KCB Rwanda has repackaged its home loan product to increase uptake of mortgages in the wake of rising demand for housing.

The bank will now offer the full amount to the borrower for a mortgage product as opposed to the market requirement of 30 per cent equity contribution of the value of the property as demand for home ownership picks up.

The product, which was launched last week, is being offered in partnership with local insurer Soras Assurances Generales Ltd which will provide insurance cover for the mortgage.

While the premium cost of the insurance cover has not been disclosed, KCB’s mortgage loan currently comes with an interest rate of an average of 15- 16 per cent per annum.

“The product was launched to address housing needs and accessibility for mortgage buyers — we increased the tenure of the mortgage to 20 years to make it affordable and easy to repay.

It is also possible to accelerate your mortgage payments without a penalty or reducing the principle on the payment without charges,” said Beatrice Chege, head of Mortgage at KCB Rwanda.

She added that the bank decided to reduce the down payment on mortgage to 10 per cent which has increased uptake of the product, allowing the bank to grow its loan book to Rwf12 billion ($19.6 million) last year when the product was launched on the market.

“We have reduced that (10 per cent) further depending on payment ability. With the new product we feel that we will grow the product to another Rwf4 billion ($6.7 million),” Ms Chege said.

The Rwf4 billion ($6.7 million) could fund between 100-150 units of housing with the range of Rwf30 million ($48,992) and Rwf40 million($65,332).

The product, which is the first of its kind on the Rwandan market, will be available to income earners with a gross income of Rwf1.8 million ($2,939) and a Rwf45 million($73,498) value of the property.

Tenants in Kigali have had to endure drastic increases in rent due to a shortage of low-cost housing.

While between 8,500 and 10,000 units are needed for Kigali and 15,000 units for the rest of the urban centres, supply is currently estimated at 200-300 units annually.

The country faces an acute shortage of decent medium and low income housing, with developers concentrating on building high-end housing.

Though a number of banks have resumed offering its mortgage products to borrowers, analysts say the shortage of low cost housing still poses a big challenge for the industry in a country where formal employment is less than 20 per cent.

“The product will work depending on handling efficiency because not everyone who needs a house will access it as many people are outside the target salary bracket.

"Most of the workforce has its salary range still below Rwf500,000 ($840),” said Eric Rutabana, the chief investment officer at Business Partners International Rwanda.