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Cablegate: Affordable Housing in Kigali: Needed but Elusive

VZCZCXYZ0005
RR RUEHWEB

DE RUEHLGB #1110/01 3441047
ZNR UUUUU ZZH
R 101047Z DEC 07
FM AMEMBASSY KIGALI
TO RUEHC/SECSTATE WASHDC 4958
INFO RUEHJB/AMEMBASSY BUJUMBURA 0202
RUEHDR/AMEMBASSY DAR ES SALAAM 1018
RUEHKM/AMEMBASSY KAMPALA 1778
RUEHKI/AMEMBASSY KINSHASA 0337
RUEHNR/AMEMBASSY NAIROBI 1088
RUEHFR/AMEMBASSY PARIS 0381

UNCLAS KIGALI 001110

SIPDIS

SIPDIS

DEPARTMENT FOR AF/C
DEPARTMENT PASS USTDA: EEBONG
DEPARTMENT PASS USTR: WJACKSON
DEPARTMENT PASS COMMERCE: RTELCHIN
DEPARTMENT PASS OPIC: BCAMERON

E.O. 12958: N/A
TAGS: EFIN ECON PGOV EINV ENRG ETRD EPET BTIO RW
SUBJECT: AFFORDABLE HOUSING IN KIGALI: NEEDED BUT ELUSIVE


1. Summary. The housing industry in Rwanda is fragmented and
in need of assistance. Individuals are currently allocated
plots and build according to their convenience, taste and
capacity, irrespective of the area. The results are
environmentally, aesthetically, and logistically problematic
for the country. Both the real estate and appraisal
professions in Rwanda are at early stages of development.
The legal and regulatory framework necessary to spur the
development of a market is developing, but it is still
largely incomplete. Mortgage loans are not widely available
and carry high interest rates, although commercial banks are
beginning to look favorably at the expansion of residential
lending. The city of Kigali has created a master plan to
address unplanned development and to exercise more control
over inevitable expansion. The city is attempting to spur
investment in planned housing, but it is far from creating a
replicable model for its various neighborhoods. End Summary.


2. Rwanda is fashioning a legal and regulatory framework for
a functioning real estate market. An Organic Land Law was
adopted in 2004, but it is very broad and requires a number
of implementing laws, regulations, and decrees for it to
function properly. USAID and the British Department of
International Development (DFID) have been providing
assistance to the Ministry of Land on the legal framework.
DFID focuses its assistance on pilot efforts to regularize,
register, and title land in several rural districts. USAID
consultants have assisted with the drafting of an
Expropriation Law, a revised version of which has just been
passed by the Rwandan Parliament and is awaiting formal
promulgation. The USAID consultants are also assisting in
the drafting of a Valuation Law, a Surveying Law, a National
Land Use Planning Law, and on regulations defining leasing
procedures, ownership, and property registration.

3. The brokerage community in Rwanda is tiny and poorly
organized. There are between four and six legitimate real
estate companies in Rwanda with professional staff that
mainly show properties and perform minimal sales assistance.
The largest company has seven permanent employees; some have
as few as two. There are, however, a large number of
independent individuals who act as "brokers" or "agents" in
the informal sector.

4. There are a number of housing developers building new
housing "estates" for middle and higher income families.
There is a considerable amount of construction of individual
homes for upper income families, including returnees from the
Rwandan Diaspora, either for their own residences or to rent
to the growing number of expatriates in the country.
According to Rwandan Housing Bank (RHB) Marketing and Sales
Manager Charles Haba, RHB has almost 900 units in the
planning stages. However, the secondary sales market is
still extremely thin.

5. The mortgage industry in Rwanda is quite undeveloped and
unsophisticated with RHB being the only institution
specialised in mortgage finance. RHB offers Housing Savings
Plans and Housing Savings Accounts, and makes 15-year
mortgage loans at 14 percent interest with a 30 percent down
payment, and 20-year loans at 7 percent interest to civil
servants. RHB currently writes about five loans a week or
250 a year. Managing Director of Banque Commerciale de
Rwanda (BCR) David Kuwana reports that his bank, the largest
and most active in Rwanda, has between 15 percent and 20
percent of its portfolio in mortgage-type loans (not official
mortgages, per se, but loans which are used to finance
housing construction) and generally charges 14 percent-16
percent for five-year loans. Because of the bank's perceived
increased demand for actual mortgages, Kuwana claimed that
BCR will begin offering mortgage products next year once a
capital market is established in which to raise long-term
funds for the new products (Note: The establishment of
capital markets is a priority project for the Rwandan Central
Bank with assistance from the U.S. Department of Treasury,
the IMF, and the World Bank. However, the project is in the
early stages with an unclear timeline. End Note).

6. Mayor of Kigali Dr. Aisa Kirabo Kacyira reported that
more than 70% of the construction in Kigali is unplanned
settlement. To address this, Kigali City recently developed
a master plan to replace traditional mud homes, often
referred to as "slums," with more aesthetically pleasing
construction. This involves planned housing development,
provision of utilities, and subsidized removal of substandard
housing.

7. Kacyira explained that Kigali City partnered with RHB and
Caisse Sociale (Social Security Fund) for the first
implementation of the GOR's master plan -- Batsinda Housing
Project. Batsinda Housing Manager Ephraim Rusurabeza
reported that 30 homes are fully constructed and plans for a
completion of the 250-unit community by the end of 2007.
According to Rusurabeza, people currently residing in slum
areas of Kigali will be compensated for their mud homes, then
strongly encouraged to move into Batsinda, where each
resident will own their home. The city's compensation funds
will be put towards the purchase price for each new home, and
the balance must be financed with the RHB, explained
Rusurabeza.

8. The Batsinda Housing Project has hundreds of workers on
site every day, largely from the Rwadan Defense Force corps
of engineers. Rusurabeza explained that having electricity
is the individual occupant's decision rather than a
project-wide goal. Every house comes equipped with large
black water tanks that collect rain water and biogas sewage
systems to power cooking stoves.

9. Kacyira reported that 750 slum homes will be expropriated
by the city, but only 250 families will be moved to Batsinda.
Currently, there is no relocation plan for the remaining 500
families. Each of the 250 families at Batsinda must maintain
a monthly mortgage payment, a concept entirely foreign to
many Rwandans. The project manager had no plan for residents
who would be unable to maintain their mortgages, but did
explain that the city is working on developing
income-generating cooperatives to provide Batsinda residents
with livelihoods and the means to sustain their mortgages.

10. As the city is filled with unplanned mud homes, Kacyira
hopes that the Batsinda Housing Project will serve as a model
for private developers to follow. Haba reported that many
foreign investors have visited and expressed interest in the
housing market, but only three have actually made firm
investments - a German company building 29 middle-income
units, a Belgian company building 230 high-income units and
another 500 middle-income units, and an American firm
building 30 middle-income units.

11. COMMENT: Kigali City should be commended for
jumpstarting the local housing market and encouraging
large-scale developers to invest in the housing sector. The
Batsinda Housing Project is a proactive effort at addressing
Kigali's unregulated development, tearing down slum housing,
and creating planned communities. Laws regarding
expropriation and valuation remain unclear however,
potentially leaving the city open to legal action by
residents who are either unwilling to move or who contest
their compensation. Providing the necessary infrastructure
and incentives for private investment are key tasks the
resource-strained Government of Rwanda must tackle in
replacing the ubiquitous mud huts around the city.
Completion of the legal and regulatory framework should act
as a stimulus to the development of a functioning real estate
market, both new construction and a secondary market for the
buying and selling of existing homes. End Comment.
ARIETTI

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