The government has come up with new measures to meet housing needs in the country, Didier Sagashya, Director General of Rwanda Housing Authority, has said.
While addressing a post-cabinet press conference this week, Sagashya said the government had identified bottlenecks hindering the delivery of low-cost housing, hence devising new procedures to streamline the set targets within the housing sector.
“We informed the cabinet that there are some challenges that need to be addressed to be able to deliver low-cost housing. Some of these challenges include; high cost of land, high cost of building materials, limited building technologies compared to other countries and high cost of financing, both for investors and property developers.
“Some of the solutions which were proposed to the cabinet, are that districts should start strategic acquisition of land and create land banks for affordable housing that can be used by investors; working with Private sector to invest in creation of industries for new forms of building technologies; Review the Housing Development financing mechanisms to allow lower interest rates and long term loans for property developers among others,” Sagashya said.
Sunday Times understands that Districts in City of Kigali and secondary cities will be asked to budget for land acquisition (create a land bank to enable easy access to land for property developers) every fiscal year.
Sagashya noted that the Cabinet recommended that, within one month, a new proposal would be drafted guiding the review of easy access to finance by Affordable Housing investors.
He also revealed that another proposal was presented to Cabinet requesting the review of Prime Minister’s instructions, enacted in November 2015, determining the Government support to developers in affordable housing to enable provision of support in infrastructure for high density housing development.
“Developers need infrastructure support in terms of electricity, roads, water and sewerage and low interest rate finances to develop low cost houses. These reviews were approved by the cabinet meeting and should be gazetted soon,” Sagashya reiterated.
The mismatch in Housing and urbanization growth
Despite efforts to facilitate affordable housing supply by enacting Policies and campaigns, the development of such low cost housing is yet to settle in, according to the Ministry of infrastructure.
Rwanda’s Vision 2020 targets urbanisation rate to increase from 17 per cent of the population in 2012 to 35 percent by the year 2020. By then, the urban population will increase from the current 1.7 million to 4.4 million, which is an increase of about 2.7 million people living in urban areas. This, therefore, requires adequate infrastructure, attracting jobs but most importantly housing to accommodate this influx.
A 2012 Housing Market Study in the City of Kigali showed that 340,000 new housing units are needed by 2022. Out of these, 86 per cent should be affordable housing and mid-range housing, and 13 per cent social housing while only less than 1 per cent to be premium housing.
During the 11th National Leadership Retreat, the Government prioritised the development of affordable housing for middle and low-income communities, and in that regards, both the National Housing Policy and National Urbanisation Policy were adopted in 2015.
At the same time more, new policies were adopted to facilitate the implementation of affordable housing plan. They include; the investment code—aimed at facilitating investors to invest in key priority areas including housing, as well as the Prime Minister’s instructions N°004/03 of 13/11/2015 determining the Government support to developers in affordable housing.
“Since the housing study in the City of Kigali was released, no tangible housing projects have come up. People are still struggling to build for themselves rendering it expensive and leading to creation of informal constructions. According to this specific market study, at least 34,000 new housing units should be availed every year,” a cabinet brief paper presented by the Ministry of infrastructure—before the Executives’ meeting this week—reads in part.
The brief paper presented to the cabinet sought to give updates on development of affordable Housing, while proposing remedies to meet the housing targets across the country.
According to the brief paper, the cost of land is precisely more than 40 percent of the housing unit selling price, while the cost of financing, both for investors (supply) and beneficiaries (demand) is equally high. Investors are borrowing at 15-16 percent while beneficiaries borrow at 18 to 21 percent; yet the borrowing period is as short as between 10 to 15 years for beneficiaries.
Stephen Ruzibiza, the Chief Executive Officer of Private Sector Federation (PSF), says access to low-interest finance and infrastructure support: “Will go a long way ensuring that the private sector delivers affordable housing to the market”.
However, The Sunday Times understands that the Ministry of Finance and Economic Planning will conduct a study this year to assess the best way to approach the financing issues faced by affordable housing supply and demand.
Several affordable housing projects in the pipeline
Since 2013, projects with more than 30,000 housing units have been initiated and are at different stages of conception and development. They include: 1000 housing units developed by Urukumbuzi in Kinyinya, Gasabo District; 2700 housing units to be developed by BRD and Shelter Afrique in Rugarama, Nyarugenge District; 561 housing units developed by RSSB in Batsinda II, Gasabo District and 56 housing units developed by Abadahigwa ku Ntego Ltd in Kabuga, Kicukiro District.
Other projects include; 2000 housing units to be developed by BRD and Groupe Palmeraie Development (a Moroccan investor) in Ndera, Gasabo District; 2500 houses to be developed by BRD (investor to partner with is still to be found) in Busanza, Kicukiro District; 20,000 housing units by RSSB in Gahanga, Kicukiro District; 1800 housing units under design by Consortium of RSSB, IFC and B-Smart (from Malaysia) in Kinyinya, Gasabo District; 500 housing units by private developers in Masaka (Kicukiro District) and Nyamata (Bugesera District); 950 housing units in Kimisange, Kicukiro District for mixed income to be done by a SPV setup by BRD and Millennial Development Ltd and 2500 housing units in Secondary cities.
However, only 2 projects have been approved for support; thes Batsinda II Project and Abadahigwa ku Ntego Ltd Project.
Legislation window on low-cost housing
The Prime Minister’s instructions determining the Government support to developers in affordable housing is being provided only for projects with maximum selling price of USD 300 per square meter and less than 95sqm as area of housing unit.
In addition, the Investment code; a Law relating to investment promotion and facilitation provides a reduction of 50 percent on corporate income tax for investors in Affordable Homes.