Housing Finance in Rwanda
Overview
This profile is also available in French here.
To download a pdf version of the full 2021 Rwanda country profile, click here.
Rwanda is one of the most densely populated but least urbanised countries in Africa. According to the 2016/17 Integrated Household Living Conditions Survey (EICV 5), 38.2% of Rwandans were living below the national poverty line. Approximately 18.4% of Rwanda’s population lives in urban areas. This is projected to rise to 35% by 2024, in line with the National Strategy for Transformation1(NST-1). Approximately 61.3% of Rwanda’s urban population live in informal settlements. Rwanda has approximately 79 informal settlements, most of which are located in the city of Kigali and Rubavu district.
As a result of COVID-19, Rwanda’s economy declined by an average of 4.1% in the first three quarters of 2020 but steadily recovered in the second half of 2020. The country’s housing and construction sectors had continuous growth until 2020. However, the decline in economic performance due to the pandemic and the loss of income affected the real estate sector negatively. It is estimated that the housing sector contributes 10% to Rwanda’s GDP. The first quarter of2021 had a 3% increase in the contribution of real estate activities to GDP. Inflation in the housing sector dropped to 1.9% in the first quarter of 2021 from 4.8% in the second half of 2020.
The government’s expenditure policies for the fiscal year 2021/22 align with the NST-1 priorities and objectives. Consequently, the economic transformation pillar has been apportioned the largest share of the budgeter sources, accounting for 58.7% of the total budget, while social transformation and transformational governance will account for 27.2% and 14.01% respectively. Pursuant to the NST-1 strategic objectives, promoting urbanisation is one of the priority areas identified for resource allocation in the 2021/22 fiscal year. This will involve implementing urban development projects in secondary cities and supporting affordable housing projects with basic infrastructure.
Find out more information on Rwanda’s housing finance sector, including key stakeholders, important policies and housing affordability:
- Overview
- Access to Finance
- Affordability
- Housing Supply
- Property Markets
- Policy and Legislation
- Opportunities
- Availability of data on housing finance
- Urban Informality
- Additional Sources
- Websites
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2021 edition, which has up-to-date profiles for 55 African countries.
Download yearbookRwanda
Overview
The Rwandan National Strategy for Transformation aims to accelerate sustainable urbanisation from 18.4 percent to 35 percent by 2024 as a key driving factor for economic growth.[1] This will be achieved by the Government of Rwanda (GoR) developing six secondary cities[2] in addition to Kigali, the capital city of Rwanda, to decentralise socioeconomic development to the entire country through public and private investment. Seventy-seven percent of Kigali households live in unplanned settlements that have narrow access pathways. Ten percent of houses in these settlements are seriously overcrowded while a quarter of Kigali households use shared toilets and only have access to shared, unimproved water sources.
Rwanda has continued to register progress, as evidenced by the World Bank Doing Business reports. In 2020 Rwanda remained the second easiest place to do business in Africa and 38th globally, a drop from the 29th position. Improvements were also noted in the country’s rankings for starting a business and dealing with construction permits. Although strong growth was expected in 2020, the effects of the COVID-19 pandemic mean the economy of Rwanda is projected to grow at only two percent in 2020, 6.3 percent in 2021 and eight percent in 2022.[3] Annual inflation is projected at 6.9 percent in 2020 from 2.4 percent in 2019. The industry sector is expected to grow by four percent in 2020, driven by government construction projects. With two percent growth during such unprecedented times, Rwanda would be one of the few countries globally to register growth this year; this is on account of mitigation strategies implemented by the government.
In response to the pandemic, the GoR launched a FRw100 billion (US$105.4 million) fund to support affected businesses through subsidised loans from commercial banks and microfinance institutions (MFIs), and credit guarantees. The fund targets small and medium-sized enterprises and hard-hit sectors such as the hospitality industry. Furthermore, businesses were supported through tax deferral and relief measures. While many interventions were implemented to mitigate the spread and effects of COVID-19, no major response was implemented for the housing sector and the pandemic has continued to be a predominantly Kigali-based, or at least an urban phenomenon.
[1] Ministry of Finance and Economic Planning (2017). National Strategy for Transformation 2017-24. http://www.minecofin.gov.rw/fileadmin/user_upload/NST1_7YGP_Final.pdf (Accessed 11 August 2020). Pg 4.
[2] Rwanda’s six secondary cities are Musanze (Northern Province), Rubavu and Rusizi (Western Province), Muhanga and Huye (Southern Province) and Nyagatare (Eastern Province).
[3] Ministry of Finance and Economic Planning (2020). Budget Framework Paper 2020/2021-2022/2023. May 2020. http://www.minecofin.gov.rw/index.php?id=231&L=370&tx-filelist-pi1-174%5Bpath%5D=Budget_Framework_Papers%2F2020-2023_Executive_Budget_Proposal&cHash=6a812380111dab6b2994a9f905a7a2cb (Accessed 20 August 2020). Pg. 15.
Access to Finance
Access to finance remains a challenge within Rwanda’s housing sector. Interest charged on residential mortgages remained unchanged at 16%. The value of outstanding residential mortgages increased from FRw348 billion (US$353.3million) in June 2020 to FRw386 billion (US$391.8million) in June 2021, while non-performing loans on residential mortgages declined from 4.3% in June 2020 to 3.7% in June 2021. The number of outstanding residential mortgages had increased to 44 767 at the end of June 2021. There are 16 licensed banks in Rwanda, all of which provide mortgage financing with a maximum loan term of up to 20 years. The maximum loan to value ratio on residential mortgages is 80%.
Due to the impact of COVID-19, a rapid survey and assessment of Rwanda’s banking sector showed that 55% of banks had tightened their lending criteria. In a country with less than 50000 mortgages, it is likely that this further constrained access to finance for housing.
Rwanda has 457 microfinance institutions. Lending from the microfinance subsector increased by 18.5% for the period ended June 2021 compared to the 8.3% growth in June 2020. However, the number of borrowers in the subsector declined from 526484 in June 2020 to 333144 by June 2021. Non-performing loans in the subsector were reduced by FRw9 billion (US$ 9.02 million) between June 2020 and June 2021. This could be because the agriculture sector, which accounts for the majority of the loans extended by microfinance institutions, was not much affected by the pandemic.
To develop more secure investments for diaspora investors in the real estate market, the African Foundation for Development (AFFORD) identified constraints in Rwanda’s housing value chain. The foundation seeks to find solutions to these constraints through mobilising new sources of finance throughout the diaspora, and by encouraging locally sourced building materials. AFFORD is introducing the Remit plus Diaspora Bond, aimed at financing affordable housing initiatives in Rwanda.
Easing access to affordable housing finances is a major priority for the Government of Rwanda. This is evidenced through the lending portfolio of the Development Bank of Rwanda, where housing and infrastructure comprise the biggest portion of the bank’s lending portfolio, accounting for FRw48 billion (US$48.7million), mainly to finance lending to participating financial institutions under the Rwanda Housing Finance Project (RHFP). The bank envisages offering affordable housing finance to 2299 mortgagors. So far, five banks have signed participation agreements with the Development Bank of Rwanda and four more have expressed interest but are yet to fulfill the necessary conditions.
Only financial institutions that meet the strict eligibility criteria and provide collateral will be able to access this financing. Under these criteria, financial institutions need to comply with national prudential requirements, maintain a minimum capital adequacy ratio and maximum non-performing loan ratio, among others. Participating financial institutions will be able to access loans from the Development Bank of Rwanda at a 6% interest rate and lend to beneficiaries at 11% over a loan period of 20 years. As a more sustainable approach beyond the RHFP, the Government of Rwanda will facilitate establishing the Rwanda Mortgage Refinancing Company to leverage long-term funds through capital markets. The Development Bank of Rwanda seeks to promote affordable housing based on two pillars: mortgage finance and the production of bankable housing. Key financing interventions include reducing the national housing deficit by increasing the supply of housing units and improving affordability, increasing access to finance for housing loans, instituting risk management measures to improve safety and performance, and creating financing links to local capital markets that have both long-term funds available and an appetite for investing in mortgage securities.
[1] National Bank of Rwanda (2020). Monetary Policy and Financial Stability Statement. 28 August 2020. https://www.bnr.rw/news-publications/publications/monetary-policy-financial-stability-statement/?L=0 (Accessed 8 September 2020). Pgs. 51-53.
[2] National Bank of Rwanda (2020). Monetary Policy and Financial Stability Statement. 28 August 2020. https://www.bnr.rw/news-publications/publications/monetary-policy-financial-stability-statement/?L=0 (Accessed 8 September 2020). Pgs. 60-62.
[3] National Bank of Rwanda (2020). Press release. 13 August 2020. https://www.bnr.rw/news-publications/news/news-press-release/ (Accessed 27 August 2020). Pgs. 1-3.
[4] Ministry of Finance and Economic Planning (2020). Government of Rwanda launches Economic Recovery Fund (ERF) to support businesses adversely affected by COVID-19. 8 June 2020. http://www.minecofin.gov.rw/index.php?id=12&tx_ttnews%5Btt_news%5D=768&cHash=bbd58c6244679f3f2fc07b3ebfe68ee4 (Accessed 29 August 2020).
Affordability
State-subsidised affordable housing focuses on low and medium-income households whose monthly income ranges between FRw200000 (US$ 203.02) and FRw1200000 (US$1218.13). The cost of affordable housing units developed by the Rwanda Housing Authority (RHA)is FRw5million to FRw35 million (US$5000 –US$36000),27in comparison to the cheapest newly built house by a commercial developer, which costs FRw40 million (US$40604). Atypical down payment on a housing mortgage is 20%. According to an unpublished report, the monthly income of most households is below FRw100000(US$101.5). In the FRw200000 (US$203.02) to FRw700000 (US$710.6) income band, only 5% could afford a FRw8million (US$8121) loan, indicating that the program is unaffordable foremost Rwandans. Therefore, even with access to long-term credit, households that earn below FRw200000 (US$203.02) would remain excluded from the mortgage market and require different solutions. The RHFP will serve as a pilot model for these interventions.
Several housing projects have been undertaken to create more affordable housing units. The Development Bank of Rwanda, for example, in partnership with Shelter Afrique will construct 2000 affordable units in the Nyamirambo sector, Nyarugenge district. According to the developers, construction costs will be minimised to ensure low-cost purchasing prices, and, to this end, the developers have advanced an efficient construction technique known as aerated autoclaved concrete masonry, which will be made locally and cut the costs of importing materials. Despite initiatives such as these, affordable housing is still out of reach of most low-income earners in Rwanda due to high development costs, which translate into higher purchasing costs than initially proposed. A large proportion of affordable housing is in reality unaffordable to many of the target beneficiaries. Therefore, the lowest income group comprising 47% of Kigali residents remain excluded. Only 5% of people living in Rwanda save to build or buy land or a house.
COVID-19 posed inflation-type challenges to affordable housing because of increased prices of wood imports from the region and imported supplies for building repairs. Progress has been made to increase local production of construction materials such as cement, as well as environmentally friendly bricks, and novel products for structural and non-structural walling materials.
[1] Multidisciplinary Digital Publishing Institute (2020). Access to Affordable Houses for the Low-Income Urban Dwellers in Kigali: Analysis Based on Sale Prices. 16 March 2020. https://www.mdpi.com/2073-445X/9/3/85 (Accessed 25 August 2020). Pg. 2.
[2] Bower, J. and Buckley, R. (2020). Housing policies in Rwanda C-38433-RWA-1. International Growth Centre. https://www.theigc.org/wp-content/uploads/2020/02/Bower-and-Buckley-2020-Policy-Paper.pdf (Accessed 30 August 2020). Pg 46.
[3]Ntirenganya. E. (2020). Rwanda’s economy grew by 9.4% in 2019. 24 March 2020. The New Times. https://www.newtimes.co.rw/news/rwandas-economy-grew-94-2019 (Accessed 17 September 2020).
Housing Supply
The housing supply in Rwanda is still low while demand is high. The housing produced also does not match the purchasing power of most Rwandans. Most Rwandans access housing through informal practices since the formal sector is unable to offer all-inclusive housing schemes. Public agencies such as the Development Bank of Rwanda, Rwanda Housing Authority, and Rwanda Social Security Board are the main developers of affordable housing units, along with registered real estate agencies.
There have been delays in construction affecting the total supply in the market, in part a result of COVID-19. The proposed restructuring of the RHFP to include the provision of infrastructure for affordable housing development projects would support the Government of Rwanda’s COVID-19 response.
Kigali houses almost half of Rwanda’s urban population and, according to a Housing Market Study for Kigali, it is estimated that the total housing needs between 2012 and 2022 will be 458256 units,344067 of which are yet to be constructed. This is made up of 43436 units for social housing (12.6%), 186 63 affordable housing units (54.1%),112867 mid-range housing units (32.8%), and 1601 premium housing units (0.5%). An estimated 22000 housing units being developed through public private partnerships are in different stages of preparation.
The Rwanda Social Security Board has also undertaken housing projects and was expected to complete 10000 affordable housing units in the 2020/21 fiscal year. These units will cost between FRw12million and FRw35million (US$12181.3-US$35528.9) depending on the size of the unit. In a bid to promote appropriate housing in rural areas, the Rwanda Housing Authority developed the Integrated Development Programme (IDP model village) in 2010, comprising so far, 28000 units in 222 settlements.
Vision 2050 aims to improve the living standards of Rwandans to upper middle income by 2035 and high income by 2050. Despite the existing significant contribution of construction to GDP, vision 2050 projects to further drive the economy through industrial park infrastructure, modern housing needs, local materials development, and expansion linked to public transportation in Kigali city, secondary cities, and other urban areas.
[1]Multidisciplinary Digital Publishing Institute (2020). Access to Affordable Houses for the Low-Income Urban Dwellers in Kigali: Analysis Based on Sale Prices. 16 March 2020. https://www.mdpi.com/2073-445X/9/3/85 (Accessed 25 August 2020). Pg. 5.
[2]Republic of Rwanda. Kigali Master Plan. https://bpmis.gov.rw/index.php?id=200016# (Accessed 19 September 2020).
[3] Bower, J. and Murray, S. (2019). Housing need in Kigali C-38406-RWA-1. International Growth Centre. https://www.theigc.org/wp-content/uploads/2019/07/Bower-et-al-2019-Final-report.pdf (Accessed 22 August 2020). Pgs. 10 and 45.
[4] Development Bank of Rwanda (2020). Priority Sectors – Housing. https://www.brd.rw/brd/housing-development/ (Accessed 5 September 2020).
Property Markets
The property market in Rwanda is serviced by both government and private sector players. The government is partnering with developers and investors to provide affordable homes for Rwandans. Rwanda’s housing sector comprises formal and informal housing developments. The formal subsector comprises real estate agencies and individuals who purchase land for development in different residential zones, while informal housing is developed by low-income earners in Kigali, many of whom own land through inheritance. However, the formal market barely serves 3% of the annual housing demand in Kigali, thoughts expected to grow. During the first quarter of 2020, Rwanda Land Management and Use Authority registered 71 463 land transactions.
Rwanda’s property market continues to steadily improve. This is supported by the findings of the World Bank ease of doing business index which noted a 3.6% improvement in dealing with construction permits in 2020 compared with 2019.
[1] World Bank (2020). Doing Business 2020. Economy Profile Rwanda. https://www.doingbusiness.org/content/dam/doingBusiness/country/r/rwanda/RWA.pdf (Accessed 24 July 2019). Pgs. 10 and 21.
[2] The three developers are: Abadahigwa Kuntego Ltd, Groupe Palmeraie Development and Shelter Afrique.
[3] Multidisciplinary Digital Publishing Institute (2020). Access to Affordable Houses for the Low-Income Urban Dwellers in Kigali: Analysis Based on Sale Prices. 16 March 2020. https://www.mdpi.com/2073-445X/9/3/85 (Accessed 25 August 2020). Pgs. 8-12.
Policy and Legislation
Rwanda’s affordable housing sector is governed by a policy and legislative framework that begins with Vision 2050, the National Land Use and Development Masterplan, and the National Strategy for Transformation 1, all of which include highly detailed implementation plans and targets. Many of these are expected within the next three years, by 2024. The NST 1 (2017-2024) is being implemented through nine sector strategic plans. These include the Financial, Urbanisation, and Rural Settlements Strategic Plans. Focusing on efficient land use, and urban planning policies to facilitate housing developments while promoting urbanisation and access to affordable housing, they have been adopted in partnership with the private sector.
To further promote access to housing finance and capital market development in Rwanda, the Government of Rwanda developed the RHFP in alignment with the World Bank Group strategies. The five-year project is aimed at addressing the structural challenges in the Rwandan housing finance market.
The government, through the National Bank of Rwanda, has put in place regulations governing mortgage refinance companies, aimed at promoting sustainable mortgage refinance business. This will be made possible through the provision of long-term funds through capital markets.
A particularly innovative intervention introduced by the Rwanda Land Management and Use Authority is an information inquiry portal where people seeking to buy land or a house can confirm land ownership, check land area, land use, whether the property has a mortgage registered against it, or verify other restrictions or transactions relating to that property.
[1] Ministry of Finance and Economic Planning (2018). Urbanisation and Rural Settlement Sector Strategic Plan 2018-2024. http://www.minecofin.gov.rw/fileadmin/templates/documents/NDPR/Sector_Strategic_Plans/Urbanization_and_Rural_Settlement.pdf (Accessed 11 August 2020). Pg. 87.
[2] Ministry of Finance and Economic Planning (2018). New property tax law will promote efficient land use and local manufacturing. 2 August 2018. http://www.minecofin.gov.rw/index.php?id=119&L=data%3A%2F%2Ftext%2Fplain.&tx_ttnews%5Btt_news%5D=679&cHash=f5143b643ca842eb49ea8c1b1df5a11f (Accessed 20 September 2020).
[3] Nkurunziza, M. (2020). 10 major changes in the new Kigali master plan. 04 September 2020. The New Times. https://www.newtimes.co.rw/news/10-major-changes-new-kigali-master-plan (Accessed 05 September 2020).
Opportunities
Rwanda’s underdeveloped housing finance sector provides an opportunity for investors, both local and in the diaspora. Some lenders have explicitly noted the investment interest of Rwandans in the diaspora to build quality homes back home. As Rwanda grows its formal residential construction industry and sharpens the financial instruments available to support it, these will be very important investment targets.
The key opportunity, however, is in packaging housing and finance offers that explicitly respond to actual household affordability –that is, households at the bottom end of the pyramid who are currently unable to meet their needs with the products on offer. It is this segment of the market that is growing and urbanising at a rate currently unmet by affordable housing delivery.
New construction technologies, such as the earthbag, have been introduced in Rwanda’s housing sector. This low-impact and highly durable building technique aim to assist low-income earners in Rwanda to own homes made in an affordable way. Lastly, Rwanda’s Special Economic Zone Policy suggests a latent, forthcoming demand for employer-supported housing. While the policy identifies the real estate and construction sectors as having unexploited investment opportunities within industrial parks, it does not address what this means for worker housing
[3] Gardner, D., Lockwood, K. and Pienaar, J. (2019). Assessing Rwanda’s Affordable Housing Sector. Centre for Affordable Housing Finance in Africa. https://housingfinanceafrica.org/app/uploads/CAHF-Rwanda-HEVC-and-HCB-FINAL.pdf (Accessed 20 September 2020).
[4] Rwanda Development Board. Overview. https://rdb.rw/investment-opportunities/real-estates/ (Accessed 20 September 2020).
[5] Gardner, D., Lockwood, K., Pienaar, J. (2019). Assessing Rwanda’s Affordable Housing Sector. Centre for Affordable Housing Finance in Africa. https://housingfinanceafrica.org/app/uploads/CAHF-Rwanda-HEVC-and-HCB-FINAL.pdf (Accessed 20 September 2020). Pgs. 22-23.
[6] Lawrence. D. (no date). In Rwanda, an Investment Market at Home. International Finance Corporation. https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/news/insights/rwanda-investment-market (Accessed 2 August 2020).
[7] Mwai C. (2020). Kigali Green City Project receives Rwf 10B investment. 1 February 2020. The New Times (2020). https://www.newtimes.co.rw/news/kigali-green-city-project-receives-rwf-10b-investment (Accessed 5 September 2020).
[8] International Finance Corporation (2019). Creating Markets in Rwanda: Country Private Sector Diagnostic. https://www.ifc.org/wps/wcm/connect/46ae22ae-6034-42a7-beb7-42d3c42a6e3e/201906-CPSD-Rwanda.pdf?MOD=AJPERES&CVID=mKmmoCW (Accessed 14 September 202).
Availability of data on housing finance
Housing data is relatively accessible in Rwanda; however, there are still information gaps. There is more information available on commercial real estate than residential real estate.
The National Bank of Rwanda documents information on the financial sector in the Monetary Policy and Financial Stability Statement and the Ministry of Planning and Economic Development documents data on the performance of the economic sector. The National Institute of Statistics of Rwanda conducts and publishes information on the population census every 10 years and also publishes the Integrated Household Living Conditions Survey/Enquête Intégrale sur les Conditions de Vie des ménages (EICV) every three years. However, due to COVID-19 restrictions, the EICV 2020/21 was not conducted.
Information on the performance of the housing sector for the year 2020/21 is yet to be published. Furthermore, there are no statistics on the impact of COVID-19 on the housing sector although it is generally agreed that the sector was affected. Evidence of this is the stalled implementation of some projects and also the government’s inability to deliver on its commitment to support infrastructural developments for affordable housing projects.
Information on housing policy and regulation is accessible; however, data on the actual performance of the sector is not published regularly.
Urban Informality
Rwanda’s informal settlements (known as “unplanned settlements” locally) have mainly been driven by rural to urban migration. Characterised by small brick houses, they have evolved in an unorganised manner, occupied by low-income earners who are mostly rural migrants, daily wage earners, and or informal traders. Residents consistently face challenges with land security. It is, therefore, crucial to expanding the affordable housing project to target lower-income groups to reduce the current housing deficit.
One of the major challenges arising from informal settlements is inadequate access to sanitation. However, the Integrated Household Living Conditions Survey (EIVC5) showed increased access to sanitation and safe drinking water, with 94.2% of the population living in urban areas using safely managed sanitation services and 96% using safely managed drinking water services.
Approximately 52.5% of Rwandans in urban areas live in unplanned housing, and concerted intervention is needed to transform these unplanned units into formal housing units.
Existing settlements must be upgraded into high-density suburbs to control urban sprawl. However, in-situ upgrading, which would alternatively supply affordable housing, has not seen remarkable progress.
The Agatare informal settlement is so far the only upgrading strategy implemented in Rwanda. This included road openings, as well as an upgrade to drainage systems and the supply of water. However, following the implementation of this strategy, it was established that the then high density/vertical densification upgrading approach was not feasible on its own but also required a structured legal framework, policies to support low-income groups, and financing systems to prevent a culture of dependency.
Additional Sources
Baffoe, G., Ahmad, S., and Bhandari, R. (2020).The road to sustainable Kigali: A contextualised analysis of the challenges Cities Volume 105 October 2020. https://www.sciencedirect.com/science/article/pii/S0264275120311860(Accessed 15 August 2021).
The New Times (2020). New international construction technology enters Rwanda.4 February 2020. https://www.newtimes.co.rw/business/new-international-construction-technology-enters-rwandan(Accessed 17 August 2021)
Websites
World Bank https://data.worldbank.org/indicator/FR.INR.LEND?locations=RW
Rwanda Housing Authority https://www.rha.gov.rw/index.php?id=41
Ministry of Infrastructurehttps://www.mininfra.gov.rw/
Rwanda Development Board https://rdb.rw/ Ministry of Finance and Economic Planninghttps://www.minecofin.gov.rw/
National Bank of Rwandahttps://www.bnr.rw/home/
Rwanda Land Management and Use Authorityhttps://rlma.rw/index.php?id=67
Access to Finance Rwanda https://afr.rw/ Development Bank of Rwanda: https://www.brd.rw/brd/
