Affordable housing

UNDP Rwanda
Photo by UNDP
Affordable housing
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Infrastructure
Real Estate
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.

Indicative ReturnDescribes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
15% - 20% (in IRR)
Investment TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Short Term (0–5 years)
Market SizeDescribes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
5% - 10% (CAGR)
Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
USD 500,000 - USD 1 million
Direct ImpactDescribes the primary SDG(s) the IOA addresses.
No Poverty (SDG 1) Sustainable Cities and Communities (SDG 11)
Indirect ImpactDescribes the secondary SDG(s) the IOA addresses.
Good health and well-being (SDG 3) Industry, Innovation and Infrastructure (SDG 9) Reduced Inequalities (SDG 10)
Country
Regions
  • Rwanda: Kigali
  • Rwanda: Western Province
  • Rwanda: Northern Province
  • Rwanda: Southern Province
  • Rwanda: Eastern Province
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Infrastructure
IF

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)

SubsectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Real Estate
IF.3

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)

IndustriesMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Real Estate
IF-RE
Investment Opportunity Area

Affordable housing

Business Model

Provide affordable housing for low and middle income households in urban and suburban areas.

CAGRDescribes the historical or expected annual growth of revenues in the IOA market.
5% - 10%
Critical IOA UnitDescribes a complementary market sizing measure exemplifying the opportunities with the IOA.
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)

IRRDescribes an expected annual rate of growth of the IOA investment.
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)

TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
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)

Average Ticket Size (USD)Describes the USD amount for a typical investment required in the IOA.
USD 500,000 - USD 1 million
Business - Supply Chain Constraints
Land challenges: In Kigali, over 50% of land is on a steep slope or in wetland, making it difficult and costly to construct buildings.(4)
Business - Supply Chain Constraints
Kigali has a significant level of land fragmentation. The majority of land is privately owned, limiting options to construct larger residential projects.(4)
Market - general preferences of potential clients
The general preference is to inhabit single-storey units.(4)
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 - No Poverty
No Poverty (SDG 1)

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

Current Level

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)

Target Level

0 (28)

N/A

11 - Sustainable Cities and Communities
Sustainable Cities and Communities (SDG 11)

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

Current Level

52.5% (27)

N/A

Target Level

N/A

N/A

Secondary SDGs addressed
3 - Good Health and Well-Being
Good health and well-being (SDG 3)
9 - Industry, Innovation and Infrastructure
Industry, Innovation and Infrastructure (SDG 9)
10 - Reduced Inequalities
Reduced Inequalities (SDG 10)
Directly impacted stakeholders
People
Low and middle income households with formal housing
Gender inequality and/or marginalization
Women benefitting particularly from safer living conditions for themselves and children
Planet
Environment due to less harmful construction practices and living conditions
Corporates
Construction services providers, construction materials manufacturers, mortgage providers
Public sector
Public entities with greater urban planning security and reduced informal settlements
Indirectly impacted stakeholders
Corporates
Secondary businesses with new income generation opportunities in the established housing complexes
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

What

Affordable housing for low and middle income families improves living conditions and allows human capital development.

Who

Low and middle income households with poor housing conditions, who cannot afford a formal lodging without affordable housing projects.

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.

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)

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

country static map
urban
Rwanda: Kigali
Kigali was estimated to need around 15,000 new housing units per year in 2018, rising to around 26,000 new housing units annually until 2032.(2). Further, over half of the new dwelling units constructed in Kigali by 2022 are forecast to belong to the affordable housing segment.(25) According to the study conducted by Planet Consortium, more than 180,000 units in Kigali are needed for affordable housing for households with monthly incomes of between RWF 33,500 and RWF 200,000 (USD 39 to USD 232).(26)
semi-urban
Rwanda: Western Province
Investments in affordable housing are also needed in the six main secondary cities, namely Rubavu, Musanze, Rusizi, Huye, Muhanga, Nyagatare, where over 25% of the population lives.(25)
semi-urban
Rwanda: Northern Province
Investments in affordable housing are also needed in the six main secondary cities, namely Rubavu, Musanze, Rusizi, Huye, Muhanga, Nyagatare, where over 25% of the population lives.(25)
semi-urban
Rwanda: Southern Province
Investments in affordable housing are also needed in the six main secondary cities, namely Rubavu, Musanze, Rusizi, Huye, Muhanga, Nyagatare, where over 25% of the population lives.(25)
semi-urban
Rwanda: Eastern Province
Investments in affordable housing are also needed in the six main secondary cities, namely Rubavu, Musanze, Rusizi, Huye, Muhanga, Nyagatare, where over 25% of the population lives.(25)
Sector Sources
  • 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
IOA Sources
  • 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