Scaling up Affordable Housing Solutions in Rwanda

Posted: 14th June 2024 Javier Daura, Bid Manager

Altair has recently secured a new opportunity from Access to Finance Rwanda to conduct a pivotal study on the supply of affordable housing through a Special Purpose Vehicle (SPV) model in Kigali, Rwanda. 

As Rwanda continues to experience demographic and economic growth, the demand for housing intensifies, creating a significant challenge due to the lack of affordable housing options. In a country where informal employment is prevalent, household incomes are often unstable and difficult to report accurately. A significant proportion of urban households in Rwanda fall into the low-income bracket, with an estimated 30% of urban households earning a net monthly income of US$86.10 or less, and an additional 27% earning between US$86.10 and US$172.19 per month. Given the high cost of newly built houses by formal developers, repayment over an extended period is a struggle for most households (CAHF, 2023). 

An estimated 79% of Kigali residents live in informal, unplanned settlements with limited access to water, electricity, and sanitation. The Kigali and Secondary Cities Master Plan promotes the inclusivity and integration of these informal settlement areas rather than their complete replacement, which could help address Rwanda’s housing needs. Despite numerous ongoing projects, the current supply cannot match the estimated demand of approximately 350,000 housing units in Kigali alone (CAHF, 2023). 

Rwanda’s housing and housing finance sectors are developing but face several constraints. While Rwanda’s mortgage-to-GDP ratio of 3.35% is relatively high for the region, mortgage lending is concentrated at the upper end of the income pyramid. Although the microfinance sector is a crucial source of finance for lower-income segments, its products and services are not typically tailored towards housing. Additionally, Rwanda has a critical but poorly documented residential rental sector (AFR, 2021). 

So, what does this opportunity mean?  

The opportunity from Access Finance Rwanda aligns with the Government of Rwanda’s (GoR) national development roadmaps, including Vision 2050, which commits to achieving “universal access to affordable and decent housing.” Fulfilling this commitment involves emphasising housing density for new developments and upgrading existing unplanned settlements, as outlined in the GoR’s 2020-2050 National Land Use and Development Master Plan. Additionally, the National Strategy for Transformation 2017-2024 reiterates the goals of upgrading informal urban settlements and promoting social and affordable housing. Despite these policies, Rwanda faces persistent challenges in achieving universal access to decent and affordable housing, leading to urban sprawl and the proliferation of unplanned settlements. 

In this context, Access to Finance Rwanda (AFR) strategically focuses on promoting the development of the financial sector by collaborating with financial institutions and other stakeholders to enhance access to and utilisation of financial products and services. AFR aims to identify and address barriers that prevent the financial market from reaching Rwanda’s low-income population. Integrating affordable housing into its broader financial sector development approach, AFR is dedicated to catering to the needs of lower-income households. To further this objective, AFR has conducted a comprehensive study on Rwanda’s affordable housing sector and its financing mechanisms. 

How will Altair’s international team help? 

The primary aim of this assignment is to provide comprehensive support to AFR, MININFRA, SDC, and SKAT Consulting in assessing the feasibility of delivering quality, affordable housing through: 

  • Rehousing/upgrading initiatives for vulnerable households in Kigali’s unplanned settlements 
  • Greenfield initiatives 

Altair’s involvement is expected to achieve the following outcomes:

Operational Framework and Guidelines: Develop feasible implementation models for rehousing 70% of the neighbourhoods’ total residents in the City of Kigali. 

Special Purpose Vehicle (SPV) models: Generate modalities for the establishment, operationalisation, sustainability, and risk management of SPV models based on Public–Private and People Partnership (PPPP) mechanisms. These models aim to create synergies between the GoR and private sector players. 

Replicable Business Model: Create a business model that can be adapted to other unplanned neighbourhoods in major cities across Rwanda, including Kigali, satellite cities, and secondary cities. 

Attractive Investment Packages: Develop investment packages to attract private stakeholders both nationally and internationally. 

Policy and Regulatory Recommendations: Identify and bridge gaps in existing laws and regulations related to housing development and redevelopment (informal settlement upgrading) and SPV operationalisation. Provide recommendations on the necessary policy, operational, and legal instruments to support effective implementation. 

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