New entrant Remote Group is out to attract aspiring property owners with a flexible payment plan that bypasses the 17 per cent-and-above mortgage interest charged by banks.
The developer has commenced construction of 280 mixed-use units in its Masaka Fields Estates on the outskirts of Kigali targeted at salaried or self-employed workers earning Rwf 700,000 or more, monthly.
Residential units costing $35,000 (Rwf 29 million) can be paid in five equal installments over two years.
“We are trying to see how we can build affordable houses tailored to the capacity of people, especially the middle class,” said Tania Firoz, the corporate services director of Remote Group.
Although not working directly with banks, the company is open to mortgage payment plans provided they are initiated by customers with their banks.
“We are not looking at making a lot of money from this project, but to introduce a housing solution we see is suitable for the market,” Ms Firoz noted.
The houses will be completed in two years time but even at the inception stage, interested customers can reserve apartments by paying $100, which is refundable at payment of the first installment.
Remote Group joins Rwanda Development Bank (BRD), which recently signed a $160 million deal with Shelter Afrique for 2,700 one-three bedroom units in Nyarugenge, range from $25,000 (Rwf21 million) a unit to $60,000 (Rwf50 million).
However, the government and the private sector are yet to come up with projects for low income earners. The housing gap in Kigali alone stands at 344,060 units between 2012 and 2022.
The Ministry of Infrastructure estimates the general housing demand at 560,000 units by 2020, which requires construction of 93,400 units annually, a target which still seem far beyond reach.
The government recently launched a new affordable housing fund, which is estimated to cost between $200 million and $250 million, to be used to subsidize mortgage loans or directly provide funding to private developers at low interest rates.
The fund, which is due to start in July 2017, will enable persons earning between $360 and $840 monthly to buy a house.
“The housing demand is mainly driven by population growth, urbanisation pressure and free entry and exit nature of the market,” said John Karamagye, a construction consultant in Kigali.
The cost of construction is also high since most materials are imported, and those produced locally also come at a high cost, which ends up driving up both rental and purchase costs.
Experts have said that the government is spending a lot on feasibility studies, research and project expropriation instead of working with the developers to bring affordable units to the market.
The high interest on mortgages has driven people to independently finance with savings or non-mortgage credit.
“The lowest recorded interest rate on a mortgage in Rwanda is 17.26 per cent repaid over a term of 15 years, and requires at least a 20 per cent down payment,” according to a survey by Centre for Affordable Housing in Africa.
There is also general skepticism around real estate developers after some unscrupulous players defrauded property buyers.
For example, DN International, owned by a Kenyan national Nathan Lloyd, defaulted on a KCB loan which it used to build an estate in Masaka, resulting in KCB auctioning off the property and home owners losing their houses.
Up to now the fate of tenants who paid deposits for houses in Ujenge Palm Estates owned by Patrick Sebatigita, remains in balance as Ecobank Rwanda, one of the financial institutions behind the project recently considered liquidation of the property, months after the project was put under receivership.