Kigali, 1^st June, 2017- In July this year, Rwanda will set up an affordable housing fund to help bring down the current cost of housing financing. This was discussed in the meeting at Marriott Hotel, City of Kigali, which was organized by the Ministry of Infrastructure in collaboration with the Private Sector Federation. The meeting meant to elaborate more on the role of private sector in housing development and the financing mechanisms.

The main objective of the meeting was to raise awareness and share experiences with Private Rwandan Investors on key existing opportunities, best practices and guiding principles that have been adopted by Government of Rwanda at various levels in order toenable the delivery and address the affordable housing gap using available opportunities in Rwanda.

It is anticipated that the "Affordable Housing Fund" will reduce the cost of financing a house for both a developer and a beneficiary by a substantial amount. The tremendous reduction in cost of financing will trigger increased levels of both housing production (supply) as well as access to housing (demand).  

Not only will the Fund provide a guarantee facility for developers, producers of locally made construction materials and any investors going into residential housing, but it will also support the targeted beneficiaries with low purchasing power who have adopted a saving culture.

According to the Minister of Infrastructure, Honorable James Musoni, ‘The Kigali city housing market survey conducted in 2012, which is currently being updated, indicated that affordable housing takes the largest segment of the demand market with more than 54%’. Having realized that the affordability levels were still low to trigger massive access to housing, it was found necessary for the Government to make appropriate interventions, such as devising how to reduce the cost of financing on both housing demand and supply.  

The survey identified four components that contribute to making the end cost of a housing unit substantially expensive and hence unaffordable to the would-be target group.                    

These constraints include:

1. The high cost of land and infrastructure, taking up almost 30-40% of the housing unit selling price;
2. The high cost of financing for investors (supply) and beneficiaries (demand). Investors are borrowing at 15-16%, while beneficiaries borrow at 18-21%; plus the fact that borrowing period is also low (10 to 15 years for beneficiaries);
3. The high cost of building materials both those made in Rwanda and those imported;
4. The limited building and construction technologies.

The Government of Rwanda has tried to make necessary rigorous interventions in each of the above constraints to enhance the housing supply and demand in the following respective manner:

1.     Besides the strategic budgeting and acquisition of land for affordable housing, the Government also provides support in form of basic infrastructure services in for affordable housing and high density projects to stimulate private investment;

2.     To reduce the high interest rate and short mortgage burden, the Government has decided to set up an Affordable Housing Fund starting July this year. The Fund will be facilitating financial institutions to lend to both developers and beneficiaries at a relatively cheaper interest rate and for a long term. The initial investment the Government plans to inject in the Fund is around USD 200M, which will subsequently grow over time; 

3.     The Government supports Private investment in the creation of industries for production of various local building materials and technologies. Typical examples of local building factories like Strawtech, AfriPrecast, and a factory producing light steel have been established, also in a spirit to contribute to the Made-in-Rwanda campaign.

The combination of all these interventions will substantially bring down the current housing cost and hence trigger increased access to housing at affordable rates by the different categories of target groups.

The role of Private Sector in ensuring the successful delivery to the above housing targets is very critical in this regard. 

This dialogue meeting has come up with a feasible way forward and commitment to engage substantial private investments in the housing sector.