Rwanda Development Bank (BRD) in collaboration with Rwanda Housing Authority (RHA) has launched a scheme that seeks to provide cheaper mortgages to Rwandans on their first house purchase.
The project known as the Rwanda Housing Financing Project promises cheaper mortgages and longer duration of payment.
The $150 million dollar project is a partnership with the World Bank and aims at addressing the shortage of affordable houses.
Eric Rutabana, the Chief Executive Officer of BRD, said the scheme largely targets the youth.
Under the arrangement, BRD will lend money to local commercial banks, microfinance institutions, and savings and credit cooperatives at an interest rate of 6 per cent.
Then banks will be compelled to issue mortgages to Rwandans at an interest rate which is not higher than 11 per cent.
An aerial view of domestic houses in Nyarutarama. Courtesy
The borrowers will have up to 20 years to clear their mortgage loans, the Bank said.
The loans will assist the recipients to buy houses that are at a cost of Rwf35 million or below and will not require the applicant to offer any collateral.
The cost of the houses will go as low as Rwf10 million and may even be lower according to the design and cost of construction, BRD said.
The recipients to the loans must be Rwandan citizens and residents who have a monthly income of not more than Rwf700,000.
The applicant must be a first-time house owner and must not buy a house exceeding Rwf35 million.
Rwandans who fulfil the requirements and wish to apply for credit will approach BRD and RHA for registration.
The two authorities will then share the list of the registered applicants to the participating financial institutions who will approach the applicant to fulfil the mortgage requirements and get the loan.
The financial institutions will then pay the seller of the house on behalf of the mortgage applicant.
BRD and RHA told journalists that they currently have 17 projects some of which started in July this year which they will use as a pilot scheme to assess the market and decide whether to expand the construction.
However, they said, the new project will be subjected to the usual mortgage loan laws and penalities such as taking possession of the house in case of default.
People who acquire the houses under this project will be able to upgrade to a better house once their income increases.
The mortgages will be rolled out in parts of the country, officials said.
According to BRD, so far over 17,000 people have expressed interest to buy houses through the new credit system.
Three banks, including Bank of Kigali, Bank of Africa and Zigama Credit and Savings Society have already signed up to the project