Scoping Rwanda’s Affordable Housing Sector and its Financing

Rwanda has a developing housing and housing finance sector – but there are constraints. While Rwanda’s mortgage to GDP ratio (3.35 percent) is relatively high for the region, mortgage lending is concentrated at the upper end of the income pyramid; and while Rwanda’s microfinance sector is an important source of finance for lower income segments of the market, the products and services of microfinance providers are not typically addressed towards housing. In addition, Rwanda has a critical, but poorly documented residential rental sector. As is the case in most countries, the affordable rental sector operates off the radar, unattended by both policy and finance.

In 2020, the Government of Rwanda partnered with the World Bank to access two grants, one of which is for housing finance. US$150 million has been approved to fund the Rwanda Housing Financing Project, the main objective of which is to expand access to long term housing finance for the benefit of middle-income segments that have limited or no access to mortgages, while also supporting capital market development. While this is important, it is unlikely to cover the breadth of the need for housing finance, specifically for lower income earners who are outside the scope of mortgage lending. How the end user finance intentions align with the availability of construction finance, and whether this addresses the needs of the so-called informal, or small-scale supply sector (and critically, rental accommodation) is also not clear. To this end, a broader and more detailed understanding of the demand and supply sides, how they intersect, and the specific housing value chains engaged with and served by each, is required.

Rwanda’s Vision 2050 “sets a new pathway that will lead the country to the livings standards of upper middle income by 2035 and high-income countries by 2050”. In line with this vision, the National Land Use Development Management Plan predicts a 2% annual growth rate, such that by 2050, Rwanda’s population will be 22.1 million people. To meet the housing needs of these people, the NLUDMP projects that 5,5 million dwelling units will be required by 2050, or an annual delivery of 150 000 dwelling units between 2020 and 2050. The research finds the urban figure to be an estimated 3,2 million units by 2050. Even just this urban projection demands a higher rate of annual delivery than current formal capacity has been able to achieve. The report finds that most housing in Rwanda is being delivered by smaller scale players and by households themselves, often informally. Meeting the Vision 2050 affordable housing targets both in terms of the anticipated scale and quality will require strong partnerships between market players and with government, while also explicitly leveraging and growing the capacity of smaller scale players.

As Rwanda develops in line with its vision, there is an opportunity for AFR to support the development of a housing finance sector in Rwanda that meets the needs of all residents and all housing supply approaches, with a variety of products and services designed explicitly to engage with the breadth and nuance of their capacity.

This review of Rwanda’s affordable housing sector and its financing explored the overall institutional, policy and legislative environment for affordable housing, scoped the demand side, interrogated the capacity and activities of the supply side, and considered where finance could make a difference. This report sets out the findings of the project, referencing a series of additional inputs that also shaped the conclusion and recommendations. The full study was presented to Rwandan stakeholders for a validation workshop on 24 August 2021. The team is grateful for the detailed engagement and inputs from all stakeholders and looks forward to further engagement on the recommendations.