Cabinet has approved a new Rwf290 billion Affordable Housing Fund that will help to put up houses for low income earners payable over a long term period.
The resolution was taken Friday.
Speaking at a news briefing, yesterday, the Minister for Finance and Economic Planning, Claver Gatete, explained that the new Fund will help many Rwandans who cannot afford to build homes and yet cannot acquire long-term mortgage loans at low interest rate.
“We also realised that land is expensive and most of materials are imported, which increases cost of rent. Interest rates from banks are also high and paid in a shorter period,” Gatete said.
He said, with the Fund, the Government plans to ensure that it reaches urbanisation target of 35 per cent in 2022, necessitating more efforts to find affordable houses.
He said the resolution is based on studies from successful similar projects in other countries such as Ethiopia, Singapore as well as the UK.
“We are mobilising partners to raise the funds, we are working with local and international organisations, we are mobilising the World Bank to put in money and we are at a very impressive stage,” he added.
Minister Gatete indicated that while there is ongoing construction of affordable houses under other projects, the Affordable Housing Fund project will start by September.
The Fund will be managed by the Development Bank of Rwanda (BRD) in partnership with other banks. Investors will get subsidies on the interest rate and will be paying 10 per cent instead of the current 17 per cent.
The mortgages will be paid in 25 years or more instead of the current 10 to 20 years.
“We will not wait until we raise the whole amount, we will see if we can start this month or in August,” said Gatete.
The Fund targets middle income workers earning between Rwf200,000 and Rwf700,000 as a monthly income.
They can service the loan in about 30 years but the minister said other criteria will be looked at, such as considering not only ones’ monthly salary but also other side income and partner’s income as well.
Officials said more ways will also be considered to support people in lower income brackets such as those earning less than Rwf200,000 per month.
“What we need is affordable housing, the Government will look for all possible ways through which these houses can be easily constructed. We will offer loans to investors at low interest rate and some materials will be made locally, we are looking for a formula that will help people own houses,” Gatete said.
‘Fund is good move’
Private sector, as well as the public have welcomed the Fund, saying it will not only boost investment but also enable people to use the money they pay in rent to pay a long-term loan and own a house.
“It is a dream for me to own a house from my monthly salary because banks want collateral and interest rate is still high. If the Fund will help us get a house and pay in about 30 years, then it is a good initiative,” said Donatien Dusenge, a public servant from Kicukiro District.
A 2012 housing market study by the City of Kigali showed that 340,000 new housing units are urgently needed by 2022.
Out of these, 86 per cent should be affordable housing and mid-range housing, 13 per cent should be social housing, with only less than 1 per cent premium housing.
This means the country needs to avail at least 34,000 new housing units every year over the next ten years.