City unveils incentives for real estate developers

The City of Kigali has unveiled grand plans to eradicate slums from the city as well as build more affordable houses for low-income earners. According to the city, about 34,000 units will be constructed by different developers over a 10-year period. Lilian Mupende, is the city’s director of urban planning and the One-Stop Centre, she told Business Times’ Peterson Tumwebaze how they will achieve these not-so-easy tasksThere has been talk from UN Habitat for Humanity and local real estate developers about the issue of upgrading slums and availing dwellers affordable houses, what is the current state of the housing industry in Kigali?The issue is not only about slums, but the entire real estate industry. Presently, real estate developers are focusing on the rich, which pose a serious challenge to providing other residents affordable houses.The City of Kigali and the European Union last year conducted a study, which indicated that only 19.1 per cent of the houses in Kigali are in good condition, 32 per cent are supposed be upgraded and 48.7 per cent others replaced.The new dwellings, including a backlog to be built by 2022, indicated that 12.6 per cent about 43,436 social houses need to be built and 186,163 affordable houses, reflecting 54 per cent and 32.8 per cent mid-range housing and 0.4 per cent premium houses to be constructed over the same period.This leaves us with an annual deficit of about 3,000 housing units that we need to construct to meet the increasing demand for decent housing in the city. With the population expected to increase to between 3.8 and five million people in Kigali by 2040, we need to get prepared.How do you define an affordable house?According to international standards, we talk of affordable house only if a third of someone’s salary can pay mortgage or rent.So, how is the situation in Kigali?Unfortunately, only 3.7 per cent people (earning over Rwf900,000 per month) can afford a premium mortgage. About 29.5 per cent earn between Rwf200,000 and Rwf900,000, qualifying them for a mid-range mortgage, with 54 per cent that earn between Rwf33,500 and Rwf200,000 able to rent or own mortgage, while 12.6 per cent (those earning below Rwf33,500) need social housing subsidies.What is the city authority doing to change the situation?We have planned to solve the problem in phases. First of all, we want to have immediate remedy for those living in prone areas, especially those living in high-risk zones. Our priority is to redevelop and improve the living conditions of slum dwellers by 2017.However, we are also looking at having a city with a vibrant economy, green transport and affordable and sustainable homes. A city, where we will be able to fully utilise our infrastructure investment, with each kilometre of a road linking 1,200 units in estates.We are currently urging local developers to get involved, especially those based in Rwanda, because they have a clear understanding of the current problems in the housing sector. We will try to give incentives to developers, who are willing to invest in affordable housing projects.Can you specify the incentives you are going to offer them?These may include availing developers land, linking them to financial institutions and negotiating tax incentives for them. The private sector has a bigger stake in ensuring that the city gets affordable houses, but need support.We already have identified areas that need to be developed and upgraded with more affordable houses in Rugarama, Kimironko, Kicukiro and Kimisagara, as well as Ndera Masaka, Akuminigo and Gitega. This will be done in phases, starting from 2017, then the second phase in 2025 with the last being undertaken in 2040. The focus now is on how to attract investment to kick-start quality growth in the city, starting with the city centre and the city fringes by 2017.How will this change life in Kigali in terms of job creation?We are talking of establishing a city with well decentralised growth nodes and well distributed transit corridors and, above all, creating over 2.3 million jobs for our people.Rwanda is commonly known as “the land of 1,000 hills”. How has the topography affected real estate development in the city?Today, Kigali covers about 730km, with developable land totalling about 33.2 per cent and existing built area is 17 per cent. This leaves us with a gap of 122 hectares needed for residential development and 50 per cent for transport and infrastructure.So, we try as much as possible to use the limited resources we have, including land, more efficiently. Reducing on redundancy by encouraging real estates construction instead of individual construction is the way to go.If we continue at today’s population density of 20 persons per hectare, we will be able to only house 976,000 people on 122km. So, we can’t afford to be wasteful if we are to accommodate 2.8 million city dwellers in the future.What are the major challenges the city is facing in pursuit of these ambitious plans?The high cost of construction, in terms of infrastructure set up and the cost of land, is one big hindrance. When the cost of real estate development is high, it’s always the final buyer to bear the burden. There is also the challenge of sustainability, quality renovation and durability that we are trying to deal with. The lack of neighbourhoods with integrated services, and dealing with informal and unplanned settlements, especially in the city, are also hurting our quest to have well planned dwellings. What is your advice to real estate developers?It is profitable to invest in affordable housing because that’s where the market is highly concetrated. Besides, those who will take this road will get the full support of city authorities.

News

City unveils incentives for real estate developers