BRD, developers to raise funds on the bourse for affordable housing

A housing deficit continues to cause city planners sleepless nights as they search for sustainable solutions to the challenge. The City of Kigali currently needs over 1,000 housing units per year, especially for the lower and middle market segments. Many of the houses being constructed today by real estate developers target the high-end of the market, and leaving out low-income earners who are at times forced to stay in inhabitable dwellings. However, this could soon be history thanks to an initiative to avail more affordable houses by the end of the year that is being spearheaded by the Development Bank of Rwanda (BRD). Alex Kanyankole, the BRD chief executive officer, said the Real Estates Investment Trusts (REITs) initiative will be implemented by the bank working with businesspeople who invest in REITs by buying shares, and the funds raised will be used to construct houses for the low and middle market segments. “By creating another investment vehicle, REIT, we will be able to develop housing units on a sustainable basis since we will be mobilising money from public and private sectors,” Kanyankole explained. He said the initiative will go along in easing the housing problem in the city and country generally. Under this model, BRD will initiate investment groups which will then float shares on local capital markets, with the proceeds going to real estate development. “The bank will also support other private investors with a similar model to fast-track provision in Kigali,” he said. The bank will also work with Capital Markets Authority and the Rwanda Social Security Board to achieve this objective. He said BRD is also drafting a housing strategic plan that will incorporate the REITs initiative. “We want to collaborate with government agencies, as well as local and foreign investors to deliver the project in a sustainable manner,” he said. He explained that, under the initiative, the bank and its partners will constructs affordable houses for sale and rent, but insists that the partnering firms must float shares on capital markets. He said this will give them an opportunity to always mobilise affordable funding through share sale to implement more projects. Kanyankole revealed that BRD and RSSB are in discussions to see how they can provide such investment groups startup capital to kick-start their activities. “This way, they can be able to attract more developers to invest in the groups and enhance their capacity to undertake more projects,” he said. REITs pioneer investors Though the first REITs group was registered last year, it is yet to start ‘real’ business. “We are working to fulfill legal requirements. Our plan is to set up affordable housing in Nyamirambo and Gikondo, where there are presently informal settlements,” said Walter Bandora Uwarugira, the chairman of REITS Rwanda. Bandora said the group’s projects will create about 9,000 jobs for youth in the area. He said they are targeting 2,500 units for low-income earners during the first phase of the project. “After meeting the legal requirements, we will go capital market to raise funds,” he added. Bandora noted that the group has already approached the CMA about their intentions, saying negotiations should end before the end of the year. He is, however, concerned that being a new investment model people might not embrace it immediately. Apart from REITs model, BRD has been providing loans to developers to build affordable houses in Kigali. Kanyankole said the bank gave Urukumbuzi funding of over Rwf500 million, while COHAKI Co-operative got Rwf1.2 billion to build affordable houses in Kinyinya. There are also projects in Mageragere funded by Shelter Afrique to build 2,700 apartments at a cost of over $100 million. Housing demand A study carried out by the City of Kigali in 2012 indicates that the dwelling units in 2011 were 223,000 of which a half were in good condition, 71,000 could be upgraded while the remaining 108,000 were not fit for habitation. Total housing needs in Kigali between 2012 and 2022 is projected at 458,265 units, requiring 344,000 new units per annum to meet the growing demand. About 43,436 of these should be for households living under the poverty line or those earning less than Rwf35,000 per month in which government needs to apply a subsidy system. Over 186,160 units are supposed to be availed for people earning between Rwf35,000 and Rwf200,000 per month, the largest segment with payment capacity and access to special rental market. Those earning Rwf200,000 to Rwf2.5 million per month require 112,867 houses, with the high end market requiring 1,601 per annum. Other city plans to provide affordable housing In January, the city authority said there were three bigger housing projects to be implemented this year, with over 1,000 affordable units. They included a 29-hectare plot in Kibenga, 195 hectares in Cyaruzinge; both in Ndera Sector, Gasabo District and a 58-hectare land in Nyamirambo Sector, Nyarugenge District, among others. The authority said the number of affordable houses in 2015 would double by 2017. At least 60 per cent of city residents are renting, according to figures from City of Kigali. The city has a population of over 1.3 million, which is expected to increase to 3.8 million people by 2040.

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BRD, developers to raise funds on the bourse for affordable housing