Low cost housing fund could be operational in February

World Bank Country Manager Yasser El-Gammal (left) and Minister for Finance and Economic Planning Uzziel Ndagijimana exchange documents after signing the MoU in Kigali yesterday. Sam Ngendahimana.

The government-backed Affordable Housing Fund could start issuing subsidised and cheaper mortgage loans in February next year.

The revelation was made yesterday by the Minister for Finance and Economic Planning, Uzziel Ndagijimana, and the World Bank Country Manager, Yasser El-Gammal, after signing a loan agreement to support the Fund.

The World Bank will lend Rwanda $150 million (Rwf130 billion) to expand access to housing finance.

The 25-year credit facility, which was approved by parliament and cabinet, attracts an interest rate of 1.35 per cent per annum.

It will be implemented by the Development Bank of Rwanda working with other financial institutions to expand mortgage lending.

“Towards the end of February (2019) the fund could be accessible if everything goes well,” Ndagijimana said, responding to a journalist’s question on when the fund could start operations.

Under the affordable housing fund, investors in residential houses will get subsidies on the interest rate and will be paying about 10 per cent instead of the current 17 per cent, government officials said last year when the fund was launched.

But the finance minister said yesterday that it is still too early to know exactly what the interest rate will be for borrowers when the fund starts operations even as the intention is to keep it low.

“The intention is to keep the interest rate lower than ordinary rates,” he said.

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.

Speaking after signing the loan agreement, the finance minister noted that the housing project is expected to expand access to housing finance to households and will support capital market development in the country.

“The Government is keen to ensure sustained provision of long-term finance to support the development of the mortgage market beyond the lifetime of the project,” Ndagijimana said.

The World Bank Country Manager noted that the project is expected to provide 6000 new housing loans to targeted households, thus creating incentives for private sector participation in the housing market.

“It will also create a socio-economic transformation at a household level which is achieved by spending less of monthly budgets on housing, leading to an income substitution effect toward improving education and health outcomes for families,” he said.

The primary beneficiaries of the housing fund project will be Rwandan households which have limited or no access to mortgages under the current market conditions as targeted houses to be funded by the project could be valued at between Rwf10 million and 35 million, the finance minister said.