capital markets as most commercial banks are hesitant to fund such infrastructure projects for varied reasons. “Commercial banks inevitably do not have an appetite in funding such infrastructure projects because much of the funding they have is deposits that have a short-term focus and these projects take much longer,” Mugerwa said. He gave an example of a housing project that is underway in the country with funding from capital markets, which is one of the biggest they have in Africa. In an earlier statement, Shelter Afrique said the project, which is a public-private partnership and also has on board the City of Kigali and the Development Bank of Rwanda (BRD), eyes 2,500 units in its first phase. According to Mugerwa, their ultimate objective is to have at least 20,000 units. “It is going to drive the cost down, we have identified a contractor to work with and also the government was clear on what their expectations were in terms of price and target clientele and design and we are also going to use some standardisation to guarantee a speedy delivery,” he said. The conference, which closed yesterday, had convened over 350 capital markets experts from within and outside East Africa to discuss issues affecting the development of African capital markets, especially in sub-Saharan Africa and East Africa.

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Government turns to capital markets to develop affordable housing