Kigali sets aside 6,000 hectares of subsidised land to fix housing shortage

Rwanda Housing Authority (RHA) has earmarked 6,100 hectares where the private sector will construct affordable houses as part of the 30-year plan to fix Kigali’s shortage of affordable homes. The demand for affordable houses in Kigali is rising faster than its supply with various studies showing that the city needs at least 20,700 housing units every year or 310,000 units by 2032. Felix Nshimyumuremyi, the Director General of RHA says allocating free land to private developers is part of a wide range of subsidies aimed at offsetting the rising cost of housing in the city. In the long run, the government aims to ensure that every city dweller is accommodated in a decent home. However, experts say that the cost of owning a house is rising faster than people’s income. Kigali’s population is projected to more than double from the current 1.6 million to 3.8 million by 2050. “There is a long way to meet the demand of 30,000 units per year. It is a long process that will be achieved over time, accompanied by continuous reforms to support and attract the supply side,” he said. Previous efforts to boost the supply of decent affordable houses have yielded minimum results. There are sustained complaints from low-income earners and analysts that the current affordable housing projects only cater for the middle and upper classes of society. Developers have expressed low interest in constructing houses with a price ceiling of Rwf35 million – currently defined as affordable. Jean Baptiste Nsengiyumva, Senior Research Fellow at Institute of Policy Analysis and Research-Rwanda (IPAR-Rwanda), argues that a house should be called affordable depending on the buyer’s level of income. “Developers must consider income categories when building houses. Otherwise, people will continue complaining,” he said. The government has said it is weighing option of playing a direct role. Addressing concerns of low-income earners The developers, Nshimyumuremyi added, on many occasions, underlined that construction projects of affordable homes are not profitable. Yet, on the demand side, many people also complain that their incomes are very low. To address these challenges, the government is reviewing its policies, he added. The affordable housing programme caters for people who earn a monthly income of between Rwf200, 000 and Rwf700,000. “A separate social rental programme (rent and rent to own scheme) is being designed to facilitate access to decent housing for low and extremely low-income earners,” he assured. Real estate developers have also complained about the high cost of borrowing to fund the construction of houses. Covid-19 disrupts market The outbreak of the Covid-19 pandemic exacerbated the situation, triggering a rise in transport costs and disrupting the supply chain of construction materials. Foreign investments in the construction sector have not been forthcoming as Covid-19 hit investors adopted a strategy to wait and see how the industry recovers. Among the incentives, the government waived VAT on imported and locally made construction materials for affordable housing projects exceeding $10 million. The tax waiver could potentially add impetus to the implementation of affordable housing projects which have stalled as highlighted by the Auditor General’s report. Currently, Nshimyumuremyi said there are 12 major projects which will add about 7,400 units once completed in the next three years and six other projects that will supply 7,600 units in the next four years. “The figures keep increasing as many investors keep exploring the affordable housing market regularly,” he said.

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Kigali sets aside 6,000 hectares of subsidised land to fix housing shortage