Sector players call for more incentives for low cost houses
Kampala, Uganda | STEPHEN NUWAGIRA | The recent signing of a Memorandum of Understanding between Rwanda Development Board (RDB) and Mitrelle Group, to construct 10,000 housing units in Rwanda has led major players to demand reassessment of priorities.
The Israel-based global conglomerate that specialises in large-scale and long-term turn-key projects, says the planned units will be affordable housing, according to a statement from RDB.
But Eric Hajabakunzi Uwinshuti, a Kigali-based real estate consultant, says that most so-called affordable housing units on the market are usually out of reach of the intended beneficiaries, costing much higher than what their “affordable tag” indicates.
Another prominent player, David Mushabe, who is the executive director of Abadahigwa ku Ntego Limited, a subsidiary company of Kigali Veterans Co-operative Society (KVCS), said subsidies are needed to ensure that the low cost segment is served.
Abadahigwa ku Ntego is already developing three bed-roomed flats in Kabuga, Masaka sector in Kicukiro District that will cost Rwf24.6 million each, which Mushabe said is among the lowest offers on the market.
But, Mushabe says, the firm was only able to reduce the cost of the units because the Rwanda Housing Authority (RHA) subsidised them by servicing the estate with roads, water and electricity among others.
Uwinshuti said other developers sell two or three bed-roomed units at between Rwf30 million to Rwf75 million and rent per month swings widely from lows of Rwf200,000 to highs of Rwf700,000 depending on location.
Access to affordable housing is one of the key priorities of government but it is clear that innovative interventions are needed to achieve it.
For Uwinshuti, formation of housing cooperatives by urban dwellers interested in homeownership is one such intervention that could help fast-track the delivery of affordable homes.
He said if residents of Kigali and provincial cities organised themselves in groups and pool funds together, it would be cheaper and easier to develop their own low-cost housing.
“The government should initiate and support such arrangements and also provide incentives,” he says, “It is also important to understand that pooling funds together is an easier way to realise what an individual cannot achieve alone.”
Uwinshuti says Rwandans can use an already existing strong cooperative movement to build affordable housing cooperatives by interested town residents countrywide.
The government could also partner with private investors on some projects because many real estate developers lack funds enough to undertake affordable housing because it often requires undertaking big project to reduce cost per unit.
Other key interventions by the government that could help ease access to affordable housing include subsidising of construction materials, especially those sourced from outside the country.
There is also need to invest in research to find innovative and low-cost housing technologies that can help real estate sector players to develop housing projects and deliver to the market at affordable prices.
The Government of Rwanda has put in place a number of strategic incentives to attract local and international investors in the sector.
Last year, Rwanda unveiled a multi-million dollar Affordable Housing Fund with an initial investment of $200 million, targeting developers of low-cost housing to help bring down prices of these homes.
Therefore, the entry of new affordable housing investors could fast-track delivery of decent homes in Kigali city and provincial cities, according to Uwinshuti.
While signing the deal, Haim Taib, the Mitrelli Group founder and president, seems to have had this in mind, saying the project was a ‘very nice’ challenge for them.
“We have the knowledge, the funds, the expertise and the ability to complete this project, and make it the best project for the people of Rwanda,” he said.
Clare Akamanzi, the RDB chief executive officer, lauded the partnership, saying Mitrelli is the kind of investor wanted in Rwanda.
Mazen Al Sawwaf, the CEO and founder of Global Investment Holding Company, a Saudi Arabian holding company, also participated in the signed.
A 2012 Housing Market Study in the City of Kigali showed that 340,000 new housing units are needed by 2022.
Of these, 43,436 units (12.6%) are required for social housing and 186,163 units for affordable housing (54.1%) for Kigali alone. Another112,867 units for midrange housing (32.8%), while premium housing needs are projected at 0.5% (1,601 units).
The city’s population stands at over 1.2 million residents but is projected to hit 3.8 million by 2040, which calls for provision of more housing facilities to accommodate the growing population.
The level of urbanisation has increased from 15.8% to 26.5% between 2002 and 2015, meaning that almost two million people live in towns.
The construction sector has been experiencing some lows over the past two years but rallied to grow by 8% in the first quarter of 2017/18 FY.
Mushabe also said Abadahigwa ku Ntego welcomes Mitrelle’s entry.
He said the market is still largely underserved, especially for young graduates and corporates looking for a decent affordable home.