About 50 per cent of Kigali residents live in overcrowded, low-quality houses, according to a recent report detailing the city’s housing needs and opportunities for investors in the sector.

The report, released by the Kigali City Authority, further states that there is a shortage of over 400,000 houses, meaning many city dwellers live in unplanned neighbourhoods.

The report says that according to the 2011 census, the city has only 223,000 housing units, calling for heavy investment in the sector to satisfy demand.

It was also discovered that most houses in the city are illegal and are bound to be demolished any time and that 108,903 of existing houses do not meet the minimal habitable standards.

“Of existing housing stock in 2011 (223,000), about half are in good condition (42,710 DU) or can be upgraded (71,487). The remaining (108,903 DU) constitute overcrowded or low-quality units, which need to be replaced and which account for backlog demand,” says the report titled Kigali Housing Market.

To address the housing needs, it was noted that decent housing for people earning Rwf 35,500 ($59) per month has not attracted many investors, forcing many in that category to live in shacks. The report advises the government to build houses for this category of people if they are to have decent housing.

About 186,163 units are needed for low income earners, according to the report. These are people who earn between Rwf35,500 and Rwf200,000 per month. The reports also notes that majority of city dwellers earn less than $329 per month. “The households have some payment capacity and could access a special rental market which may include, for instance, rent-to-own leasing mechanisms and others,” says the report.

Those who live in mid-range housing and earn between Rwf200,001 and Rwf2.5 million per month, need an estimated 112,867 units. The report says this is the second largest segment and most people in this category may be eligible for traditional mortgage financing.

There is also a gap in supply of houses for what city authorities call “premium class residents.” According to the report, these are people who earn more than Rwf2,500,000. For this group, “there is a shortage of about 1,601 houses.”

With the first comprehensive research on the city housing needs, city authorities believe the report will guide investors on the housing needs and the opportunities that come with investing in the sector.

There is a general population growth in the city putting pressure on the few resources and facilities currently estimated at 1,059,000 people.

“The city has been growing very fast since the 1960s and this growth accelerated in the second half of the 1990s as a result of the political events in the country.” Most returnees decided to settle in urban areas as some could not go back to their ancestral homes, and these form the largest population in the city. Authorities are therefore calling for planning.

“A key element for the sustainable growth of Kigali is the provision of decent housing for all. To that end, we are committed to ensure the availability of financing, land, utilities and building materials and an adequate regulatory framework,” said Fidele Ndayisaba, the mayor of Kigali.

However a detailed analysis of the report indicates that there is a growing number of housing units.

Unplanned

Although there has been an improvement in housing supply in the past three years, real estate dealers and developers say about 80 per cent of houses in the city were unplanned.

The unplanned houses are slowly giving way for planned estates and multi-use commercial houses. Some of the areas like Kiyovu, Gaculiro, Kimichanga and Kinyinya where slums dwellers used to live have been demolished, displacing hundreds of people. Real estate players say these are some of the projects that are closing the supply gap for middle and high end clients.

As a result, rents have started falling and in some residential areas like Nyarutarama, Gaculiro, Urwego and Kiyovu, the rent has reduced by about 20 per cent.

“In Gaculiro, the rent has dropped to $800-$600. Many developers have invested in high-end houses and are releasing them into the market,” said Clare Akamanzi, the chief executive of Rwanda Development Boar.

She however said renting midlevel houses is still expensive and costs almost the same money a tenant in the high end residential areas pays. Some of the high end residential areas in Kigali include Nyarutarama, Kimuhurura, Urwego, Masaka and Kagugu.

Developers find investing high end residential houses more attractive as Rwanda government waived taxes on some of the most expensive construction materials including doors, windows and tiles.

Charles Haba, the president of Real Estate Association of Rwanda (REAR) and Managing Director Century Real Estate confirmed the drop in rent costs saying it started early that it started early this year and he expects a further drop.

The report goes ahead to name some of financing for real estate and homes owners in Rwanda an indication that there is a growing appetite for mortgages in Rwanda.

It is estimated that between Rwf64 billion $102 million–Rwf84 billion (134 million) has been pumped in mortgages financing in Rwanda but this is just a drop in the ocean, according to industrial players.

“Mortgage financing is accessible Rwanda is accessible to households with monthly income of greater than Rwf900,000 ($1450),” according to the report. Information from market players indicates that it is only 3.8 per cent of Rwandans earn this amount months. An indication that banks in the country have not fully tapped the potential housing offers.