The cost of mortgages in the country could drop significantly in the coming days as the government steps up its intervention in the housing sector.
The New Times understands that a $ 150 million loan from the World Bank Group is expected to be approved in about a month, and the proceeds from the sale will be used to set up a mortgage finance company.
The funds will be part of a revolving fund providing affordable mortgages to the general public at rates below commercial bank rates and with longer repayment periods.
The intervention comes at a time when the housing sector in Rwanda is plagued by multiple challenges in terms of both demand and supply, limiting the chances of home ownership.
Currently, mortgage loans in Rwanda are in the range of 16% interest per year, which is quite high for potential homeowners.
Finance and Economic Planning Minister Uzziel Ndagijimana told the New Times that the move addresses challenges on the demand side, with the cost of capital to owning a home often too high for the middle class and those living in poverty. low income.
He confirmed the development by saying that the loan is expected to be approved in the coming month.
He said they intended to provide cheap loans below the commercial rate and have longer repayment periods.
“We are starting a housing fund to which we will inject $ 150 million, a loan from the World Bank Group that can build around 6,000 housing units. The money will be a revolving fund and provide cheap loans below the commercial rate and combined with a long repayment period, ”he said.
This development is likely to cause banks to rethink and revise their mortgage rates as well as their terms, as they will have a smaller market to share.
Experts say that increased competition could improve the diversity of the industry’s products, thereby improving the chances of homeownership.
The local housing sector has faced multiple challenges, including a mismatch between supply and demand, where local commercial banks are unable to provide long-term finance.
The Managing Director of the Development Bank of Rwanda, Eric Rutabana, said affordable long-term financing was needed to address the problems on the demand side of housing.
He also said that more public-private partnerships were needed to fill the gaps in the sector. The status quo in the market has seen developers prefer high-end housing projects – often out of reach for most Rwandans – because they promise better short-term returns.
The finance minister said the government also decided to provide basic infrastructure in housing projects in order to reduce the cost of the final project. According to him, this should reduce the cost of homes by about 30 percent.
Current housing initiatives are an intervention against an estimated demand of around 31,000 housing units per year.
BRD recently announced the implementation of the Ndera affordable housing project in partnership with Moroccan real estate developer, Palmeraie Development Group, which is expected to deliver 1,750 homes in the first phase.
A group of local and international housing actors also signed a memorandum of understanding this week to devote $ 200 million to the construction of affordable housing in Kinyinya, targeting 10,000 housing units.
Stakeholders include the Chinese company Broad Homes Industrial International, the Development Bank of Rwanda, the Rwanda Social Security Council and BSMART Technology – a research and design company – and the International Financial Cooperation (IFC).