The government has decided to create an affordable housing fund to help bring down the current cost of homes.
According to Infrastructure Minister James Musoni, the Affordable Housing Fund will cut down the cost of houses by up to 50%. This means that a house that the real estate developers are selling at Rwf 50m will go down for about Rwf 25m.
The Fund, which will become operational in July, provides a guarantee facility for developers, producers of locally made construction materials and investors in residential housing. The government will initially inject $200m in the fund, which will subsequently grow with time.
“A survey we conducted on housing showed that a big part of our population is in need of affordable housing, which required government intervention,” Musoni said.
The survey identified several components in a housing development project, starting with the developer constructing the houses and the infrastructure.
“Infrastructure alone represents 30% of total cost. To bring the cost down, the government has agreed to cover the infrastructure part as long as developer meets certain criteria,” the Minister added. “The second challenge is that the developer borrows at a very high interest rate and the mortgages are also costly. At the end of the day, this makes the houses unaffordable.”
“The Affordable Housing Fund will facilitate financial institutions to lend at cheaper interest rate and for a long term. This will also bring down the cost of these houses,” Musoni explained.
Another component affecting the cost of a house is land which is expensive, especially in urban areas.
“The government has decided to acquire land in areas designated for housing projects and offer the land at cheaper rates to develop it at low cost,” the Minister said.
The government is also pushing for the use of only locally made construction materials. Various products are already on the market including precast concrete products and construction equipment supplied by NPD-COTRACO Ltd. There is also Strawtec which offers developers solutions for all typologies, including single family homes and apartments.
Another local maker is Ruliba Clays, the only brick- and tile-making company in the country.
“We think that addressing these four components will bring down the current price to almost half to allow the different categories of people who need houses to get them at an affordable rate,” Musoni noted. “I can assure you that in a year or so, you will see a big difference.”