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December 10, 2019
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The business case of investing in affordable housing development in Rwanda

  1. Huge investment opportunity for developers and players in the new housing development value chains

The Government of Rwanda is encouraging investment into the Rwandan housing sector especially in the following sub-sectors:

  1. Investment into local construction material and production of related items e.g. materials such as aerated concrete blocks, or sanitary room items etc.
  2. Investment as a shareholder into the first Real Estate Investment Trust (REITs) which is a special purpose investment vehicle meant to help trigger and facilitate large scale housing construction as a profitable investment within Rwanda’s capital markets.
  3. Investment into housing development including but not limited to carrying out construction on the readily available 7 sites under a variety of typologies and ownership acquisition scenarios.
  4. Investment into housing development and construction on additional sites in collaboration with land holder cooperatives under specific development of a variety of typologies, shareholding and tenure scenarios.

  1. Huge demand for affordable housing in Rwanda

The ministry of infrastructure (mininfra) estimates that demand countrywide for housing remains very huge.

The national demand stands at more than 60,000 housing units every year. The estimated demand for affordable housing unit is approx.55 % of total national demand. Kigali city demands more than 30,000 housing units annually against estimated supply of less than 1,000 housing units every year, according to a housing market study report for period 2012-2022 commissioned by mininfra states.

The study states that the following projections constitutes demand estimates: Total housing needs (2012-22) are estimated to reach about 458,256 units. From above estimates, over 344,068 are expected to be newly constructed.

The estimated low supply of below 1,000 units per year covers less than 3.3% of the annual demand which caters for the supply for upper income segments.

Given the above dynamics, it is a high level priority by the Government of Rwanda to ensure supply of requisite stocks of affordable housing units in the market.

  1. National housing policy

The Government of Rwanda has developed a raft of new policies establishing a framework which facilitates private-sector-led housing construction.

Part of creating the enabling base conditions was a land reform, which, with the regularisation of land tenure paved the way into an open real estate market, and enabled the enhancement of the private construction industry sector.

In 2015 the Government of Rwanda adopted a new national housing policy as basis of enabling access to housing for all. Besides the policy paper discussing how to ensure sustainability in future urban and settlement development, the policy discusses a variety of access models addressing all population strata to access decent homes.

The housing policy is designed to trigger and facilitate large, medium- to small-scale investment into affordable housing through collaborative development schemes. The new legal framework contains large opportunities for local economic development through a number of schemes.

This includes collaboration among land holders forming cooperatives, or land holders interacting with investors as shareholders in new, efficient and well-planned housing development projects.

  1. Complementing policy directives to support housing development

Two major policy directives has been issued by the Government of Rwanda with a view to stimulate affordable housing development. This includes;

The 2015 Prime Minister’s order on public support for affordable housing development;

Technically known as PM’s instructions determining the conditions and procedures for obtaining government support for affordable housing projects. This is a significant policy direction meant to drive the collaboration with the private sector in housing delivery. It is a commitment to the financing of inner-neighborhood 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 local SME’s.

  1. The new 2015 investment law;

Rwanda’s new investment code enacted in 2015 relating to investment promotion and facilitation is an additional component to boosting affordable housing development. Its objective is incentivizing investment in affordable housing by offering tax incentives to investors such as such as preferential corporate income tax rate, and accelerated depreciation for investments in construction projects worth at least US$ 1,800,000.

Currently, the Government of Rwanda’s preferred route of enabling construction of mass housing development is through private public partnership framework. Under the PPP framework private sector investors are expected to construct sustainable, mixed-use houses.

Seven housing development sites with a total land area of about 257.5 ha are open for investors to develop. The objective of the proposed housing schemes is to support supply of higher density and mixed use housing which is envisioned to assist residents in increasing their socio-economic levels due to the proximity to local economic opportunities.

At least 22,000 housing units are estimated to result from this.

Public sector financing mechanism

The Government of Rwanda has put in place a number of funding initiatives in order to enable large-scale construction and simultaneously facilitate households to access finance:

a) Urban Development Fund (UDF):

Newly created housing development financing mechanism to be managed by Rwanda Development Bank (BRD).The fund is meant to support development of core affordable housing neighbourhood infrastructure such as power connection, sewage system and water connection as well as road access networks through subsidies. The UDF will make the Government of Rwanda more flexible in approving and implementing its public infrastructure commitments in a timely manner for any approved investment and development proposal independent of the government budgeting cycle.

b) Housing subsidy program;

Funding scheme targeting low income earners which once ratified is meant to facilitate beneficiaries to access financial support through guarantees, topping up to savings, and other subsidies related to the slashing costs of buying houses.

c) Mortgage backed securities;

A facility issued by a financier in this case Rwanda Development bank (BRD) to give more comfort to third party mortgage financiers to issue housing mortgages to clients who would otherwise not be eligible to acquire homes.

d) Real Estate Investment Trust (REIT);

Is a special purposes firm created by its promoters with the sole intention of channeling investible funds into operating, owning or financing income-producing real estate. In the context of affordable housing in Rwanda BRD is mulling on possibility of forming an affordable housing REIT as promoting corporate shareholder with other promoters.

REITs can use pooled capital of several investors to make mortgage loans to builders or developers or to directly invest in income producing property that offers tax benefits in addition to interest and capital gains. The proposed Rwanda REIT is to be created to trigger and facilitate large-scale housing construction through Rwanda’s capital markets.

e)Residential Credit Line Facility;

BRD is further seeking the introduction of a proposed residential credit line facility (RCLF) designed as a US$200 million funding line in affordable housing scheme for on-lending to qualified mortgage originators, as well as construction finance facility in support of developers.


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