Rwanda Adopts Rwf290 Billion Affordable Housing Fund

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Many Rwandan homeowners are rejoicing at the historic approval of Rwf290 billion affordable housing fund by the cabinet cut mortgage interest rates by the central Bank to 10 per cent.

The fund comes as the country is trying to boost housing sector, come September this year the new housing scheme will cut mortgage loans on affordable housing to around 10 per cent down from the current 17 per cent.

Claver Gatete, the minister for finance and economic planning told the media that the Fund will help middle class Rwandans acquire long-term mortgage loans at low interest rate.

Minister Gatete indicated “the Affordable Housing Fund project will start by September”

What will the cut in interest rates mean for homeowners and buyers?

“We also realised that land is expensive and most of materials are imported, which increases cost of rent. Interest rates from banks are also high and paid in a shorter period,” Gatete said.

Gatete noted the country is mobilising funds from both local and international organisations to boost the fund.

“We are mobilising the World Bank to put in money and we are at a very impressive stage,” he added.

The tremendous reduction in cost of financing will trigger increased levels of both housing production supply as well as access to housing demand.

The Fund will be managed by the Development Bank of Rwanda (BRD) in partnership with other banks. Investors will get subsidies on the interest rate and will be paying 10 per cent instead of the current 17 per cent.

The mortgages will be paid in 25 years or more instead of the current 10 to 20 years.

“We will not wait until we raise the whole amount, we will see if we can start this month or in August,” said Gatete.

For those with variable mortgage deals or looking to remortgage, it is likely to translate into lower monthly mortgage payments. The Fund targets middle income workers earning between Rwf200, 000 and Rwf700, 000 as a monthly income.

They can service the loan in about 30 years but the minister said other criteria will be looked at, such as considering not only ones’ monthly salary but also other side income and partner’s income as well.

“What we need is affordable housing, the Government will look for all possible ways through which these houses can be easily constructed. We will offer loans to investors at low interest rate and some materials will be made locally, we are looking for a formula that will help people own houses,” Gatete said.

A 2012 housing market study by the City of Kigali indicate that 340,000 new housing units are urgently needed by 2022.

Out of these, 86 per cent should be affordable housing and mid-range housing, 13 per cent should be social housing, with only less than 1 per cent premium housing.

This means the country needs to avail at least 34,000 new housing units every year over the next ten years.

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