Africa Biz Construction and Business News
Rwanda Unveils First of Many New Affordable Housing Projects
September 1, 2018
Rwanda Development Bank (BRD) just announced a new housing project which will likely be the first of many to address the serious shortage of affordable housing in the country.
With new affordable housing programs in place in the country, children like these in Rwanda could soon have the opportunity to live in better quarters within its major urban centers.
Addressing the housing shortage in Rwanda is a major concern for the country. In a study conducted by the City of Kigali, the Ministry of Infrastructure and the European Union, it is estimated that Kigali could be facing a shortfall of as many as 344,000 homes by 2020. Considering that at best 800 and 1000 houses are constructed each year in the city, and that most of those are aimed at high-income people, most of those living in Kigali, the country’s capital, have few housing options to choose from.
Within the city, an estimated two-thirds of those looking for housing in the city were low-to-middle-income earners. To meet the demand, even considering challenges of those looking for housing finding ways to pay even for the lower tiers the industry might provide, the study concluded a minimum of 31,000 houses a year need to be built in the city.
The ‘Ndera Affordable Housing project’, as the new BRD development is named, is part of a partnership agreement negotiated between BRD and Palmaraie Development Group, a Moroccan real estate developer. That agreement was worked out in 2016 when King Mohammed VI of Morocco visited Rwanda. The first phase of this new project will be built for a cost of US $35 million, under a joint venture featuring 25% equity from BRD and 75% equity for Palmeraie Development Group.
The project features 1759 housing units, all designed with a target minimum offering price of US $31,000. The units are very different from most other housing in the city. Those were mostly what are referred to as traditional bungalow style. The affordable housing construction will be offering instead moderately-sized two- and three-bedroom apartment blocks.
According to Eric Rutabana, the Chief Executive Officer of BRD, the project is aimed at Rwandans with a monthly income between US $227 and US $1,360. In designing and pricing he units, BRD had investigated local rate information and identified this income range as one both in need of housing as well as one typically locked out by the market.
Another issue developers face in addressing this market is that potential buyers are often rightfully concerned about fraud in building new complexes. Many have made deposits on new supposedly affordable homes, only to find the projects are never completed and they often have to file lawsuits to recover their funds. For this project, BRD will not be asking for deposits until the entire project is completed. That may delay early income for BRD but it will shield potential buyers from any concerns about the projects never being completed.
Instead of deposits, all that BRD will require of potential buyers is that they provide documentation to support that they can make the contributions required of the contract, or that they can raise needed funds from mortgage companies or other financing agencies.
As CEO Rutabana said about these policy changes, “We are hoping that this model could help raise confidence in the local real estate market and be replicated in the future to reduce exploitation of the market, as has happened in the past.”