Affordable housing
Affordable housing
Business Model Description
Provide affordable housing for low and middle income households in urban and suburban areas.
Expected Impact
Enable access to formal housing and safe living conditions for low and medium income communities.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Rwanda: Kigali
- Rwanda: Western Province
- Rwanda: Northern Province
- Rwanda: Southern Province
- Rwanda: Eastern Province
Sector Classification
Infrastructure
Development need
The country significantly underscored in SDG 9 - Industry, Innovation and Infrastructure, SDG 7 - Affordable and Clean Energy, SDG 11 - Sustainable Cities and Communities and SDG 6 - Clean Water and Sanitation.(I) Rwanda faces high costs of logistics and long transport times due to its relatively poor supply chains.(1) As infrastructure improves overall productivity of the economy, it will be the key driver for enhancing Rwanda’s sustainable development and economic growth.(2)
Policy priority
Rwanda's industrial sector accounts for approximately 15% of gross domestic product (GDP), making it a crucial component of the national economy.(3) The government recognizes the construction materials industry is facing several constraints arising from the infrastructural gap, which makes building products relatively expensive.
Gender inequalities and marginalization issues
Developing a gender-responsive infrastructure is a key element to accelerate poverty reduction efforts and economic growth. Infrastructure projects in transport, energy, water and sanitation not only reduce the time and labor burden of women and girls, but can also improve their level of mobility, productivity and access to markets.(29)
Investment opportunities introduction
The growing population, accompanied by rural-urban migration, will require heavy investment in urban planning and development (sanitation, waste management, low cost housing, electric supply and information and communication technology (ICT) connectivity.(3)
Key bottlenecks introduction
Limited physical infrastructure, constrained by hilly and mountainous topography, remains a major challenge for producers and farmers in increasing their access to markets, enhancing competitiveness, and improving incomes and livelihoods. It also negatively influences the pace of structural transformation.(3)
Real Estate
Policy priority
The government recognizes the need to scale up affordable housing, and supports the sector through national policies, regulations and financial incentives. The government is pursing public-private partnerships (PPPs) with commercial developers to develop sustainable, mixed-use housing neighborhoods. 22,000 dwelling units are under construction under a PPP scheme.(5)
Real Estate
Pipeline Opportunity
Affordable housing
Provide affordable housing for low and middle income households in urban and suburban areas.
Business Case
Market Size and Environment
5% - 10%
310,000 housing units are needed between 2017 and 2032.
According to International Growth Centre estimates, an additional 373,000 households will need accommodation in at least 310,000 housing units between 2017 and 2032. Moreover, approximately 140,000 units will also need replacing given the current planning standards.(6)
Rwanda's construction industry is forecast to experience growth of 9% compound annual growth rate (CAGR) until 2021, making it the second-fastest rate of growth in Sub-Saharan Africa.(8)
Gross domestic product (GDP) from construction in Rwanda reached USD 170.4 million in the second quarter of 2019.(8) The direct contribution of housing construction to Rwanda's GDP is approximately 10%.(8)
Indicative Return
15% - 20%
A similar business model implemented in Kenya reports an average internal rate of return (IRR) of 16% - 17%.(7)
Benchmark examples from Africa report IRRs between 23% and 26%.(9),(10)
International Housing Solutions, a private equity investor in Africa, achieved an IRR of 25.2% for constructing affordable housing.(11)
Investment Timeframe
Short Term (0–5 years)
According to a case study from Kenya, a developer of affordable housing was paid 2 years after delivering the project.
The total investment timeframe for this example can be considered short term, given estimated time to construct 150 flats was 18 months. (10)
Ticket Size
USD 500,000 - USD 1 million
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Business - Supply Chain Constraints
Market - general preferences of potential clients
Impact Case
Sustainable Development Need
Approximately 79% of Kigali's residents live in unplanned, informal settlements that have limited access to basic services such as transport, water, electricity, and sanitation.(4)
The lowest price of a developer-built dwelling unit in Kigali is USD 20,000. This price is far beyond the budget of the bottom 50% of the income group, which can afford to rent a unit below USD 12,000. Therefore, at least half of Kigali's population cannot afford formal housing.(4)
Gender & Marginalisation
Time and labor burden of access to services and transport is higher for women.(29)
Expected Development Outcome
Improved living conditions, quality of life and livelihoods of populations living in poverty
Ameliorated affordability of housing and increased level of safety of individuals living in inadequate housing or without access to basic services
Increased formal settlements and urban planning development, reduced growth and expansion of slum areas
Gender & Marginalisation
Infrastructure projects in transport, energy, water and sanitation not only reduce the time and labor burden of women and girls, but can also improve their level of mobility, productivity and access to markets.(29)
Primary SDGs addressed
1.2.1 Proportion of population living below the national poverty line, by sex and age
1.4.1 Proportion of population living in households with access to basic services
All individuals: 38.20% Adult males: 31.6% Adult females: 34.8% Boys (age < 16): 44.2% Girls (age < 16): 44.8% (27)
Food market: 50.0 (min) Primary school: 25.4 (min) Secondary school: 35.7 (min) Health center: 49.9 (min) (27)
0 (28)
N/A
11.1.1 Proportion of urban population living in informal, informal settlements or inadequate housing
11.3.1 Ratio of land consumption rate to population growth rate
52.5% (27)
N/A
N/A
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
Corporates
Outcome Risks
Alteration of natural environment in greenfield projects
Waste production due to construction
Contamination of water and increased mud and dust due to construction
Increased traffic increase due to increased population and supply chain operations
Impact Risks
Unexpected impact risk given the negative environmental effects of construction activities
Stakeholder participation risk if construction activities lead to gentrification
Impact Classification
What
Affordable housing for low and middle income families improves living conditions and allows human capital development.
Risk
The model has proven to be effective, but the construction industry's environmental footprint should be considered during the design and development phases.
Impact Thesis
Enable access to formal housing and safe living conditions for low and medium income communities.
Enabling Environment
Policy Environment
Urbanisation and Rural Settlement Sector Strategic Plan for National Strategy for Transformation 2018/19-23/24: This plan outlines the key priorities for sector development such as institutionalized monitoring on sector performance via data collection, auditing of local development management, and capacity building.(12)
National Urbanisation Policy 2015: This policy aims to promote well-coordinated urban settlement and development. It also supports affordable housing development.(13)
National Housing Policy 2015: This policy aims to ensure improved access to housing, efficient resource use of land, development of infrastructure and housing, improved skills of the local construction industry and increased social inclusion.(14)
National Informal Urban Settlement Upgrading Strategy: This strategy provides 5 scenarios for implementing an upgrade project and recommends where each option is best adopted.(15)
Human Settlement Policy: This policy highlights the need for planning, efficient use of land, urban financing mechanisms, development management responsibilities of local authorities, public participation, and development of the building industry. It also provides a framework for housing for vulnerable groups.(16)
Financial Environment
Financial incentives: The government established an affordable housing fund within the commercial banks allows affordable housing developers and buyers to apply for low interest bank loans.(22)
Fiscal incentives:15% preferential corporate income tax (CIT) for strategic sectors such as energy, transport, affordable housing, information and communications technology (ICT) and financial services. Exemption from capital gains tax.(13) 0% preferential CIT rate for foreign enterprises, investing a minimum USD 10 million and planning to set up regional headquarters in Rwanda.(23)
Other incentives: Accelerated depreciation of 50% for key priority sectors i.e. tourism, construction, manufacturing and agro-processing. Repatriation of capital and assets.(24)
Regulatory Environment
Rwanda Urban Planning Code: This code provides principles for sustainable development and management of land for human settlements. It sets a reference for the authorities, planners and professionals who work within urban planning and development.(17)
Rwanda Building Code 2019: This code provides standards for construction that developers must meet.(18)
Ministerial Order N° 02/CAB.M/019 of 15/04/2019 Determining Categorization of Buildings and Procedures for Applying for and Granting Building Permits: This order provides procedures and conditions for applying for and granting building permits and gives instructions for building categorization.(19)
Annex IV of Ministerial Order N° 03/CAB.M/019 of 15/04/2019 Determining Urban Planning and Building Regulations: This order provides sanctions for breaches of construction law.(20)
The Ministry of Infrastructure (especially its Urbanization, Human Settlement and Housing Development (UHSHD) department) is responsible for establishing the legal framework for affordable housing.(21)
Marketplace Participants
Private Sector
China Civil Engineering Construction Corporation (CCECC), Abadahigwa Kuntego Ltd, Groupe Palmeraie Développement, Afriprecast, African Development Bank, Rwanda Development Bank (BRD), International Finance Corporation
Government
Rwandan Ministry of Infrastructure (MININFRA), Rwanda Development Board (RDB)
Multilaterals
World Bank (WB), United Nations Human Settlement Programme (UN Habitat)
Non-Profit
United States Agency for International Development (USAID), Centre for Affordable Housing Finance in Africa (CAHF)
Public-Private Partnership
Shelter Afrique
Target Locations
Rwanda: Kigali
Rwanda: Western Province
Rwanda: Northern Province
Rwanda: Southern Province
Rwanda: Eastern Province
References
- (1) Ministry of Infrastructure (2018). Draft Final Transport Sector Strategic Plan for the National Strategy for Transformation (NST1) 2018.
- (2) Gatete, C. (2016). The Rwanda we want: Towards ‘Vision 2050’. https://www.minecofin.gov.rw/fileadmin/user_upload/Minecofin/Speeches/Hon_Gatete_Umushyikirano_Presentation_2016.pdf
- (3) Ministry of Infrastructure. Housing Sub-Sector. https://www.mininfra.gov.rw/index.php?id=269&L=4%22
- (4) World Bank. Housing Solutions for Low-Income Urban Communities in Rwanda.
- (5) Ministry of Infrastructure. Housing Sub-Sector. https://www.mininfra.gov.rw/index.php?id=269&L=4%22
- (6) Bower, J. and Murray, S. (2019). Housing need in Kigali: Findings and policy reflections. https://www.theigc.org/wp-content/uploads/2019/07/Bower-Murray-2019-Policy-brief.pdf
- (29) African Development Bank (2008). Gender assessment: progress towards improving women’s economic status. https://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/rwanda.pdf
- (7) Kenya Property Developers Association (2018). Affordable Housing in Kenya - Investment cases for developers building affordable homes in Nairobi. http://housingfinanceafrica.org/app/uploads/Kenya-Affordable-Housing-Investment-Cases6.pdf
- (8) Project Africa Rwanda. Rwanda’s construction market in focus. http://www.projectafrica-rwanda.com/market-insights
- (9) Chilongo, M. (2015). Investment Theme: Access To Housing. Bertha Centre for Social Innovation and Entrepreneurship. https://www.sbs.ox.ac.uk/sites/default/files/2019-01/Impact-theme-Acess-to-Housing.pdf
- (10) Shah, S. (2019). Construction financing in Africa’s affordable housing sectors: a critical gap. Testing the assumptions in Kenya’s Affordable Housing Program. Centre for Affordable Housing Finance. http://housingfinanceafrica.org/documents/case-study-16-construction-financing-in-africas-affordable-housing-sectors-testing-the-assumptions-in-kenyas-affordable-housing-program/
- (11) Rust, K. (2016). The Residential Investment Opportunity in Driving Economic Growth. Centre for Affordable Housing Finance in Africa. http://housingfinanceafrica.org/documents/the-residential-investment-opportunity-in-driving-economic-growth/
- (12) Ministry of Infrastructure. Urbanisation and Rural Settlement Sector Strategic Plan for National Strategy for Transformation 2018/19-23/24.
- (13) Ministry of Infrastructure (2015). National Urbanisation Policy. https://www.mininfra.gov.rw/fileadmin/user_upload/Rwanda_National_Urbanization_Policy_2015.pdf
- (14) Ministry of Infrastructure (2015). National Housing Policy. https://www.rha.gov.rw/fileadmin/user_upload/documents/General_documents/Housing_regulations_and_standards/Policies/National_Housing_Policy.pdf
- (15) Ministry of Infrastructure. National Informal Urban Settlement Upgrading Strategy. https://www.mininfra.gov.rw/fileadmin/user_upload/aircraft/National_Urban_Upgrading_Strategy.pdf
- (16) Ministry of Infrastructure. National Human Settlement Policy. https://bpmis.gov.rw/asset_uplds/files/National%20human%20settlement%20policy.pdf
- (17) Republic of Rwanda. Rwanda Urban Planning Code. https://www.mininfra.gov.rw/fileadmin/user_upload/Annex_I.pdf
- (18) Republic of Rwanda (2019). Rwanda Building Code. https://www.rha.gov.rw/fileadmin/user_upload/documents/General_documents/Laws_of_construction/Rwanda_Building_Code_2019.pdf
- (19) Republic of Rwanda (2019). Ministerial Order N° 02/CAB.M/019 of 15/04/2019 Determining Categorization of Buildings and Procedures for Applying for and Granting Building Permits. https://www.rha.gov.rw/fileadmin/user_upload/documents/General_documents/Laws_of_construction/Ministerial_Order_on_Building_Categorization_and_Permitting_2019.pdf
- (20) Republic of Rwanda (2019). Annex IV of Ministerial Order N° 03/CAB.M/019 of 15/04/2019 Determining Urban Planning and Building Regulations. https://www.rha.gov.rw/fileadmin/user_upload/documents/General_documents/Laws_of_construction/Administrative_Building_Sanctions_2019.pdf
- (21) Ministry of Infrastructure. Urbanization, Human Settlement and Housing Development. https://www.mininfra.gov.rw/index.php?id=93
- (22) Uwayezu, E. and de Vries, W.T. (2020). Access to Affordable Houses for the Low-Income Urban Dwellers in Kigali: Analysis Based on Sale Prices. https://www.mdpi.com/2073-445X/9/3/85/pdf
- (23) Rwanda Development Board. Invest in Remarkable Rwanda. https://ungreatlakes.unmissions.org/sites/default/files/rwanda_convention_bureau.pdf
- (24) Rwanda Development Board. Investment Incentives. https://rdb.rw/why-rwanda/investment-incentives/
- (25) World Bank (2019). Creating markets in Rwanda. https://www.ifc.org/wps/wcm/connect/46ae22ae-6034-42a7-beb7-42d3c42a6e3e/201906-CPSD-Rwanda.pdf?MOD=AJPERES&CVID=mKmmoCW
- (26) Gardner, D., Lockwood, K. and Pienaar, J. (2019). Assessing Rwanda’s affordable housing sector. Centre For Affordable Housing Finance in Africa. http://housingfinanceafrica.org/app/uploads/CAHF-Rwanda-HEVC-and-HCB-FINAL.pdf
- (27) Republic of Rwanda (2019). Voluntary National Review Rwanda 2019. https://sustainabledevelopment.un.org/content/documents/23432Rwanda_VNR_Document__Final.pdf
- (28) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F. (2020). The Sustainable Development Goals and COVID-19. Sustainable Development Report 2020. Cambridge: Cambridge University Press. https://dashboards.sdgindex.org/profiles/RWA
- (30) Rwanda Housing Authority (2020). Affordable housing program. https://www.rha.gov.rw/index.php?id=41