The cost of mortgages in the country could drop significantly in coming days as the government increases its intervention in the housing sector. The New Times understands that a $150 million loan from the World Bank Group is set to be approved in about a month’s time with proceeds going to setting up a Mortgage Financing Company. The funds will be part of a revolving fund provide affordable mortgage loans to the general public at rates below commercial bank rates as well and with longer repayment periods. The intervention comes at a time when the housing sector in Rwanda has been plagued by multiple challenges in both demand and supply aspects limiting chances of home ownership. Currently, mortgage loans in Rwanda are in the range of 16 per cent interest per annum which is quite steep for potential home owners. Minister of Finance and Economic Planning Uzziel Ndagijimana told The New Times that the move is in response to challenges on the demand side whereby cost of capital to own a home is often too expensive for the middle class and low income earners. He confirmed that the development saying that the loan is set to be approved in the coming month. He said that they intend to provide cheap loans below commercial rate and have longer repayment periods. “We are starting a housing fund which we are going to inject $150million, a loan from the World Bank Group which can build about 6000 homes. The money will be a revolving fund and will provide cheap loans below commercial rate and combined with a long period for repayment,” he said. The development is likely to cause banks to rethink and review their mortgage rates as well as their conditions as they will have a smaller market to share. Experts say that increased competition could improve the diversity of products in the sector improving chances of home ownership. The local housing sector has been faced by multiple issues including a mismatch in supply and demand where local commercial banks are not able to provide long term financing. Development Bank of Rwanda Chief Executive, Eric Rutabana, said that there is need for long term affordable financing to address issues on the demand side of housing. He also said that there is need for more private public partnerships to address shortcomings in the sector. The status quo in the market has seen developers prefer high end housing projects -often out of reach for most Rwandans- as they are promise better returns in the short term. The Finance Minister said that the government has also moved in to provide basic infrastructure in housing projects to reduce cost of the final project. This he said is estimated to reduce the cost of homes by about 30 per cent. The current housing initiatives are intervention against an estimated demand of about 31,000 housing units annually. BRD recently announced the Ndera Affordable Housing Project being implemented in partnership Moroccan real estate developer, Palmeraie Development Group which is expected to deliver 1750 houses in the first phase. A group of local and international players in the housing sector also this week signed a Memorandum of Understanding to spend $200 million on the construction of affordable housing units in Kinyinya, targeting 10,000 homes. The stakeholders include, China’s Broad Homes Industrial International, Development Bank of Rwanda, Rwanda Social Security Board, and BSMART Technology – a research and design firm – and the International Finance Cooperation (IFC). editorial@newtimes.co.rw
