"It’s just too expensive.” A young professional from Kigali expresses the all too familiar complaint of those wanting to get on the property ladder.

Justus Kayonga, managing director of Property Solutions, explains: "property prices are high while incomes are low. People just can’t afford it.” "As a result the majority of people rent,” Kayonga adds.

Perhaps most worryingly up to 80 per cent of houses in Rwanda are not planned. As such they meet no official standards and are potentially dangerous.

"This is not desirable. As much as possible, people should live in houses that are formally structured, formally built, safe and secured,” David Kuwana, BCR managing director, said.

As of last week, Rwanda Commercial Bank (BCR) is offering a solution.
When Actis, the UK based equity investors, took over BCR they made a promise to support the Government’s development goals and find ways of making life easier for Rwandans.

"We began exploring ways of how individuals could start accumulating wealth,” explained Hannington Namara, marketing and communications manager at BCR.
Residential property was the obvious answer.

Let’s take for example Gaculiro, Kigali’s swanky new housing estate, homes that were bought for about Frw28m are now worth Frw60m. A home is quite simply an asset which accumulates value as you are living in it.

So, BCR reasoned, if individuals are given a helping hand onto the property ladder, in theory, this should set them up for life.

And this is where mortgages come in. Namara explained in an interview at the bank’s headquarters last week, that before the introduction of mortgages, individuals could borrow from the bank for a construction loan to build a house.

"But the lending period is short and the interest is high,” says Kayonga. "It’s a back breaker!”

With a mortgage, individuals borrow money to buy a house; the house acts as the security as the individual pays back the money to the bank over time.

"It’s like leasing in that the house belongs to the bank until you have fully paid for it,” Namara clarified.

What exactly is a mortgage?
A mortgage is a method of using property (real or personal) as security for the performance of an obligation, usually the payment of a debt.

A domestic mortgage is an arrangement where an individual or a home owner borrows money from the bank, for the purposes of constructing, buying or extending an existing house to live in or to rent, and to pay for it over a period of time. 

"Instead of paying rent you pay back your mortgage,” Kayonga explains. "It makes business sense.”

‘Own a home’
BCR’s mortgage product lends money for the purposes of buying house. Unlike the construction loan, the interest is low at 14 per cent per annum, while the repayment period is longer, up to 15 years.

To qualify one needs to earn at least Frw300,000 a month. While the amount is not fixed, there will always be a deposit to pay. According to Namara, it will be no more than 30 per cent of the total cost of the property.

This is the first ever mortgage product in Rwanda and as such it faces various challenges.
While I am assured that there is already much interest in the product, the BCR marketing and communications manager explained that at least to begin with there is going to be a limited number of people who can afford a mortgage.

The mortgage product is aimed at middle to low income earners but there are worries that only about 20-30 per cent of earners will be able to afford the product.

As a way round this, BCR is introducing special savings accounts.

"Hopefully once people understand the benefits of a mortgage they will begin to save,” Namara explains.

The other main problem lies with the houses themselves. Kayonga explains that while demand is high, supply is virtually non existent.

This will initially pose a problem but it seems that once developers ascertain their market and start building affordable housing, buyers, with mortgage in hand, will be queuing up.
It’s just a question of sensitising both developers and potential home owners as to how the product works.

"Then its win, win, for buyers and developers,” enthuses Kayonga.

The mortgage then is a welcome addition to Rwanda’s growing property market. It seems it won’t be long before the mortgage becomes an inherent part of the purchasing process for all those wanting to make a house a home.
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