The housing industry in Rwanda is still very fragmented, with the majority of construction being undertaken by private under-capitalized firms and individuals as opposed to large-scale property developers. Planned settlement comprises a meager 7%, whereas the remaining 93% is catered to by spontaneous settlements. For the most part, individuals are allocated plots and they build according to their convenience, taste and capacity, irrespective of the area. The results are pockets of areas with slum huts next to good houses in otherwise high-priced communities. However, residential estates are slowly sprouting up through public institutions, such as the Social Security Fund of Rwanda, limited liability companies such as Rwanda Housing Bank, and a few private players such as Real Contractors, TRA Estates, STIPPAG, Kigali Top Mountain, the GOBOKA Housing Co-operative, etc. Despite this upward trend, the market is still largely under-served. It will therefore be expedient for collaboration between local and foreign real estate developers, in conjunction with the Ministries of Infrastructure and Local Administration to develop well-planned residential estates with all the appropriate services.
Another issue the industry has to confront is the cost of construction. Materials are mostly imported and so are skilled experienced personnel. The current cost of construction is estimated at $400 per m².
Several studies carried-out by UN Habitat in conjunction with concerned organs of Government on housing needs show that the market potential is huge, though the repayment capacity remains a challenge. Another issue yet to be resolved is the provision of long term financing by lending institutions.
All these issues emphasize the need for a specialized institution such as Rwanda Housing Bank (RHB) with longer terms and cheaper financing resources to mitigate this problem. The mortgage industry in Rwanda is quite undeveloped and unsophisticated, with RHB being the only institution specializing in mortgage finance.
RHB was established in 1975 to serve as a governmental instrument for the implementation of sect oral policies of social housing and offering of mortgage loans. Like most Rwandan institutions, it was severely affected by the war and genocide of 1994; it lost staff, clients, assets, etc. It has since undergone a restructuring aimed at cleaning up its financials and redefining its strategy and position on the national financial sector, and putting in place a strategic business plan to re-launch its activities. The new strategic actions that RHB has adopted evolve around an operational mission which is centered and adapted to its new image.
Its current share capital is 1,500,000,000 Francs (about 2.680 million USD). There is yet more capital increment scheduled for end 2007 that will target private investors, both local and foreign. This will be aimed at having the majority of shares in the Housing Bank in the hands of the private sector.
In addition to its own resources, RHB mobilizes housing savings through Housing Savings Accounts (HSA) and Housing Savings Plans (HSP), housing deposits, and eventually, borrowings to finance the loans that are granted. Currently, RHB offers the following kind of loans:
Home acquisition loans;
Home construction loans;
Home improvement or completion loans;
Diaspora home loans, a product called “Own a home at home”.
The demand for housing in Rwanda today is quite high. The aforementioned 93% illustrates the amount of land available for development. In Kigali City alone, demand estimates are put at about 100,000 homes required to narrow the gap.
With an annual increase of 10%, it comes to 10,000 units per year. Solvency is assured and conservative estimates value it at 10,000 units required per year.
Homes that would sell at prices ranging from 25,000 USD to 80,000 USD would be sold off plan, as this is the affordability range for the medium to medium-high income earners.
Mortgage financing can be available with a repayment period of up to 15 years.
Construction of the houses is the responsibility of a professional property developer, be it national or foreign. Organizations such as RIEPA, the district authorities and other stakeholders are keen to collaborate in closing the housing gap.
The housing gap can also facilitate in the soliciting of serviced plots of land and grant housing loans to qualifying beneficiaries. Other financial institutions have opened up as well.
Business Development, Rwanda Housing Bank.