
Rwanda
Overview
The Rwandan National Strategy for Transformation aims to accelerate sustainable urbanisation from 18.4 percent to 35 percent by 2024 as a key driving factor for economic growth.1 This will be achieved by the Government of Rwanda (GoR) developing six secondary cities2 in addition to Kigali, the capital city of Rwanda, to decentralise socioeconomic development to the entire country through public and private investment. Seventy-seven percent of Kigali households live in unplanned settlements that have narrow access pathways. Ten percent of houses in these settlements are seriously overcrowded while a quarter of Kigali households use shared toilets and only have access to shared, unimproved water sources.
Rwanda has continued to register progress, as evidenced by the World Bank Doing Business reports. In 2020 Rwanda remained the second easiest place to do business in Africa and 38th globally, a drop from the 29th position. Improvements were also noted in the country’s rankings for starting a business and dealing with construction permits. Although strong growth was expected in 2020, the effects of the COVID-19 pandemic mean the economy of Rwanda is projected to grow at only two percent in 2020, 6.3 percent in 2021 and eight percent in 2022.3 Annual inflation is projected at 6.9 percent in 2020 from 2.4 percent in 2019. The industry sector is expected to grow by four percent in 2020, driven by government construction projects. With two percent growth during such unprecedented times, Rwanda would be one of the few countries globally to register growth this year; this is on account of mitigation strategies implemented by the government.
In response to the pandemic, the GoR launched a FRw100 billion (US$105.4 million) fund to support affected businesses through subsidised loans from commercial banks and microfinance institutions (MFIs), and credit guarantees. The fund targets small and medium-sized enterprises and hard-hit sectors such as the hospitality industry. Furthermore, businesses were supported through tax deferral and relief measures. While many interventions were implemented to mitigate the spread and effects of COVID-19, no major response was implemented for the housing sector and the pandemic has continued to be a predominantly Kigali-based, or at least an urban phenomenon.
KEY FIGURES
Main urban centres
City of Kigali, Muhanga, Musanze, Huye, Rubavu, Rusizi, Nyagatare
Exchange rate (1 July 2020): 1 USD = [a] 1 PPP$ = [b]
948.36 Rwandan Franc (RWF)
290.14 Rwandan Franc (RWF)
Total population [b] | Urban population [b]
12 626 950 | 2 186 104
Population growth rate [b] | Urbanisation rate [b]
2.61% | 3.2%
GDP per capita (Current US$) [b]
US$802
Percentage of population below national poverty line (2017) [b]
46.0%
Unemployment rate (% of total labour force, national estimate) (2017) [b]
1.3%
Proportion of adult population that borrowed formally (2017) [b]
7.7%
Gini coefficient (2017) [b]
43.70
HDI country ranking (2018) [c] | HDI country score (2018) [c]
157 | 0.54
GDP (Current US$) [b]
GDP growth rate [b]
Inflation rate [b]
Yield on 10-year government bonds Lending interest rate (2018) [b]
US$10 122 million
9.41%
3.35%
n/a
16.52%
Number of mortgages outstanding [d]
Value of residential mortgages (CurrentUS$) [d] Typical mortgage rate | Term | Deposit
Ratio of mortgages to GDP
Number of mortgage providers [d]
Number of microfinance loans outstanding [d]
Value of microfinance loans in local currency units [d] Number of microfinance providers [d]
41 013
US$329.20 million
16% | 15 years | 30%
3.25%
16 509 724
184 000 000 000 RWF
457
Total number of formal residential dwellings in the country
Total number of residential properties with a title deed [e] Number of formal housing units built in this year (2019) [f] Price of the cheapest, newly built house by a formal developer or
contractor in an urban area in local currency units [f]
Size of cheapest, newly built house by a formal developer or contractor in an urban area [f] Typical monthly rental for the cheapest, newly built house [g] Cost of standard 50kg bag of cement in local currency units [g] Type of deeds registry: digital, scanned or paper [g] World Bank Ease of Doing Business index rank [g] Number of procedures to register property [g] Time to register property [g] Cost to register property as share of property price [g] World Bank DBI Quality of Land Administration index score (0-30) [g]
n/a
1 469 445
16 241
12 500 000 RWF
30m2
150 000 RWF
12 000 RWF (US$12.65) Computer - Fully digital
38
3
7 days
0.1%
28.50
Percentage of women who own a house alone: Total | Urban (2017) [h]
Percentage of households with basic sanitation services:
Total | Urban (2017) [h]
Percentage of households with no electricity: Total | Urban (2017) [h] Percentage of households with 3+ persons per sleeping room:
Total | Urban (2017) [h]
Percentage of urban population living in slums (2018) [i]
n/a | n/a
65.4% | 45.5%
66.8% | 15.5%
17.1% | 15.9%
65.1%
NB: Figures are for 2020 unless stated otherwise.
[a] Xe.com
[b] World Bank World Development Indicators
[c] Human Development Reports, United Nations
[Development Programme
[d] National Bank of Rwanda
f] Rwanda Affordable Housing Authority
[g] World Bank Ease of Doing Business Indicators
[h] Demographic and Health Surveys, USAID
[i] United Nations Human Settlements Programme
(UN-HABITAT)
Access to finance
According to a report released in August 2020 by the National Bank of Rwanda (NBR), growth of the banking sector loan book (outstanding loans) slowed owing to reduced lending in the first half of 2020. Outstanding loans reduced by 14.6 percent (year-onyear) to FRw2 306 billion (US$2.43 billion) compared to a 16 percent growth in June 2019. The slowdown is attributed to weak lending, especially during the country lockdown. The pandemic revealed the need for banks to diversify their loan portfolio, which is currently concentrated in the mortgage sector at 34.3 percent and the trade sector at 15 percent. However, mortgage loans had been slowing due to the prudent lending standards of banks attributed to a loan-to-value policy implemented by the NBR. This policy was implemented in March 2019 and requires that banks limit loan - to-value rates for commercial real estate and second residential projects to 80 percent, implying that the developers should raise the remaining 20 percent.4
The microfinance sector continues to be an important element in the financial sector as it reaches the majority of Rwanda’s rural population. Similar to the banking sector, lending continued to be the main business for MFIs, with the total outstanding credit increasing by 8.3 percent from FRw168 billion (US$177 million) in June 2019 to FRw182 billion (US$192 million) in June 2020, compared to 12.3 percent growth registered in the previous year. This percentage decline is mainly attributed to credit risks related to COVID-19 and weak credit demand associated with disruption in business. Agriculture and livestock loans continue to take the biggest share of MFI loans at 35.1 percent followed by trade at 28.7 percent and mortgages at 13.1 percent.5 In a press release by NBR, the financial sector was reported to have remained sound and stable at the end of June 2020. However, there were notable effects from a slowdown of economic activity due to lockdown measures to contain the spread of the pandemic. This resulted in a decline in demand for new loans and an increased demand in loan restructuring. Banks restructured over 39 percent of their loan portfolio in the second quarter of 2020, the equivalent of FRw978 billion (US$1.03 billion) while MFIs restructured approximately 23 percent of their loan portfolio, the equivalent of FRw41.6 billion (US$43.9 million) in the same period. The growth of outstanding loans reduced to 14.6 percent as of June 2020 from 16.6 percent in June 2019, while new loans reduced by nine percent during the first six months of 2020 compared to a similar period in 2019.6 The NBR has instituted monetary, fiscal and supervisory measures to support the financial sector. These include establishing a FRw50 billion (US$52.7 million) lending facility to support banks facing liquidity challenges; reviewing the treasury discount bond window from five percent to four percent; and releasing FRw23.4 billion (US$24.7 million) additional liquidity to banks. The GoR’s Economic Recovery Fund7 and other tax incentives will support financial stability. In addition, the NBR restricted dividend distribution in supervised financial institutions to support their capital position
Affordability
Access to affordable housing is listed among the key factors for promoting inclusive urban development and promoting the right to live well for all urban dwellers. In Kigali, approximately 54 percent of inhabitants are low income and earn between FRw36 038 and FRw213 381 (US$38 and US$225) a month. The middle income group represents only 21 percent of inhabitants and their monthly incomes range between FRw213 381 and FRw642 990 (US$225 and US$678). Generally, the housing market has largely targeted high income households, which represent less than 12 percent of all urban dwellers earning more than FRw642 990 (US$678) and can afford housing prices that are greater than the purchasing capacities of other categories of urban dwellers. Consequently, most of the Kigali city inhabitants who cannot afford formal housing prices have informally self-developed their dwellings in unplanned areas, which take up 60 percent of residential neighbourhoods in this city.8 Housing finance in Rwanda is expensive and the housing market is at an early stage. Mortgage interest rates are approximately 17 percent.9 This means that only a small portion of households can afford to borrow. For most of the population borrowing is effectively out of reach, with the result that buying a home is also out of reach. Similar to many sectors, the construction and real estate sector has faced challenges due to lockdown measures. Some of the immediate challenges included an increase in prices of products like cement, which has made it more costly for developers to continue existing projects. In addition, international travel restrictions hindered entry of key products such as aluminium and tiles, and this will affect completion times and budgets for projects. While the construction industry was reported to be growing rapidly, having grown by 33 percent in the fourth quarter of 2019,10 it has declined this year due to the pandemic.
Housing supply
The formal housing sector in Kigali is generally made up of real estate agencies or individual developers which purchase land from private landowners and develop housing units that are then sold to the public. Some of the major formal developers include public agencies such as the Rwanda Social Security Board and the Development Bank of Rwanda. Various local and foreign registered real estate
COVID-19 response
In a bid to manage the COVID-19 crisis, a national crisis committee of key Ministries involved in the response was nominated and chaired by the Prime Minister. The committee put in place a COVID-19 Joint Task Force which implemented various measures including total lockdown from 21 March 2020 to 4 May 2020. During this period, numerous businesses were shut down except those selling food items. In April 2020, the NBR reduced the Central Bank Rate (CBR) from 5.0 percent to 4.5 percent to help banks continue financing the economy. The NBR established a FRw50 billion (US$52.7 million) lending facility for banks at the CBR. No government moratorium on evictions was put in place, nor was there any documented response to informal settlements during the COVID-19 period.
agencies operate in the country, such as Urukumbuzi, Abadahigwa ku Ntego, Ultimate Developers Limited, Millennial Development Limited and Remote Estates, among others. However, they tend to supply a small number of houses, hardly meeting three percent of the annual housing demand in Kigali city. Informal housing development entails self-help construction and is used by approximately 40 percent of low income Kigali city inhabitants whose monthly income is less than FRw360 378 (US$380). Most of these are original inhabitants of the city and own land through the traditional process of inheritance.11 In addition, middle income groups have been using the informal housing development option to build houses they use as personal residences or rent out to tenants. Informal housing development has resulted in the escalation of informal settlements.12 A study by the International Growth Centre (IGC) in 2019 reports that the annual average increase in the number of households between 2014 and 2017 was at 38 164, while the annual average number of houses built was 24 773. Therefore, if the ratio of households to houses of 1.2 remains constant in subsequent years, the following estimates of houses will be needed: in the medium population growth scenario with a medium household size scenario, it was estimated that in 2018 Kigali needed 305 594 houses which will grow by 294 672 to a total number of 600 266 houses in 2032; in the low population growth scenario, housing need in Kigali will grow from 286 633 in 2018 to 543 138 in 2032; and in the high population growth scenario, housing need will grow from 345 079 in 2018 to 718 205 in 2032.13 The GoR has partnered with the World Bank to access two grants. The first is FRw90 billion (US$95 million) for urban upgrading and infrastructure, which has been implemented. The second is for housing finance for FRw142.3 billion (US$150 million), which has recently been approved to fund the Rwanda Housing Financing Project.14 The main objective of this project is to expand access to longterm housing finance for the benefit of middle income segments that have limited or no access to mortgages under the current market conditions and to support capital market development.
According to the World Bank Doing Business 2020 report, Rwanda remained the second easiest place to do business in Africa and is now 38 globally out of 190 countries. Registering property in Rwanda takes only seven days, three procedures and costs 0.1 percent of the property value, while the time taken to obtain a construction permit dropped from 113 days to 97 days, with registration for the building permit processed online.15 A Multidisciplinary Digital Publishing Institute journal article16 revealed that the price for a three-bedroom house ranged between FRw29 million and FRw53 million (US$30 535 and US$55 743) among the three developers interviewed. This shows very low trends in affordability, since less than 30 percent of households can afford a house from the housing packages proposed by real estate developers in Kigali.17 The high property prices are attributed to the high cost of construction
RWANDA
Annual income profile for rural and urban households based on consumption (PPP$), 2019
PPP$40 001 – PPP$10 000 000 PPP$23 001 – PPP$40 000 PPP$12 001 – PPP$23 000 PPP$8 001 – PPP$12 000 PPP$5 001 – PPP$8 000
PPP$3 601 – PPP$5 000
PPP$2 401 – PPP$3 600
PPP$1 601 – PPP$2 400 PPP$801 – PPP$1 600

Population:
12 626 950
Urbanisation rate:
3.20%
Cost of cheapest newly built house:
12 500 000 RWF
House price PPP$:
PPP$43 083
Urban households that could afford this house with finance:
12.87%
1 PPP$:
290.14 Rwandan franc
Policy and legislation
The government, through the Ministry of Infrastructure, has developed the Urbanisation and Rural Settlement Sector Strategic Plan 2018-2024. This highlights the need for private investment in affordable housing and the creation of an enabling environment to increase access to housing for all Rwandans, with a target to reduce the housing deficit by 10 percent by 2023. It further stipulates the need to increase households’ access to mortgages through support schemes such as guarantee funds.18 Land that is available for human settlement development should be managed in an integrated cross-sectoral way and government assets must be managed to create a competitive private construction industry. Lastly it calls for integrated programme capacity. The government is undertaking a variety of infrastructure investments and has introduced a property tax19 to help finance these. If implemented correctly, this tax mechanism could encourage the development of idle urban land as well as contribute to fiscally healthier cities. This law is crucial for decentralised entities as it will allow them to mobilise some of the resources needed to provide the basic infrastructure for economic growth and efficient service delivery as districts currently rely heavily on central government funding. On 4 September 2020, the City of Kigali launched a new city master plan to be implemented from 2020 to 2050. This introduces a flexible and incremental approach to city development as it seeks to accommodate a 3.8 million population by 2050, which is the estimated increase from the current 1.6 million population. The master plan is guided by economic, social and environmental drivers. Major changes related to housing include mixed-use houses, where one building can be used for different purposes; a minimum of 70 houses per hectare, where the minimum houses per hectare will increase from 25 to 70 houses; home offices, where small business owners will be allowed to have small offices in residential areas; flexibility in building residential houses, which will also allow improvement of unplanned settlements without necessarily relocating residents and allowing auxiliary residential units; and a new approach to density, which integrates mediumheight storey buildings.20
Opportunities
The World Bank, IGC, other key stakeholders and the government have undertaken several studies on affordable housing in Rwanda. These studies have greatly improved understanding of the key gaps and opportunities for promoting housing in the country’s cities and provide information on how to better target resources. Some of the completed studies include Housing Need in Kigali;21 Housing Policies in Rwanda22 and Assessing Rwanda’s Affordable Housing Sector, among others.23 The Rwanda Development Board reports that the real estate sector is a key driver of future economic growth, having contributed FRw647 billion (US$682 million) to the national gross domestic product (GDP) in 2019.24 The real estate sector has also shown high potential to create job opportunities in Rwanda. In 2017, the sector supported approximately 157 000 jobs, resulting in paid labour remuneration to the value of FRw111 billion (US$117 million). Approximately FRw53 billion (US$58.2 million) in net indirect taxes and a gross operating surplus of FRw129 billion was generated. The estimated direct contributions (gross value added plus intermediate inputs) of housing construction and housing rental activity collectively accounts for 11.5 percent of Rwanda’s GDP.25 In 2019, Rwanda registered investments worth FRw2.33 trillion (US$2.46 billion), an increase of 22.6 percent from the previous year. While the construction sector has attracted significant investment, it still heavily relies on importing most building materials such as cement, tiles, manufactured steel and paint, among other things. There is therefore an opportunity for investors to promote local manufacturing of materials needed for construction to serve the local market and neighbouring landlocked countries that face similar high import and transport costs. Demand for secure, affordable housing is surging because of the fast urban population growth – estimated at 5.75 percent annually, more than twice the rate of overall population growth in the country.26 This, coupled with the significant housing deficits evident in Kigali and the secondary cities, presents an opportunity for real estate development in Rwanda. Innovative approaches, such as the Green City Concept, have been pioneered in Kigali city to set a new standard for affordable housing and sustainable urban development in Rwanda and in Africa. In February 2020, the project received its first capital injection from the German government through KfW Development Bank worth approximately FRw10 billion (US$10.5 million). The first phase of the project is set to kick off this year and will see the construction of 749 housing units on 18 hectares at an estimated cost of FRw98.4 billion (US$103.8 million) for five years, while the entire project will be developed on 620 hectares at an estimated FRw1.4 trillion ($1.5 billion).27 A Rwanda Country Private Sector Diagnostic report28 highlights alternative building technologies as an innovative approach to complement traditional construction techniques and materials. Rwanda is exploring ways to introduce several innovations to the market, either by local companies, or joint ventures with international partners with the latter providing the initial technical and financial input required to bring the products to local markets.
Availability of data on housing finance
In Rwanda data on housing is generally available but is collected by different institutions. Data on the financial sector and its performance is collected by the National Bank of Rwanda and reported in the Monetary Policy and Financial Stability Statement released twice a year. Data on economic performance is documented by the Ministry of Finance and Economic Planning as well as the National Institute of Statistics Rwanda. Data on property markets is also available in the Doing Business report released annually by the World Bank. Despite these, data on housing supply and affordability is not consistently collected and published. However, there are recent studies available, conducted by individuals as well as the IGC, which commissioned a study on housing demand in Kigali in 2019 and housing policy in Rwanda in 2020. A key limitation is that these studies focused on Kigali and, while it is important that some aspects may be similar to other districts, it is important to get a full picture of the country. The National Institute of Statistics conducts an Integrated Household Living Conditions Survey or Enquête Intégrale sur les Conditions de Vie des ménages (EICV) every three years. This survey has sections on housing but the indicators are mainly focused on household living conditions. It is important to note that the EICV has been a useful reference document for other studies on affordable housing in Rwanda, especially those by IGC. The Rwanda Housing Authority provides useful administration data on indicators such as prices of affordable units, construction costs and rental prices, among others
Websites
National Institute of Statistic Rwanda https://www.statistics.gov.rw/home
National Bank of Rwanda https://www.bnr.rw/home/
World Bank https://www.worldbank.org/
Ministry of Finance and Economic Planning http://www.minecofin.gov.rw/index.php?id=2
International Growth Centre https://www.theigc.org/
Republic of Rwanda https://www.gov.rw/
Rwanda Development Board https://rdb.rw/
Development Bank of Rwanda https://www.brd.rw/