Rwanda is seeking Rwf264 billion ($300 million) from international lenders in the coming months to address the shortage of housing on the market.
The EastAfrican has learnt that the World Bank Board is expected to approve a $150 million long-term credit line to finance Rwanda’s housing needs on September 27, while the government expects an additional $150 million from the International Finance Corporation (IFC) and India Housing Bank.
“The IFC is leading the credit mobilisation process,” said Claver Gatete Infrastructure Minister, adding that government is also making land available and introduced a 30 per cent tax rebate for developers of high density housing units.
Analysts say the government is taking concessional loans to create liquidity in the mortgage market, meaning that the banks will be able to offload some of their mortgage book to create liquidity for new loans.
Analysts cite lack of long-term finance for the low supply of affordable housing and the expensive mortgage financing in Rwanda.
The new credit line is expected to push housing prices and mortgage loans downwards by 400-600 basis points, from the current baseline lending rate of 16 per cent down to 10-12 per cent.
While the banks have grown their mortgage and housing loanbooks over the years, they mostly lend to salaried employees earning over Rwf700,000 ($795) per month, leaving out a majority of the population.
A few resort to building their homes in phases and use substandard building materials, contributing to the rise of informal settlements where a majority of households now live.
Property developers say the annual stock of new affordable housing units has remained low, averaging 1,000 units only.
However, The EastAfrican has learnt that incentivising affordable housing development is beginning to pay off as the government foots some of the costs.
As a result, some 10,000 housing units for the lower, mid and high-end market are in the pipeline.
Property advisers see more business prospects in smaller three- and two-bedroomed units as the market segment is larger.
They argue that Kampala and Nairobi’s rental business is booming, partly because developers have tapped into the mass market of young people seeking houses to rent in well-planned neighbourhoods.