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Financial inclusion in Rwanda has been steadily improving. The National Bank of Rwanda's 2015 report indicates that the number of accounts opened in MFIs increased by 13.4 percent from 2.3 million in June 2014, to 2.7 million as of June 2015; 75 percent of which were opened in Savings and Credit Co-operatives (SACCOs) created under UMURENGE SACCOs program.  This recent growth is consistent with trends noted from 2012 to 2014, during this period alone the number of accounts opened in MFIs increased by 29.3 percent (from 1.988 million to 2.571 million).
Rwanda amended its mortgage laws in 2011 to facilitate access to home loans. As a result, banks have reduced down payments from 70 percent to 30 percent, and extended the duration of mortgage loans to a maximum 20 year period. However, current statistics show that mortgage financing in Rwanda is still only accessible to people who earn more than RWF 900 000 (US$ 1 216.30) per month which has led to an adequate supply of high end, luxury homes in Kigali (however, supply remains constrained for low income earners.) A major hurdle to the development of real estate is lack of mortgage finance at a reasonable interest rate for lower income earners. In 2012, it was estimated that 96.2 percent of households had no access to housing finance.
The Development Bank of Rwanda (BRD) plays a major role in ensuring that Rwandans are properly housed through the financing of large-scale real estate projects as well as individual home buying and construction. In 2014, the bank invested over RWF5 billion (US$ 6 757 213.30) in mortgage financing for affordable housing in both low and middle income categories. The Global Financial Inclusion (Global Findex) Database reported that in 2014, 9.5 percent of the top 60 percent of income earners over the age of 15 reported having an outstanding loan for home purchase, contrasted with 1.2 percent of the poorest 40 percent of income earners over the age of 15. Additionally, findings from a survey conducted by USAID in Rwanda in 2014 showed that, only 15 percent of respondents reported using mortgage to acquire their properties, most of those who accessed mortgages used them to finance multistoried properties (36.4 percent) followed by enclosed housing properties (20.5 percent). Only 10.5 percent of bungalow owners used mortgages to finance acquisition of their property.
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At two percent, inflation was lowest in 2014, however it has subsequently increased to  3.8% in 2015 and is projected to increase further to 5% in 2016. The inverse trend is observed for house prices and cement. The house price for the cheapest newly built house, built by a developer, almost halved from 2012 to 2015, from US$ 78 000 to US$ 34 247 respectively; the price of cement also decreased from 2014 to 2015. Unemployment is considerably low at 0.6% and almost half, i.e. 44.9%, of the population lives below the national poverty line. As a result, affordability for housing is low, and is further compromised by constrained mortgage finance. In 2015 the cost of a 50kg bag of cement was US$ 13 which is slightly more than the East African Community average of approximately US$ 12.52.
According to the World Bank's Doing Business Indicators, there are three procedures to register property, this is less than the average number of procedures across the East African Community region. The time taken to register a property in Rwanda is 32 days which is below the region average of 47, with Kenya taking the most number of days at 72 and Burundi taking the least at 23 days. The cost to register a property in Rwanda is 0.10% of the property value (down from 6.3 in 2012) which is lower than the region average of about 2.9%. This means that registering a property in Rwanda is much cheaper than other countries in the East African Community region.
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Housing Affordability: Rwanda
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Using C-GIDD (Canback Global Income Distribution) 2014 income data for Rwanda and 2015 CAHF survey input, we have explored housing affordability. The following graph suggests the market segments where investors and developers might target their efforts. The number of rural and urban households is illustrated per income bracket defined. Additionally, the graph provides the national average annual urban household income in 2014 and the average annual household income needed to afford the cheapest newly built house by a developer. This was calculated by CAHF and is based on a number of assumptions.
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The majority of Rwandan households are still rural and concentrated within the lower income brackets demarcated. In 2015, the cheapest newly built house in Rwanda was US$ 34 247. Calculated using key assumptions of mortgage interest rate (16%), bond term (20 years) and down-payment (20%) needed. The average annual household income needed for the cheapest newly built house would be US$ 18 484 per annum, which is about eight times higher than the average annual household income of US$ 2 377. This means that only about 2% of urban households can afford the cheapest newly built house, built by a formal developer. It is clear to see that the Rwandan market needs to cater to the affordable market or majority of the population more vigorously.
The graph below shows the affordability of market segments across urban areas in Rwanda, in terms of the potential book size that might be achieved if each household in the band were to access the loan they could afford. This is shown assuming a bond term of 20 years, interest rate of 16% and a 25% installment to income ratio. The 2% of households that can afford the cheapest newly built house is indicated in the shading on the graph. The graph also highlights the sweet spot for market opportunity - the affordable and middle income bands - households earning an annual income of US$ 6 500 to US$ 19 500, which might afford to purchase houses with mortgages of between US$ 10 000 to US$ 30 000 (house prices not unheard of elsewhere on the continent). This is illustrated by the orange shading indicating that the 7% of the household population can contribute to 49 363 unrealized loans which will make up a considerable portion of the potential book size. Broadly, this shows that if the challenges hindering housing supply in this market segment could be solved, housing has the potential to create a book size of over US$ 768 252 186 million with only 7% of its household population. If GDP was about US$ 8 billion in 2014, housing in this market segment would contribute almost 1% to national GDP. The higher income market is clearly catered for, leaving a growing backlog in all other income bands.
Access to mortgage finance is limited by household affordability as well as the irregularity of incomes among some borrowers. In Kigali, 26 percent of the working population generate their income from piecework, 19 percent from business, 11 percent from government employment and 15 percent from farming activities. More so, 44 percent of adults reported having more than one source of income. Three percent of adults do not generate an income, but depend on government grants, remittances or household transfers to subsist.
Deposit requirements of up to 30 percent make mortgage finance inaccessible to the majority of people without formal employment. This is exacerbated by the cost of housing—for instance, houses on the market today cost between Rwf25 million (US$ 33 786) and Rwf700 million (about US$ 1 million); 80 percent of city dwellers earn below Rwf300 000 (US$ 405.43) per month, according to the City of Kigali (CoK). Despite increased housing delivery, due to increased investment by commercial banks in housing and a buoyant construction sector (the fastest growing sub-sector of the Rwandan economy), housing remains unattainable for a large proportion of the urban population. And while it is estimated that by 2022 Kigali will require at least 344 068 new units, only 37 594 units will be delivered in the same timeframe should current delivery rates continue.
Housing finance demand for both mortgage and microfinance, has barely been met, and there is great potential for growth. More players are needed in the market to improve accessibility. As a top regional performer in reforming the macroeconomic environment, the state has performed its role as a market maker well. Rwanda has made tremendous progress in registering property, and this shows the commitment of the government to improve the property market by making it more inviting for developers and mortgage lenders. The government has also established a Housing Bank to provide loans to Rwandans to better enable them to own houses at an affordable rate in three major ways; namely housing for employees, housing for sale and housing for rent to low income households. However, this only benefits people with a reliable income.
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The Rwandan housing market consists of both urban and rural houses. Within urban areas there is low, middle and high income housing.
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Low income housing, as found for example in council designated areas, is generally 90 square meters to 250 square meters and usually caters for households earning between Rfw75,000 - Rfw381,000 (US$ 101.36 - US$ 514.90) per month. These houses are generally one to four bedrooms and are made of mud brick, cement screed flooring, rammed earth walls with timber struts, clay tile roofing, volcanic stone, timber and mud plaster, examples of which are above.
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Middle income housing in Rwanda generally usually comprises of a larger main house and smaller external quarters. These houses are usually on a plot with an average size of 450 square meters. Households living in these areas generally have an average household income of >Rfw900, 000 (US$ 101.36) per month. These houses are characterized by reinforced cement concrete, plain cement concrete brick, hollow concrete block, fired brick, steel, glass, aluminum doors and windows and granite tile. An example of an average middle income house is above.
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High income housing generally comprises permanent structures, available for households earning >Rfw1.5m ( US$ 2 027) per month. These units generally have three bedrooms, with an average size of 240 square meters. The houses are made up of cement, roof tiles, ceramic tiles, marble and consist of all services. An example of which is above.
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These housing types provide a broad understanding of the various types of housing in Rwanda. Images were provided by local consultant, Janine Ampulire. The data presented is by no means exhaustive and is merely presented as an indication of housing in the country.
- Exchange rate: US$ 1 = Rfw739.95
- Feel free to contact us with any updated information.
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Housing Policy Table: Rwanda
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Rwanda has recently published a new national housing policy. Two further laws and a national programme are relevant.
This is the final draft of Rwanda’s national housing policy, it provides an overview on the history of settlements and housing in Rwanda, the Rwandan policy framework, housing neighbourhood and human settlement development principles, government framework and housing development conditions, urban and rural planning and building principles and lastly the implementation road map.
- Law Governing Urban Planning and Building in Rwanda:
The Law Governing Urban Planning and Building in Rwanda from 2012 establishes the basis for planning and building in Rwanda, including general provisions on the types of plans and the types of urban development related activities and tools, as well as general provisions on building. It refers to a number of implementing orders to be developed, many of which have by now been drafted and submitted for cabinet approval in 2014.
- Law governing human habitation in Rwanda:
The law governing human habitation in Rwanda, gazetted in 2011, governs the occupation of land, and construction on lands reserved for human habitation. It includes provisions for grouped settlement sites on occupied land, and requires minimum infrastructure provision for human settlements.
- National program on regrouped settlement:
The Ministerial Order n° 001/07.05 of May 19, 2009 relating to the implementation of the national program on regrouped settlement in Imidugudu, defines settlement and rural areas. It points out the combination of physical components necessary to be offered inside an inhabited area, as well as a component of activities performed therein by the residents. The order defines Umudugudu[i] as a mode of planned settlement made of between 100 and 200 houses by site in rural areas, including ranges of plot measurements, with a reserve for future growth.
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The CAHF website collects news updates. Filter by 'country' or 'theme'. Some recent studies available for Rwanda include:
• Supporting Incremental Building through Housing Microfinance, October 2013: This report by Habitat for Humanity International discusses “incremental” or “progressive building” as a mechanism which many low income families use to improve upon their dwelling. It looks at the need for housing, what prohibits successful housing projects, the solutions to incremental housing and innovations within the sector.
• Housing Market Demand, Housing Finance, and Housing Preferences for the City of Kigali, October 2012: This study was prepared for the City of Kigali, Rwanda and investigated the need for housing in the city. The report aims to provide some understanding of the housing market to establish the volume of affordable housing required. The focus on affordable housing, however, responds primarily to the political will of the City of Kigali and of the Rwanda Housing Authority (RHA), to promote access to housing for the widest possible segment of the market, seeking to create a sustainable and harmonious process of urban growth.
In 2015, CAHF commissioned a HOFINET survey on the Rwandan housing finance market. The results of the survey, which includes general macro-economic data, and data on housing finance systems and housing policy, can be found here.
A forthcoming project commissioned by CAHF in 2015 seeks to understand and track housing costs across Africa. The aim is to explore the cost of a basic, entry-level house across different countries in Africa, and to understand what drives cost differences. Rwanda is one of 16 countries that are being investigated. Once the research is complete, it will available on CAHFs website. For more information please contact David Gardner.
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• http://www.afr.rw/ - AFR’s strategic focus is stimulating financial sector development by partnering with financial institutions and other stakeholders to increase access to and use of financial services.
• http://www.rha.gov.rw/ - the Rwanda Housing Authority contributes to sustainable growth and poverty reduction through the development of infrastructure, building internal workforce capacity and the promotion of related services in Rwanda.
• https://www.brd.rw/ - the Development Bank of Rwanda has been the sole provider of long term finance in Rwanda for more than four decades, it has also significantly facilitated the emergence of different productive enterprises in the private sector.
• http://fortuneofafrica.com/rwanda/financial-institutions/ - provides a brief overview of Rwanda’s financial sector. Fortune of Africa (FOA) is an information platform which seeks to highlight the opportunities and challenges of Africa in order to show the continent’s competitive in the global economy.
• http://www.mixmarket.org/mfi/country/Rwanda - is a data hub where microfinance institutions (MFIs) and supporting organizations share institutional data to broaden transparency and market insight.
• http://www.worldbank.org/en/country/rwanda/overview - provides data and research on a country basis.
• www.doingbusiness.org - the doing business indicators, is a World Bank publication on quantitative indicators on business regulations and the protection of property rights that can be compared across 189 economies over time.
• https://www.mfw4a.org/rwanda.html - The Making Finance Work for Africa Partnership is an initiative to support the development of African Financial Sectors.
• www.afdb.org - The aim of the African Development Bank (AfDB) Group is to spur sustainable economic development and social progress in its regional member countries (RMCs), thus contributing to poverty reduction. In order to achieve this, the Bank mobilizes and allocates resources for investment in RMCs and provides policy advice and technical assistance to support development efforts.
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CAHF wishes to appoint a service provider to undertake surveys of the housing finance market in Angola, Cameroon and Ethiopia, on behalf of HOFINET. Visit our website for more information.
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CAHF's Case Study Series has been launched! The case studies vary, addressing themes as diverse as housing microfinance,mortgage liquidity facilities, cement block-banking, home loan guarantees for the informally employed, and infrastructure financing, highlighting experiences from countries across the continent.
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