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Rwanda: Mortgages Can Create Wealth
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Focus Media (Kigali)
OPINION
26 March 2008
Posted to the web 26 March 2008
Timothy Kisambira & Sam Ruburica
Although most Rwandans like their home sweet home, getting a house of your own is still a big challenge. Now that BCR has become the first commercial bank to offer mortgages (the National Housing Bank has done so since 1975), it might become easier for people to become home-owners, and to make them more prosperous.
Not everybody can afford prices at the Nyarutarama estate.
It might also give a boost to property brokers, although they express some doubts.
"Cut the cloth to fit your size, and be careful of what type of house you want. Everybody would dream of having a house in Nyarutarama, but we cannot all afford it," the managing director of BCR, David Kuwana, warned at the launch of the bank's Own your Home mortgage scheme. "We are trying to design an ordinary house that an ordinary person can afford."
For Kuwana, buying a house is an investment, thus a means to become more prosperous, and people should see it as such. "Think of where you are going to invest; start with a little house while looking at the situation in the country, because the nation is developing rapidly.
You may think that you are investing in the best place, but things change. At first we had Caisse Sociale estates, and everybody wanted to go there. Yet today it's Nyarutarama, and I believe with time Nyarutarama will be no outshone by some other project," the BCR boss pointed out.
He added that the wealth of a nation is made of the total of its assets. "For individuals, once you have a property, it grows in value. The richest people in the world own estates."
The mortgage scheme rides the wave of a fast-growing economy, giving rise to a growing middle class with stable incomes. "In this country, people's incomes are often bigger than their salaries," Kuwana further pointed out.
"We have so many cases in our bank where our clients have loans even if their salaries are rather small; yet surprisingly, they manage to pay back the credit. Many of our clients have other sources of incomes, so I believe that they will be able to take care of their mortgage. If not, we still have the house as a guarantee."
The BCR mortgage loan targets customers who want to purchase a completed house, not those wanting to construct their own.
Therefore, David Kuwana recommended people to deal with experienced and professional developers who can ensure that the structure is sound and the price realistic. "We will finance the houses the clients come up with. BCR is a bank, not a developer - we don't know anything about construction," he said.
Cost of land
BCR's is not the first mortgage scheme in the country. The National Housing Bank (NHB) has been offering mortgages to its clients for a long time. "We have been in this kind of business since 1975," Charles Haba, the bank's business developer, said.
He added that the bank has also invested money in real estate development in order to help people own their own homes. Yet Haba acknowledged that a major challenge remains the affordability of houses, since those built by the NHB are beyond the means of some people.
He stated that one of the factors that make houses expensive is the cost of land. "For the price of houses to reduce, the land should first become cheaper," Charles Haba said.
There are, however, ways to make houses more affordable, the NHB business developer points out. "For example, those built for the junior army officers are valued at Frw 11.5 million. Also, it is cheaper to use pre-prefabricated houses or hydra-foam bricks compared to the usual brick and mortar."
He advised that thought there the cost of housing is high, there is need for the Rwandans to embrace the saving culture since it's important to borrow as little as possible and cover the costs as much as possible.
Currently, the NHB is constructing 234 houses in Gaculiro most of which have already been bought even if they cost Frw 41 million. "They have been selling like hot cakes, which is a sign that people still can afford the houses," Charles Haba pointed out.
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He added that the national housing bank does not directly work with estate managers, though at a certain moment they would require them to manage maintenance, electricity and plumbing. Also, the NHB could hire real estate brokers to sell some of their estates.
Mixed feelings amongst property borkers
Property brokers, however, have mixed feelings about the mortgage scheme - although certain fears seem to be based on lack of information.
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