Michel Nzabahimana lived in Nyamagabe district in southern Rwanda with family, but the father of six always thought of trying his luck in the capital Kigali.
In 1995, Nzabahimana took the risk. Left his home and relocated to Kigali to seek for greener pastures. He rented a two-bedroom house in Gikondo suburb. He worked as a house-helper and later secured employment at SOSOMA food processing plant.
However, in 1997, his baby succumbed to pneumonia resulting from the cold because the house was poorly ventilated.
“This was a wake-up call,” Nsabimana says. The only possible choice for a personal house was to work hard and save until he had enough to build his own proper house.
“It was fine to forego some meals in a week, keep only few clothes and slash expenses to save for a home,” he says, evoking critical periods his family endured.
In a year Nsabimana had saved Rwf 120,000 and went on to purchase a plot (25m by 30m) in Kimironko sector, Gasabo district.
He acquired small loans from microfinance, staking his plot as collateral. He first got Rwf 180,000, then Rwf 500,000 and built a 3-bedroom house worth Rwf 30 million now.
Today, Nzabahimana has built three houses estimated at Rwf 50 million. His family lives in one of them and the two have been rented to tenants earning the family a monthly income of Rwf 400,000.
He recently bought a car which he has turned into a cab to expand his income. He earns Rwf 200,000 per month from renting the cab. He plans to venture more into real estate development.
“My appetite to build houses is growing more and more. It is a business where many fear to venture and this gives us an advantage on tenants.”
Property dealers say people who start with small earnings, mostly in informal sector like Nzabahimana, dominate the real estate sector. They literally own the capital city building low cost houses.
Engineer Dismas Nkubana supports the idea of saving for a house. “When you afford a plot, you shouldn’t worry about constructing a house. You set targets and then build gradually,” he says.
He however says that you should only acquire a bank loan, “when you want to build once and for all.”
Small earners tell whoever wants to have a dream house that the bank is not the first thing to think about. Interests on bank loans go up to 19%, including collateral, which most wage earners may not afford and end up becoming tenants of the Nzabahimana’s.
One Evalde Ukozehasi also started like Nzabahimana. “The problem with wage earners is that they always think the salary will keep coming forever and do not have courage to make some savings.”
Jean Bosco Ntirenganya, a civil servant told KT Press ,“It is difficult to construct a house using your salary, unless you get some additional allowances.”
Michel Rucaca a credit manager at Kenya Commercial Bank advises Rwandans to design smaller houses to enable small and middle income earners’ to access small loans and own a house.
For example, a civil servant earning Rwf 300,000 monthly can save Rwf 100,000 every month for two years. With Rwf 2.4 million he can then seek an advance salary of Rwf 5 million payable in three years.
With Rwf 7.4 million one can construct a low-cost house in the outskirts of Kigali where the city master plan allows for renovation, transformation or alteration.
While thinking of owning a house in Kigali, many are challenged by matching their financial capability to construction costs and the failure to make savings.
Landlocked Rwanda with 11 million population and territorial size of 26,338 sq km makes it one of the densely populated countries in Africa.
The country faces problems caused by rapid urbanisation such as scarcity of land, proliferation of unplanned settlements, and environmental degradation.
The country’s development blueprint, Vision 2020, the government has formulated an urban housing policy and also gazetted towns that will be upgraded into secondary cities to curb one-way migration to Kigali City.
But for Kigali, construction is guided by a-2040 master plan that was designed by Surbana, a Singaporean company.
Currently, the country is experiencing construction boom and attracting various investors into the construction sector. However, most materials are imported, creating an opportunity for manufacturers to set up franchises.
Strawtec, a Germany company has invested $ 10 million in manufacturing of robust strawboard panels that can replace cement walls. A house made from strawboard costs 30% less than a house with cement bricks.
Strawboards are expected on the local market this month.
Skat, a Swiss company has introduced new and cheap technology that helps in making strong bricks from mud and clay. It will enable many Rwandans afford a modern house.
“It is cutting production costs, saving the country scarce resources and giving durable construction material,” says Julienne Musabyimana from Nyange sector, Karongi district who invested in production of baked bricks made from clay.
Shelter Afrique, a pan-African finance institution will also finance 2000 units in Nyarugenge district.
Meanwhile, as the country undergoes a rapid economic growth, a section of the middle class is migrating to high class and thus a demand for high-end housing.
Investors are targeting to build 10,000 units annually destined to the three categories of high, middle and low income earners, in a city’s campaign to bridge a-300,000 units’ gap in next ten years.
In Rwanda, middle class are people with Rwf 50,000 ($73) and 600,000 monthly incomes. Part of this class lives in informal homes which represent 67% of Kigali settlements.
The upper class represents 5% with people earning between 600,000 and Rwf 900,000.
Only 2% of Kigali working community earns between Rwf 900,000 and Rwf 1.5 million, while 1% earn above Rwf 1.5 million monthly.
Urukumbuzi, a local real estate company, is building 150 housing units whose prices vary between Rwf 17 million and Rwf 45 million.
“We are using local but strong materials, which reduces building cost,” says Jean Nsabimana, the proprietor of the company.
Such mortgage projects like that of Nsabimana work with banks to facilitate home owners. For a example, a mortgage deal from Kenya Commercial Bank (KCB) for a civil servants earning Rwf 500,000 would need require him pay Rwf 249,000 including 17% interest rate every month for 20 years.
Such a mortgage is financially excruciating given the fact that it eats away over 50% of the earner’s income. With the rising cost of living in Kigali, the earner taking that sort of a mortgage is equivalent to signing for a miserable life contract.
However, the mortgage law prohibits for signing a mortgage that takes above 25% of one’s income.
To soften the pressure on housing demands, Rwanda Social Security Board (RSSB) is expected to build 3000 units including six storied apartments in Kinyinya, Gasabo district in the next two years.
RSSB will build more extra 609 units on a-10 ha land in Batsinda, Gasabo district at Rwf 20 million each unit.
The $ 100 million Vision City project in four phases will provide for 3000 units, costing between Frw120 million and Rwf 300 million each to cater for the high class segment.
RSSB says 500 villas are overbooked months ahead of completion.
“Of those who booked, Rwandans represent about 90%,” said Lillian Mupende Uwantege, the project Managing Director.
While the thirst for a decent house in the high class segment increases day by day, housing projects cannot run away from the lucrative sector and waiting to cater for the lower and middle class at a later time.
This, however, leaves the middle class chocking on the inability to own a house.
Until they learn the art of frugality, they have no choice but to submit themselves to the landlords such as Nzabahimana to feast on their income.