Rwanda has a growing housing finance sector. As the mortgage market does not yet meet the breadth of the population who might afford a mortgage, most households still finance their housing independently, with savings or non-mortgage credit.
The lowest recorded interest rate on a mortgage in Rwanda is 17.26 percent repaid over a term of 15 years, as of September 2016, and requires at least a 20 percent down payment. The cheapest newly built house by a developer recorded by CAHF is US$ 38 000.00, which is for a 95 square metre unit. Cement prices are higher than the continental average, at US$ 12.00 for a 50-kilogram bag.
With an urbanisation rate of 5.76 percent, demand for affordable housing will remain strong, both for rental and purchase. Housing microfinance will play an important role in increasing the supply of housing, and efforts to increase access should be undertaken. A National Affordable Housing Approval Committee, was established by the Prime Minister. This committee has approved the first affordable housing development, Batsinda2, where more than 530 housing units will be developed. Seven other housing development sites with a total land area of about 257.5 ha are open for investors to develop high density, mixed use housing. At least 22 000 housing units are estimated to potentially result from this in the mid-term. With a good macroeconomic environment, sound policy, better data and increased access to affordable credit, an enabled housing market can increasingly provide housing that the average household in Rwanda can afford.
Find out more information on the housing finance sector of Rwanda, including key stakeholders, important policies and housing affordability:
- Access to Finance
- Housing Affordability
- Housing Supply
- Property Markets
- Housing Policy and Regulations
- Housing Sector Opportunities
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2016 edition, which has up-to-date profiles for 51 African countries.Download yearbook
Rwanda pursues a series of reforms aimed at improving living conditions and service provision to the population. The GDP annual growth rate averaged 7.25% from 2000 until 2017. Between 2002 and 2015, Rwanda’s per capita GDP increased by almost 80%; it was last recorded at US$738.60 in 2016. Rwanda’s economy grew 5.9% and its credit rating was rated B with a stable outlook by the credit rating agency Standard & Poor, in 2016. Rwanda was ranked 52nd in the 2017 Global Competitive Report and is the 2nd most competitive place to do business in Sub-Saharan Africa after Mauritius. It is positioned 56th out of 190 countries in the World Bank Doing Business report 2017, attributed to strong political will driving positive changes.
The national five-year development plan – Second Economic Development and Poverty Reduction Strategy 2013-18 (EDPRS2) –emphasizes coping with the challenges of the urbanisation process. The overall goal is to promote good urban and human settlement development that enhances local and national economic growth, and ensures good quality of life for everyone. A fundamental concern in the context of accelerated urban and demographic growth is access to housing. Since the early 2000’s, the way to an exemplary housing policy had been paved, and is now in the process of being implemented. With the uniform registration of land ownership, land reform has made way for a formal real estate market as a legalised part of the national economy. Subsequently the formation of a private construction and real estate sector has been triggered.
The understanding of the actual housing demand in the context of financial resources available to average private households has made housing a high level priority. Housing construction shall no longer benefit only a minority, and urban renewal processes must be based on socially acceptable strategies. Since 2015, the government’s commitment to facilitate housing is reflected in concrete legally founded frameworks which facilitate private investment in affordable housing, to ensure that housing intregrates all levels of society.
Further strategic frameworks to define development in coming years are under elaboration, including Vision 2050 (succeeding Vision 2020), and the National Strategy for Transformation and Prosperity, which will combine the 7-Years-Government Program framing the vision set forth by President, Paul Kagame, (reelected August, 4th 2017), combined with the successor document of the Economic Development and Poverty Reduction Strategy, the second version of which is ending in June 2018.
Access to Finance
Rwanda’s housing finance environment is characterised by i) an electronic land registry; ii) a modern mortgage law; iii) a law enabling off-balance sheet securitisation of mortgage assets and other asset-backed securitisation; and a law enabling real estate investment trusts. Mortgage lending, home building and investment in affordable housing is increasingly being enabled. Rwanda’s financial sector consists of 12 commercial banks, three microfinance banks, one development bank and one cooperative bank, and microfinances institutions (MFIs) including 18 limited companies and 480 savings and credit co-operatives (SACCOs  and UMURENGE SACCOs). These are complemented by non-bank financial institutions, including 13 private and two public insurers, and one public, mandatory pension scheme by Rwanda Social Security Board (RSSB) as well as 62 voluntary, complementary occupational pension schemes and some personal retirement savings accounts managed by the National Bank of Rwanda (BNR) and by insurance companies. There are now 10 banks providing housing mortgages, with lending conditions improving continuously.
The total mortgage debt outstanding as of 2016 is about FRW 454 billion (US$538 million) estimated at about one percent of GDP. According to the Integrated Household Living Conditions Survey (EICV4) 2013/14, 6.2% of households have a loan from a commercial bank. The share of mortgage loans in total was 36.6% in June 2016, up from 33.9% in June 2015, meaning that about 235,000 households access mortgage in the country. The noted change shows that banks further increased their lending to the mortgage sector with an increased annual growth rate of 38.4% in 2016 compared to 33.7% in 2015 and a reported rate of 5.1% in June 2016 of non-performing loans (NPLs) in the mortgage sector. To date, only few benefit from conventional mortgage finance schemes, which require high down payments, and which are characterised by high minimum loan rates and mortgage interest rate margins of around 17%. Less than 10% of the labour force is employed in the formal sector, restricting access to formal borrowing sufficient for house construction. Levels of savings are still low, but the percentage of persons above 18 years with a savings account has risen from around 19% in EICV3 to 30% in EICV4.
To make housing more affordable the government is introducing targeted strategies for supply and demand of housing including financial support for construction of infrastructure services and facilities for affordable housing projects and urban upgrading projects. On the 30 of June 2017, the Cabinet approved the establishment of the Affordable Housing Financing Fund, a housing finance entity that will address improved access to housing mortgages and potentially facilitate housing finance entities in the provision of mortgages for developers. The mortgage lending conditions for end user beneficiaries are meant to improve dramatically, benefitting those who have not been able to access mortgages until now. Access to housing mortgages is meant to become possible for households with monthly household incomes as low as FRW 200,000 (US$240) and with longer mortgage terms of up to 30 years as compared to the current term of 15 years. A reduction of mortgage interest rates will be subsidised by the fund tentatively to about 10% compared to 17% currently.
Other immediate goals in the housing finance sector are to develop the long-term investment sector including the insurance industry and long-term savings schemes; active and fair competition in mortgage lending, and facilitation of liquidity in mortgage lending through securitisation legislation. The government’s scheme aims to address better access to mortgage finance for the end user, with conditions that increase accessibility for lower income households. The measure intends to grow the number of housing mortgages provided to better match housing demand, which is estimated to be above 30,000 units annually, and to improve the financial capacities of the demanding households.
Rwanda has the highest discrepancy between the GNI per capita and the cost for cheapest newly constructed (formal) house in Africa. Consequently, less than 10% of households are able to afford a formal housing unit. Carefully selected subsidies are required to make units accessible to poor families and those families with median income, while the housing deficit is expected to increase since the required expenses would not meet demand. In the EDPRS2 and also in the successor document National Strategy for Transformation and Prosperity (NSTP) (under review), the Government targets a framework which facilitates private sector-led housing finance and construction. The National Housing Policy identified the discrepancy between incomes and formal sales costs and has initiated a discussion about how to enable access to housing for all. Its vision is: “Everyone independent of income, base of subsistence, and location shall be able to access adequate housing in sustainably planned and developed areas reserved for habitation in Rwanda”.
Median monthly household incomes valid for the City of Kigali, in the market quintiles are; 1) very low (81.03%) US$ 0-380; 2), low (11.25%) US$ >380-720; 3) mid (4.17%) US$ >720-1 140; 4) high (2.41%) US$ >1 140-1 900 and 5) very high income (1.13%) US$>1 900. Countrywide, the average household income differs significantly from household incomes in Kigali: the national average annual household income is US$368, which is a monthly income just above US$30. The discrepancy between affordable house costs compared to actual house costs is significant. To be able to afford the lowest cost formal house in the market, which is now just below US$22 000, an urban household income would have to be triple the average; to be able to afford a commonly available house of US$125 000, incomes needed to be more than 16 times higher. According to an estimate made by the International Growth Centre (IGC), the bottom 20% of population need homes below RWF 10 Million (US$ 11,850), the bottom 40% need homes below RWF 20 Million or about 23,700 US$, and the bottom 60% need homes below RWF 32 Million (US$37,900).The top 20% are much more able to afford housing.
The National Housing Policy highlights that despite the constraint of high interest rates, the bigger challenge is the value and regularity of household income. Lowering the interest rate for home owner mortgage would not cause significant change for the lowest income earners. A wide approach is needed to make housing affordable by addressing i) cost-efficiency in design, construction, and construction management; ii) increase of available material resources; iii) decrease of unit sizes and floor area per person; iv) use of technologies which allow lower construction cost; and v) settling households closer to economic opportunity. Above areas are now consistently integrated as part of the guiding framework and are being worked on with the help of a cost-efficiency study and pilot designs that target the multiple areas where increased cost-efficiency is possible.
The Ministry of Infrastructure is sensitising home builders and developers through consultation to use locally-made construction materials to be able to participate in development. The Government further encourages private investment in the creation of industries for production of various local building materials and technologies. The successful examples of new facilities producing local building materials are in particular Strawtech, AfriPrecast, a factory producing light steel profiles and an SME producing stabalised soil blocks in a purpose built production facility in the spirit of responding to the Made-in-Rwanda campaign. Other production facilities are in the conception stage, such as a facility to produce aerated concrete blocks under the Remote Group.
Since 2015, Rwanda financially incentivises large scale private investment into affordable housing, and in collaboration with the banking sector addresses accessibility of financial products. Government supported affordable housing development projects must fulfil predefined eligibility criteria and target specified beneficiary profiles. The criteria state that a project must offer a variety of housing unit categories and sizes; exceed the minimum density provided for by the Urban Planning Code; and be designed for the predominant use of locally produced or locally prefabricated construction materials as far as this is possible. A developer is expected to include an on-site training program and to contract local or national small and medium enterprises for more than half of the works. Housing development will also be financially supported assuming they comply with one of the follwing criteria: the sales cost per square meter of a housing unit, excluding the cost of public infrastructure, is below a set benchmark; beneficiaries are offered an affordable financial scheme to access a unit; or the developer is a cooperative formed by individual land holders of the housing planning area, with members fulfilling the beneficiary conditions. The benchmarks to be specified by the Minister in charge of housing are being published in 2017 for the first time and will be reviewed every two years for the purpose of continously lowering the household income benchmarks and sales cost per square meter over time.
According to EICV4, 62.6% of all urban households country-wide live in unplanned urban settlements due to high demand and limited household financial capacity. The supply backlog of formal housing units has been updated to about 44,186 units in Kigali; there is no estimate available yet for the country. The new government support schemes actively target such households and bi-annual revision of beneficiery conditions will help address households with a decreasing household income cap for eligibility.
A National Affordable Housing Approval Committee, established as part of the Prime Ministers Instructions No 004/03 of 13/09/2015 to ensure transparency in Government support provided to projects and supervision of selection of beneficiary households, has so far approved the first two housing developments – Batsinda II in Gasabo District, Kigali with more than 530 housing units planned and a project initiated by a housing cooperative, ‘Abadahigwa’ in Masaka Sector, Kicukiro District, Kigali with 56 units.
It is being reported that the newly offered incentives clearly appeal to investors in the sector. Over the course of the coming three to five years, 4 500 affordable housing units are expected through involvement of the BRD with 20-30% equity participation. An important long-term strategy is to increase awareness about the opportunities in collaborative development in urban renewal processes, where original land holders either form cooperatives to finance their development projects, team up with a private investor and hold shares in a redevelopment or in a (Social) Investment Trust, with administrative procedures guided and supported by local governments.
The foundation for a formal property market has been set within the National Land Policy and the National Land Tenure Regularisation Program (NLTRP). NLTRP resulted in the issuance of registered titles to every landholder in an effort to unlock the potential for sustainable growth, based on a clear framework which would be equally valid to all users of land. The land and property market activity is increasing as a consequence of the reform, and the real estate and construction industries have developed and become drivers of economic growth in Rwanda. Registering property in Rwanda requires three procedures, takes 12 days and costs 0.1% of the property value. As a result Rwanda is ranked fourth of 190 economies on the ease of registering property.
Real estate companies and valuers have only developed since NLTRP. Real estate valuers are registered in the Rwanda Institute of Architects, without comprehesive valuation guidelines yet to be developed. While no comprehensive study about the dimension of property transactions is available yet, some case studies may help to understand the dimension of impact of NLTRP. IGC found 3% of plots in Kigali are now transacted annually. For transaction of rural land, “participation in both land rental and sales market is high”.  For a 12 month recall period, it was found that 31% of the sampled households leased-in, 12% leased-out, 9.5% bought land and 4% sold land.
The inner city of Kigali is dominated by rental housing whilst in peri-urban and rural areas, owner-occupancy dominates. According to EICV4, country-wide 49.9% of urban households are owning occupants and 44.2% are tenant households, while in rural areas 87.2% are owning. There is however a high demand for small short term rental units which is not accomodated by the formal market.
With property registration effective, efficient and accountable building permitting, and with urban master planning documents available, continuous increase of property transaction is expected. Large market activity is expected following the rezoning of land parcels for residential use. A second intensification of property transaction can be observed after NLTRP; this is coupled with the unauthorised land use conversion that takes place on agricultural land beyond the scope defined within the Master Plan. The intensity of this challenge has been recognised through the first round of District urban planning and building audits introduced in 2015, but has not been quantified yet.
Housing Policy and Regulations
The National Housing Policy (2015)(NHP), envisions enabling everyone irrespective of income, base of subsistence, and location to access adequate housing in sustainably planned and developed areas reserved for habitation in Rwanda. The Policy strategises the way toward positive impact on the increase of employment rates, skills transfer, and on quality enhancement in the local construction industry – all seen as factors contributing to the vision of increasing wealth for all. In three policy pillars, the document covers the aspects of access to housing, resource efficiency, land, infrastructure, skills development, enhancement of the local construction industry, construction materials and technology, townscape and liveability, as well as public responsibility.
The Policy is the grounds for a framework that enables the private sector to satisfy the current and growing demand for housing in terms of quantities and access costs offered to clients. It addresses support to purchasing power among the population through saving for housing, and pooling of individual resources, and financing models accessible to the full range of residents, including low income earners. Lastly, it emphasises principles of quality and professionalism in the planning and construction of neighbourhoods and housing, and combines land, land use, urban planning and housing policy directions in order to achieve the efficient use of land and resources when developing housing.
In 2017, the National Informal Urban Settlement Upgrading Strategy was validated as part of the implementation strategy of the National Housing Policy. Urban upgrading is supported as an important strategy to tap existing and future land and property equity. The strategy will help integrate housing neighbourhoods that offer affordable housing, and consequentially conserve large housing stock. It identified five options for implementing an upgrading project, and recommends where best each of the options should be adopted.
The Law N°10/2012 of 02/05/2012, Governing Urban Planning and Building in Rwanda, guides the overall framework for urban planning and building. It is implemented through a set of implementation orders. The orders in their co-existence support cross-sectoral and cross-hierarchy coordination and consider different types of planning and framework for the integration of civil concerns. They provide clear procedures for local management to support sustainable, integral and inclusive development, clear institutional frameworks, decentralisation, local economic development, citizen participation and accountability mechanisms. The orders further specify urban plan elaboration processes to be followed, the legal basis for building and real estate development permitting, and for development management at plot and site level. They provide for public administrative procedures, such as planning auditing, public inspection, and guidance to physical principles of urban planning and building.
Two legal documents adopted in 2015 intend to facilitate private investment in affordable housing. The Prime Ministers Instructions Nº001/03 of 23/02/2017 determining the conditions and procedures for obtaining government support for affordable and high density housing projects. The policy relates to a commitment by the Government to finance neighbourhood infrastructure in projects fulfilling specified conditions, which relate to the profiles of beneficiaries of supported housing units, affordability of access schemes to housing (which may either look at the sales prices or affordability of financing schemes), resource-efficiency, and local skills enhancement through collaboration with local Small and Medium Enterprises. Draft Minister’s Instructions Specifying Infrastucture Standards, Beneficiary and Cost-Efficiency Requirements For Government Supported Affordable and High Density Housing Projects, that specify details required by the Prime Minister’s Instructions regarding infrastructure standards applied in government supported projects, as well as sales cost and beneficiery household income caps, are expected to be adopted before the end of 2017.
The Law N° 06/2015 of 28/03/2015,Investment Promotion and Facilitation, incentivises investment in affordable housing. It offers tax incentives, such as a preferential corporate income tax rate and accelerated depreciation for investments in construction projects worth US$ 1.8 million or more.
Housing Sector Opportunities
Rwanda’s NHP reacts sensitively and holistically to the in-country housing situation by demonstrating innovative solutions to the challenging starting conditions. In an effort to overcome the limited resources at the household level as well as at the macro level, the Rwandan Government takes great strides to complete sensitive facilitation frameworks and its technical and institutional setup to enable close collaboration between the Government and private sector. The policy promotes the development of housing finance and development solutions where financial risk is carried collectively, to ensure that the largest population groups with low and irregular income receive opportunities for improvement to the personal socio-economic situation. The Government’s, commitment to service urban land area with public infrastructure is a continued priority. Continuous sites-and-services projects implemented through budget transfers to the local governments, help service urban land for planned development and avoid informal growth.
Additional work is planneed to complete and harmonise fiscal, monetary and tax policies with the expected outcome of increasing household incomes through developing employment opportunities, domestic productivity and production of building components and materials.
The private sector, with government facilitation, should take on the development of a long-term investment sector, including the insurance industry, private sector pension funds and other long-term savings vehicles, as well as the fostering of active and fair competition in mortgage lending backed by securitisation legislation.
Eight sites, with a total land area of about 55 ha in the City of Kigali and the six Secondary Cities, are immediately open for investors through the Districts to develop high density, mixed use housing as a way to help increase supply quantities in the short term. In total, sites of about 496 ha have been identified for possible affordable housing investment in the mid term.
Emphasis will be, on better linkage between households and private suppliers to match demand and products offered in realtime; on the promotion of saving and de-risking products for private beneficiary households; and on facilitating the finance sector to offer better accessible housing mortgages. Further, emphasis is also on increased resource efficiency and professionalism, in order to promote sustainable practice. The Draft Sector Strategic Plan 2018-24 largely highlights priority actions to increase the local and regional competitiveness of the local construction industry. More projects should target formal rental housing schemes, with an integrated professional asset management component. As a supporting tool, the Sector plans to draft the necessary legal framework regulating the relationship between owning individuals or entities and tenant households.
A social housing component under public responsibility is to be introduced and operationalised as part of the implementation of the NHP. The component shall address very low income and vulnerable households through alternative programs, which target inclusiveness and possibly the reintegration of beneficiary households into the private market once successful.