It is good news that Shelter Afrique is investing US$ 12 million in local a housing scheme targeting middle income earners. The company which has vast experience in the sector of housing and habit in Africa is offering a loan at fair rate of 8.5 per cent and a grace of two years to Rwanda Housing Bank. Shelter Afrique also loaned Goboka cooperative US$ 1.8 million for the purpose of co-financing 3 bed roomed houses in Kinyinya in Kigali.
This is is certainly a good deal and indeed if other operators like Rwanda Development Bank’s declared interest to invest in the same venture materialize, the shortage of appropriate housing for middle income earners in Kigali might find a lasting solution.
According to the Director General of the Housing Bank, under the scheme, individuals wishing to construct houses in Kigali will access loans between frw 30 and 40 million (US$ 50.000 to US$ 67.800). Housing is a capital intensive and a long term investment requiring long term funding. Hopefully the banks will charge a fair interest rate for a longer period of time because the 5 to 7 years offered today by the banking industry is likely to limit beneficiaries to high salary earners who already own houses.
A prominent Ugandan development journalist Joachim Buwembo writing in The East African (November 8-14) provided informed insights into the situation of real estate in his home city Kampala, not much different from our own city Kigali. Buwembo informs us that to the minimum price for a two bed-roomed house from estate companies is US$ 50,000 and an up market ‘matchbox’ apartment at a staggering US$ 100, 000, whereas the real cost of each unit could be only US$ 20.000.
What Sir Buwembo (he is a Knight International Fellow for Development Journalism) is simply this; estate developers exaggerate the cost of houses to earn huge profit and buyers who are desperate to own homes pay a high premium for them. The situation is made worse by equally high financial services by the banking industry which charges between 15 and 20 per cent on house mortgages plus numerous fees including consultancy, insurance etc.
Inflated real estate values and poor management of mortgages contributed to the recent economic crisis in USA, Europe and the rest of the world and have to be addressed, especially in small economies. Reports indicate that In Sacramento the value of houses dropped by 50 per cent in 2009.
The Government of Rwanda recently institute mechanism to regulate the price of land for housing construction in an effort to slow the escalating costs of housing, so developers and financial institutions likewise should find appropriate strategy to regulate costs to affordable levels.
A number of Kigali residents talked to feel that housing mortgages should be spread over a long period of time to allow middle income earners own houses for after all there is minimum risk as the houses themselves are safe guarantees.
When the Housing and Urban Development Board proposed in the National Urban Housing Policy is in place, to meet the objective of providing affordable shelter of all incomes, the low income groups should be addressed. I propose the adoption of ‘site and service’ scheme which has been used in South Africa and Kenya to alleviate the pressure resulting from rapid urbanization.
The Site and Service system works well for the urban low income earners and could be used to improve housing standards in slum areas. Although there are diverse approaches to site and service schemes, basically they are partnerships between government authorities and beneficiaries.
The authorities provide land and basic infrastructure like roads, piped water, sewerage, electricity and other amenities. If it is a big site even health services, schools and shopping facilities are included. After providing infrastructure, beneficiaries use their own resources to construct houses under the supervision of the implementing agency. The beneficiaries could borrow relatively little money from Housing department to purchase concrete blocks for construction and use locally available skills of carpenters, brick layers and plumbers.
In Rwanda, we could think of the site and service scheme modeled on the experience of Voi town in Kenya. The implementing authorities, cleared the site, provided basic infrastructure and built a ‘core’ house of one room, a kitchen and a toilet on each plot leaving room for expansion.
The beneficiary may then occupy the premises and continue to expand his house according to plan and under the supervision of authorities.