Affordable housing developers to get more govt incentives

Real estate developers and government have in the past few years come up with various interventions to ensure Rwandans access decent and affordable homes. These initiatives were strengthened further this year with new policies and incentives as government moves to fast-track delivery of decent homes on the market for low and middle-income earners. Industry players say these steps will help turn around the sector, attract more investments and players and hence make it possible for Rwandans to realise their dream of acquiring homes at affordable rates. In fact, both government and private sector have increased investments into the real estate sector this year to drive this ambitious objective. The Cabinet adopted the national housing policy in March 2015 to guide the sector and ensure that affordable houses are brought to the market targeting low and middle-income earners. Efforts toward easing access to affordable decent homes by Rwandans have been boosted by promotion of use of locally produced building materials improving the participation in planning and openness towards using local materials in construction, and equal acknowledgement of tenure rights. According to the Ministry of Infrastructure, plans are underway to further improve and strengthen the urban planning policy to encourage consistency in planning and development management. To support the sector, government issued a new criteria for real estate developers to qualify for support from public funding to construct affordable homes for the lower end of the pyramid. Under the new guidelines, government will offer basic infrastructure and land to developers, amounting to 30 per cent of the costs for the affordable housing programme. James Musoni, the Minister for Infrastructure, also said developers can now easily access funding from banks, noting that mortgage conditions have also improved. “The introduction of long-term credit facility targeting the real estate industry meant that there would be a reduction in interest rates on mortgage loans. Real estate developers can also secure more funding with better options for down payment. “Applying for and acquiring building permits has also been significantly eased,” minister Musoni pointed out. He said efforts to strengthen the current housing policy are ongoing, saying it is important to support the private sector so that they are able construct more homes to satisfy the growing demand for housing. The minister said encouraging homebuyers to save for housing and pooling resources will be part of the policy framework they are drafting. He argued that this will help Rwandans to acquire decent homes without acquiring bank loans. He said the policy will also be designed in a way that it will help increase financing models accessible to Rwandans. “We are also emphasising the principles of quality in planning and construction of homes. We envisage a situation where land use, urban planning and housing policy directions complement each other to ensure optimal resource utilisation when developing housing,” Musoni said last week. The country requires 344,068 housing units by 2020 to be able to meet the growing demand in the country. Minister Musoni says government will give more support to the private sector. (File) The minister said instructions determining the conditions and procedures for obtaining government support for affordable housing projects recently adopted by the Office of the Prime Minister will play a significant role in helping cement collaboration between government and the private sector in efforts geared at bringing more houses on the market. “It is a commitment to the financing of inner-neighbourhood infrastructure from the side of the Government under set conditions. The conditions relate particularly to the profiles of beneficiaries of the housing units, to the affordability of access schemes to housing which may either look at the sales prices or affordability of financing schemes, and to resource-efficiency and local skills enhancement through collaboration with small-and-medium enterprises,” Musoni, said. Reducing the costs Developers say the cost of homes is high in Rwanda because most building materials, including iron sheets and cement, are imported. This challenge has also made it hard or very costly for individuals to build their houses. However, recent developments in the country could help reduce the cost of construction materials, making it easy for real estate developers to bring more homes onto the market. For instance, a few months ago Cimerwa, Rwanda’s sole cement producer, unveiled its $170 million (Rwf126.7 billion) cement factory that will make it possible for the firm to produce 600,000 tonnes a year, up from 100,000 tonnes previously. This will help reduce the cost of cement and will support efforts geared at increasing access to affordable houses. In addition, different investors have unveiled alternative building solutions, a development that will help reduce the cost of construction materials and make houses more affordable. Already, two firms specialising in manufacturing of construction materials were launched a few weeks ago. STRAWTEC specialises in manufacture of straw boards used to set up prefabricated homes. S&H Industries Rwanda produces stone-coated tiles (Hippo brand), which were hitherto imported from the region. Sector experts say these plants could be a game-changer in as far providing affordable houses is concerned. STRAWTEC says Rwanda could build up to 2,000 housing units every year using straw boards. With S&H Industries producing stone-coated tiles locally, the cost of this type of roofing will go down. Eckardt Dauck, the STRAWTEC chief executive officer, argues that increasing locally-sourced construction materials is a critical step toward achieving affordable housing. He says, however, that local production of construction material should gradually increase to realise this objective. Charles Haba, the chairperson of the Rwanda Association of Real Estate Developers, recently told The New Times that there is need to embrace innovative housing options that can help ease the current housing shortage. Urban Development Fund Meanwhile, the Ministry of Infrastructure designed a fund targeting urban developers and it is expected to facilitate the financial commitment to public infrastructure and project approvals once in place. Minister Musoni says the move will allow government flexibility in approving and implementing infrastructure projects in a timely manner. This is particularly for investments that are not funded by the government. “We are looking at ways of giving incentives to the housing sector to support developers involved in construction of houses for low-income households. Under the initiative, these people will be able to access finance through guarantees, top-up funds, and other subsidy programmes.” A few months ago, government launched a new investment code that provides additional incentives for investors. It offers tax incentives to affordable housing developers, including preferential corporate income tax rate, and accelerated depreciation for investments in construction projects worth $1.8 million (about Rwf1.4 billion). According to Musoni, the government is also promoting a progressing Public-Private-Partnership (PPP) scheme to implement a sustainable, “mixed-use housing neighbourhood development based on a PPP model”. Under this model, over 22,000 housing units will be developed by the private sector with government support. The twofold strategy is designed to, firstly, trigger large-scale investment targeting affordable housing, and create competition by using identified available land. Secondly, it will help facilitate small and medium affordable housing developers through collaborative development schemes. Lillian Mupende, the chief executive officer of Ultimate Developers, says homegrown solutions is the answer to the issue of affordable homes. “Rwanda is one of the smallest countries in the world, which however has one of the highest population densities in sub-Saharan Africa. Land, especially for development, is a scarce resource. Therefore, the housing policy intends to trigger and facilitate optimal utilisation of land by encouraging developers to embrace sustainable land use. Under the second Economic Development and Poverty Reduction Strategy (EDPRS II), the government promotes sustainable green urban development to cater for increasing urban population, rising rural and urban consumption, and environmental protection. business@newtimes.co.rw

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Affordable housing developers to get more govt incentives