The recently approved affordable housing Fund could start issuing loans in December this year, according to the Minister for Finance and Economic Planning.
The Government is optimistic that the World Bank will approve its $150 million loan request this month for investing in the Fund that was proposed last year, Dr Uzziel Ndagijimana told The New Times.
The lack of affordable housing is a thorny issue in Rwanda where interest on mortgage loans hover between 16 and 19 per cent.
“After the loan approval, there are other processes of loan agreement signature, ratification of the agreement and disbursement,” the minister said, adding that; “The exact time when beneficiaries will access the fund is not clear yet but we anticipate that it would be around December this year,”
The $150-million loan (about Rwf130billion) will be used to establish the Affordable Housing Fund, which was approved by the Cabinet in July last year.
Its initial capital is estimated to be over Rwf200 billion.
The money will be part of a revolving fund that will provide affordable mortgage loans to the general public at an interest rate below that of commercial banks.
Expensive loans remain one of the factors behind the high cost of delivering housing units in the country. It prompted the Government to set up a fund to offset high cost of acquiring a home.
Under the affordable housing fund, which will be managed by the Development Bank of Rwanda (BRD) in partnership with some commercial banks, investors in home ownership will get subsidies on the interest rate and will be paying about 10 per cent instead of the current 17 per cent.
Experts say that the initiative will trigger access to low cost houses, which has been hindered by expensive sources of financing, among other factors such as lack of home-made construction materials, rising prices of land and lack of a variety of professional real estate developers.
The Division Manager for Affordable Housing at Rwanda Housing Authority (RHA), Léopold Uwimana, told The New Times that the initiative will boost investors’ appetite for the construction sector.
“It’s not easy to get cheap loans for building houses,” Uwimana said.
Interest rates on mortgages are projected to drop to as low as 10 per cent owing to guarantee facility for prospective home-owners, developers, producers of locally made construction materials, and other investors in residential housing.
Investors in the construction sector are upbeat about the fund.
Kigali-based property developer Vincent Sekimondo told The New Times yesterday that the fund needs to start working because it’s been a while since investors were told about it.
“Everyone can benefit if we can access funds at a lower cost. It’s obvious that this fund would be helpful if it can only start working,” he said in an interview.
Sekimondo attended a meeting between real estate developers and the Ministry of Infrastructure in June last year when the Government first mooted the idea of setting up the Fund.
While pitching the idea of the Fund to investors last year, officials at the Ministry of Infrastructure said that it would slash the cost of houses by up to 50 per cent. This means that a house, which currently costs Rwf50 million would reduce to Rwf25 million.