It has been conceived as one of the continent's most ambitious urban planning projects: a city of gleaming high-rise towers, arching pedestrian walkways, green spaces, fountains and an effective public transport system. The reimagined Kigali will be decentralised, with satellite towns, business, leisure and shopping districts, as well as a wetlands conservation area.

Twenty years after Rwandan capital was decimated by 100 days of killing, its population of 1.22 million is now expected to triple by 2040. The development plan has won international awards, but detractors argue that at best the vision is beautifully unrealistic, and at worst a work of fantasy that fails to take into account the demographic and economic challenges facing the east African country.

"Who are these buildings for, tourists, the creme de la creme of society?" asks one of the city's intellectuals, who requests not to be named. "Fine, but we ask: where are normal people going to sleep tonight?"

In Kigali's "one-stop centre" for construction, on the ninth floor of the glass-and-steel Grand Pension Plaza, architects' impressions of the future cover the walls. From here it is possible to see half a dozen building projects already under way. Liliane Mupende, the director of urban planning and construction, takes pains to point them out, noting that some are financed by Rwandan investors and others by foreigners.

The centre of the Rwandan capital, Kigali. Photograph: Phil Moore/AFP/Getty Images

While the flashy promotional videos don't dwell on where Kigali's mainly low-earning residents will live, possible solutions for affordable housing are quietly on show in the office. "Creating affordable housing is one of our greatest challenges," admits Mupende.

By demolishing informal housing - an estimated 70% of all dwellings in the capital - and creating more high-density areas, the city is "getting itself organised so future generations don't face what we are facing now", she says. Rent-to-own schemes are being considered and the government will enforce regulations that set quotas of affordable building for any purchased land.

Despite empty patches of land, and half-filled new office blocks in which many find space too expensive to rent, Mupende insists the scheme is realistic and workable. "We are trying to establish how we can best use our limited resources to provide for future generations," she says. "It is a long-term plan. Yes, it is bold, but you have to be bold to achieve anything of note. When you dive into a pool, you don't aim for very close to the side, [but] try and get as far as you can go and then see where you end up."

Supporters say the plans, designed by Oz Architects and developed by Surbana, an urban planning consortium based in Singapore, fit with President Paul Kagame's ambition to drive Rwanda's economy forwards. In 2012 Rwanda jumped to 52nd on the World Bank's "ease of doing business" rankings, from 158th in 2005, after Kagame set up a special unit to analyse and crack its ratings system.

That ambition has a darker side too: Kagame has been accused of locking up street hawkers and beggars to keep Kigali's streets clean. When the New York Times alleged that street children had been rounded up and placed in a detention centre on the island of Iwawa on the remote Lake Kivu, the government responded by saying Iwawa was "a vocational training centre, and it has not only taught the youth life-changing skills but also helped them get off drugs". It said students could be seen "singing, dancing, chanting and showing off their new hard-earned skills" at graduation ceremonies.

As part of the development, many businesses in the boisterous downtown shopping district have been boarded up, and nearby shopkeepers know they are next. "Development is good but to change the situation of a country is not a small thing, we have to go step by step – but this is very, very quick," says Celestin Pierre Munyendamutsa, 32, behind the counter of his small kiosk that sells paper and ink cartridges. "For me, that isn't easy, it means we have to go and find somewhere else to do business."

Another shopkeeper, who did not want to give his name, said he paid around 400,000 francs (£355) a month in rent, but in the new glittering mall next door he would have to pay 1m francs (around £880). "That's not good business," he says. Asked where he will go when the time comes, he gives a bark of a laugh. "What do you want me to do? I will go home to sleep."

Construction workers at the site of the new Kigali Conference Centre. Photograph: Phil Moore/AFP/Getty Images

Guillaume Sardin, a French architect and co-founder of the George Pericles thinktank, who works in the city, says the Kigali masterplan is a smart piece of branding. "It is a very clever way of putting yourself on the map, of saying: 'Yes you may remember us for one thing, but we can also be something else.' The plans are beautiful, but the problem is the implementation – there is a gap between the perception and the reality. But the positive news is the city is listening."

A new middle class is emerging, which includes members of the diaspora such as Matthew Rugamba, who started his own House of Tayo fashion brand after studying in the US. "I was fed up of seeing the pity in people's eyes when I told them I was Rwandan," he says. "So I decided to create something, so I could change perceptions."

Building of new homes has started in Kigali suburbs that are little more than villages perched on the edge of red-dirt roads. In Kinyinya, about a 20-minute taxi moto ride from the centre, a new apartment block with glass sliding doors leading out on to balconies is nearly finished. Here a two-bed apartment will cost in the region of £80,000 – in the 25th poorest country in the world, where 45% of the population live in poverty.

The block is moments away from a vibrant little town centre where music blares out of laptop speakers and people haggle over fresh produce and admire the new trainers for sale on a show stall. Elias Dusable, 31, a taxi moto driver who rents a small house with no running water for about 25,000 francs (£22) a month, says he is relaxed about the new homes. "If my country is developing and beautiful then I have no problem with that," he says. "These are homes for rich people, but their riches came from God. So maybe one day I will be that rich too."