More than 100 businesses and home buyers in Rwanda are facing huge losses if KCB Rwanda succeeds in auctioning property belonging to DN International, a real estate construction firm that is currently facing liquidation.

DN International (DNI), registered in Rwanda but run by Kenyan investor Nathan Ndung’u Lloyd, defaulted on a loan acquired in 2010 to construct a housing estate, prompting KCB to auction the property.

DNI had taken out the loan to construct Green Park Villas, a development with 50 housing units in Rusororo on the outskirts of Kigali. Each unit was to be sold at Rwf75 million ($125,000) for those who secured 15-year mortgages with KCB Rwanda.

A memorandum of understanding was signed between DNI, the buyer and KCB Rwanda. But some home buyers paid Rwf53 million ($77,000) cash for a unit. All the money was deposited in KCB Rwanda where DNI had an account.

The EastAfrican has learnt that KCB Rwanda recently secured approval to auction the estate — constructed by the Kenyan investor who has since gone on the run — to recover over Rwf3 billion ($5 million) that it loaned the project.

READ: Home buyers in the cold as Kenyan investor faces auction

While the auction has been set for December 27, several creditors and home buyers are up in arms, even asking President Paul Kagame to intervene and halt the auction.

“We are victims because we trusted an investor who was recommended to us by the government. We are disappointed because it appears that KCB Rwanda is being given priority because it is a big business,” said Francis Bayingana who chairs the committee of the other creditors.

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In a letter dated November 25, 2013 and seen by The EastAfrican, the creditors petitioned the president to intervene. The creditors blame Rwanda Development Board (RDB), the country’s investment promotion agency, for misleading the public since it sanctioned the DNI investment.

“RDB has to take responsibility because it introduced us to this investor. We need a roadmap on how we shall be compensated,” said Mr Bayingana.

In the petition, the creditors claim KCB Rwanda helped DNI to transfer funds out of the country. They also want Mr Lloyd to be extradited to Rwanda to face charges.

The creditors said the issue can only be resolved through negotiations. But KCB Rwanda managing director Maurice Toroitich said the bank is acting according to the law to recover its money.

“We are only doing what is provided for within the law. I don’t see any reason why the auction should not proceed,” he said.
RDB said KCB is a secured creditor, and is therefore given priority under the mortgage law.

“The mortgage law gives secured creditors the authority to auction mortgaged properties once the clients default on their loan payments as per the loan agreement,” said Registrar-General Louise Kanyonga.

In 2010, the mortgage law in Rwanda was amended to allow creditors to lend against the value of the property after financiers rejected a clause stating that only 30 per cent of a property’s value could be subject to mortgage.

With regard to article 30 of the law No12/2009 of 26/05/2009 on issues arising from insolvency, a secured creditor with an asset involved in the insolvency proceedings may apply for retention of such an asset and shall not be considered among creditors. The law gives KCB the right to hold all properties it has acquired as securities for a loan given to DNI.

The saga over the houses has been ongoing since early 2011 and has left the government embarrassed since it had sanctioned the DNI investments.

On the face of it, the entry of DNI into Rwanda was supposed to be a game-changer in the country’s real estate sector. The firm also clinched several other lucrative contracts including one to build the American embassy in Kacyiru on the outskirts of Kigali.