Innovative approaches meet country's housing

As demandfor housing continues to grow, experts say Rwanda needs to adopt innovative approaches to deliver more houses onto the market. Lilian Mupende, the chief executive officer of Ultimate Developers Limited, says Rwanda should maximise the available land to develop affordable houses to serve all the segments of the market. “One way of maximising the limited land we have is by embracing the apartment model of housing, but it is also equally important to make sure we have new models that allow us to achieve the objective and ensure every Rwandan has a decent home,” she says. As urbanisation increases in Rwanda, land has become scarce and it is increasingly becoming hard for low and middle-income earners to buy land or build their own houses. However, Mupende says with innovation, people need to invest in organised settlements that are within reach of the mass market. It is estimated that the City of Kigali presently needs to build about 34,000 units annually, while 344,068 units will be required by 2020, according to research done by the city in 2012. The current national housing policy emphasises mechanisms that will enable individual landholders to participate in housing development to maximise the positive impact of land tenure regularisation in the context of the need for efficient resource utilisation. The policy promotes innovative forms of housing development to ensure the highest possible benefit for the public. Mupende says there is need to explore more alternative housing options, and calls on government and the private sector developers to invest in skills development to create a pool of experts required to take the real estate sector to the next level. “This is because when you have more skilled personnel, this is likely to lead to reduction in cost of construction that will, ultimately, translate into affordable houses,” she notes. Government has already pledged continued support to stakeholders to ensure that the country’s housing industry attains the necessary skills as one of the ways of promoting standards. This is also aimed at making the sector more competitive. According to Charles Haba, the Association of Real Estates Developers in Rwanda chairman, adopting the apartment housing model is suitable for Rwanda because of the country’s land challenge. “Land is becoming scarce due to the increasing population density, it is therefore essential that the industry puts more focus on development of apartments to be able meet the growing demand, especially for low and middle-income earners,” Haba told Business Times in an interview. He noted that it is important for the real estate industry to continue investing in alternative solutions and technical knowhow to be able to deliver affordable houses to Rwandans. The construction sector is generally one of the key drivers of growth and real estate developers and experts are confident the sector will, not only create more jobs, but also play a critical role in easing rural-urban migration if investors are given more support and incentives. Despite challenges the sector faces, it posted an impressive growth rate contributing more than Rwf350 billion to the national economy last fiscal year. Therefore, embracing alternative and modern housing technologies could help keep the momentum and ensure sustainable development of the real estate industry. Encouraging use of locally-made materials Many investors and sector experts agree that the lack of locally-produced raw materials has affected the growth of the industry and partly affected efforts to reduce cost of acquiring homes. Getenet Motle, the S&H Industries chief executive officer, says the private sector should be given more support to produce raw materials in the country, arguing that this could help bring down the prices of houses. “When developers use expensive imported raw materials to build houses, the final product will automatically be expensive. It is, therefore, important that we encourage the production and use of locally-made materials,” Motle says. Emmanuel Hategeka, the Trade and Industry Ministry permanent secretary recently noted that such an alternative could help Rwanda save up to $450 million in importation bills by 2018. Funding woes Despite the potential of the sector, developers have always had challenges accessing affordable funding with some financial institutions reluctant to get onboard and finance the country’s housing and construction projects. They have also always decried the high interest rate charged by commercial banks, as well as other ‘unfavourable’ terms imposed by banks on borrowers. However, with more dialogue between banks and developers, it is expected that the cost of finance for affordable houses could soon reduce to support development of housing units for the low-income earners. The Rwandan Development Bank (BRD) is also in the process of introducing mortgage-backed securities to deliver affordable finance, which is one way of diversifying sources of funds available to households to buy decent homes. According to RDB, the plan includes investing into a Real Estate Investment Trust as a major shareholder, which could trigger and facilitate large-scale housing construction. The bank is also looking at the introduction of a residential credit facility to boost access to finance by sector players. Low-cost houses being built by the veterans co-operative in Masaka sector. The country needs more decent housing for low-income earners. (Jean dAmour Mugabo) What to expect in 2016 To further streamline the sector, government through the Ministry of Infrastructure, has developed a national construction policy to guide activities in the industry and ensure quality real estate development. The policy, according to the ministry, is in the final stages of drafting and will be submitted to Cabinet for approval by the end of the fiscal year. The policy is tipped to help address some of the major challenges the sector has been facing, like land acquisition of priority projects and lack of incentives. The Cabinet adopted the national housing policy in March 2015. The policy seeks to help bring affordable houses onto the market, among others. According to the Ministry of Infrastructure, plans are underway to further improve and strengthen the general urban planning framework that will ensure proper planning and sector development management. Government also issued a new criteria on how real estate developers who want to build affordable housing units can qualify for government support. Under the new instructions, government will offer more incentives to developers, including land and basic infrastructure, which will cover 30 per cent of the cost of the projects. The Housing Policy also intends to trigger and facilitate investment into affordable housing through collaborative development schemes, particularly under the public-private sector partnership arrangement. More accommodation and office space in the offing Rwanda is counting on projects like Kigali Convention Centre, Kigali Heights, Kigali Bsiness Centre, Century Park, Vision City 2020, among others, to deliver more accommodation and commercial office space in 2016. Once completed, these projects could be game-changers in terms by bringing more office and residential space onto the market to ease demand. With more projects focusing on affordable housing being developed, the present challenge where real estate investors cater for the high market segment will be solved. However, experts say a more enabling environment should be put in place and sustainable land development strategies adopted to make the real estate industry more competitive. Production of raw materials With the coming on line of a new Cimerwa Cement modern plant a few months back, the cost of cement went down marginally, and the plant will help the country to reduce importation of cement. This is a huge boost to efforts geared at scaling up affordable housing projects. Cimerwa is Rwanda’s sole cement producer. It commissioned a $170 million (Rwf126.7 billion) state-of-the-art plant in Cyangugu, Rusizi District about three months ago. The plant has the capacity to produce 600,000 tonnes of cement annually, up from 100,000 tonnes previously. Rwanda’s cement needs currently stand at over 450,000 tonnes per year. STRATEC, a construction material producing firm specialising in production of straw boards, and S&H Industries Rwanda, which makes Hippo stone-coated tiles, have recently started commercial production in the country. Located in the Kigali Special Economic Zone, STRAWTEC’s $10 million plant targets developers that use pre-fabricated housing materials. This firm expects the project to bring 2,000 housing units onto the market using straw boards every year. S&H Industries is tipped to help the country reduce the import bill of roofing materials by 50 per cent.

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Innovative approaches meet country's housing