Kenyan private equity firm Fusion Capital, and Rwandan real estate developer Kigali Heights have teamed up to tap into Kigali’s commercial property market.

The real estate market has been hit by low quality office space and high rental charges.

The partnership, announced last week, will inject $16.9 million into commercial real estate where experts say the return on investment is attractive as property owners have hiked rents to exploit the prevailing shortage.

The project, expected to create some 300 jobs, will build a commercial property around the Kimuhura roundabout opposite the Kigali Conventional Centre which is under construction.

Kigali City Council (KCC) is said to have sold 1.21 hectares of land where the commercial complex will be constructed for Rwf1 billion ($1.5 million).

The investment will be financed by a syndicate of local and foreign financial institutions.

Fusion Capital Rwanda will provide both equity and debt funding, and facilitate the participation of local funds through syndication.

The firm also plans to invest $150 million in East Africa’s construction sector — one of the fastest growing sectors and among the top drivers of economic growth in the region.  

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“It is very difficult for investors to look at Rwanda in isolation; they want to spread the risk. For you to receive these funds you have to show a level of risk management,” said Kajuju Kageenu, the country manager of Fusion Capital.

This year, the company is also planning a financial outlay of $5 million in small and medium enterprises in Rwanda through debt and equity investments.

The investment in commercial property is Fusion’s biggest in the Rwandan market since its entry in 2011.

According to the proprietors, the structure will be built in two phases, and will be complete by 2016.  The first phase will have nine floors whereas the other will have six.

KCC says the investment is in line with its 50-year master plan, which seeks to turn Kigali into a modern city.

“This is a mutual benefit venture for the city and the private investors; we will support their initiative as we encourage more companies to enter into such important partnerships with us,” said Kigali mayor Fidel Ndayisaba.

KCC revised its master plan to cater for the extension of the boundaries of the Central Business District (CBD) where retail and office rent increased by between 50 and 200 per cent between 2003 and 2006.  

Currently, prime office space around the CBD costs between $15 and $20 per square metre per month, while average rent per square metre of quality retail space ranges from $20 to $25.

For modern buildings such as Kigali City Tower and the Grand Pension Plaza, office rent is higher, and out of reach for most SMEs.  For instance, the proprietors of Kigali City Tower charge $32 per square metre.

Kigali is considered to be one of the fastest-growing cities in Africa, with an ongoing influx of NGOs and foreign missions.