Kigali mulls incentives to real estate developers to lower housing burden

Housing burden in Kigali that is usually characterised by high cost of rent could soon be a thing of the past as the City of Kigali moves in to give incentives to real estate developers with prospects of investing in more affordable houses.
Batsinda estate in Kigali. Low cost housing remains a challenge in the city. The New Times/ File.
Batsinda estate in Kigali. Low cost housing remains a challenge in the city. The New Times/ File.

Housing burden in Kigali that is usually characterised by high cost of rent could soon be a thing of the past as the City of Kigali moves in to give incentives to real estate developers with prospects of investing in more affordable houses.

The incentives will include easy access to land, linking developers with commercial banks for credit financing, construction materials and negotiating tax incentives among many others.

Addressing real estate developers in Kigali this week, Mayor Fidele Ndayisaba said the City would be negotiating partnerships with investors who are willing to invest in affordable housing.

The City says it is engaged in negotiations with Rwanda Revenue Authority to see how investors in low cost housing can be exempted from the 25 per cent tax on imported construction materials.

The tax was recently reinstated by government to encourage local production of raw materials.

The move is aimed at mitigating the growing shortage of affordable or low-cost houses.

“Most people cannot afford houses in Kigali because for a long time developers have concentrated on developing high-end houses that target the rich. You find a house costing more than Rwf100 million or rented at $1,000 (about Rwf670,000), which most middle income earners cannot afford,” said Ndayisaba.

He tipped investors on vast opportunities they stand to gain if they developed middle class affordable housing units.

“The market is there, you only need to look where there are more clients,” Ndayisaba said.

According to 2012 study on affordable houses, Kigali has about 114,197 existing housing stock and more than 344,000 new dwellers are expected by 2022.

Underlying factor

The study also revealed that only 3.7 per cent of the city population earns above Rwf900,000 monthly net salary and can afford premium mortgages.

The study says 29.5 per cent of city dwellers earn between Rwf200,000 and Rwf900,000 per month and can only afford mid-range mortgages, while more than half of the population (54.1 per cent) earn between the Rwf33,500 and Rwf200,000.

This latter category, according to the survey, can only afford low mortgages.

Lillian Mupende, the director of urban planning and one-stop centre in the City of Kigali, said they have selected three sites where affordable houses would be developed. They include Kinyinya and Ndera in Gasabo District, and Gahanga in Kicukiro District.

Investors were told that there is a big gap in housing for the middle class.

In separate interviews, civil servants, most of whom fall in the income range of Rwf280,000 and Rwf400,000 net salary, argued that they struggle to find a residential house because developers seem not to have them in plans.

“We only see high-end houses being constructed by, say, Rwanda Social Security Board (RSSB) and other investors; Rwf50 million is their cheapest and no bank would give it to me at my salary,” said Jean Bosco Ntirenganya, who works with the Ministry of Foreign Affairs.

Ntirenganya said under the current circumstances, he will never dream of owning a house in Kigali.

Damien Ndizeye, from the Consumer Protection Association, said developers are proposing houses which are not commensurate with consumers’ income.

“They (developers) are not tackling the biggest problem, as far as housing is concerned,” Ndizeye said.

Samson Rukundo, a banker, suggested that government, in considering any incentives, should look at only those that construct apartments, because the cost of land is too high.

Developers speak out

Developers say it is good news that the City of Kigali is seeking solution to the housing deficit.

“If social amenities such as roads, energy and water were readily available, our houses would really be affordable,” said Daniel Ufitikirezi, the deputy director-general in charge of funds management at RSSB.

Titien Taratibu, a developer, challenged his colleagues to learn to use wood in developing affordable housing, which he said makes it far cheaper.

“In Kampala (Uganda), there is a three-story house I built from wood. It is has been there for the past three decades and I think this is the kind of technology we should bring here,” he said.

But this suggestion triggered debate among his peers, with many saying wood is weak and cannot firmly support a multi-storied house.

The developers agreed to work with the City of Kigali to conduct more research on the use of wood in construction as well as other mechanisms that may help lower the cost of housing.

Projection

Fred Rwihunda, the president of Institute of Engineers of Rwanda, said what is most important is a general agreement that housing problem exists in Kigali because that calls for collective action to address the shortfall.

A joint study by the European Union and City of Kigali says the city will have a deficient of 340,000 housing units in the next 10 years.

To fix this deficit, the City will have to construct 3,000 housing units annually.

Statistics show that Kigali has a population of about 1.2 million people, which is expected to reach 3.8 million by 2025. 

 

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