Despite an increased supply of commercial and office space in Kigali, rent remains high for tenants, which has been attributed to the fact that most of the buildings have been built using on expensive loans due to high interest rates.
There was a sense of optimism in the market with many commercial complexes completed in the central business district and other areas around Kigali and others nearing completion. The business community expected a slowdown in rental costs but this has not happened; instead, rent has gone up in some places.
“Even if one hundred commercial houses are added to the market, rent will not go down,” said Derrick Rwitare, general manager of CVLD. “It all comes down to the investment cost; most developers are using borrowed money, and the money is not cheap.”
Mr Rwitare said unless banks and the government come up with some structure of financing for the construction industry, the problem of high rent will be there even if the market gets more commercial buildings.
“Unless the market gets subsidies, or if the city decides it will not tax commercial construction for some time, there is a need for affordable financing,” said Mr Rwitare. “The banks want their money in not more than 10 years.”
He said in a building there are usually different costs for different spaces. However, the issue is that, as expected, the demand for the ground floor for businesses is high, which has driven up costs for these spaces, yet most commercial tenants target this space.
The high charges on rent for commercial space are passed on to the final consumer, hence driving up prices of consumer goods at a time when disposable income is reducing among the population.
In a span of four years, big shopping and mixed complexes sich as Kigali City Tower, Grand Pension Plaza, M Peace Plaza and Nyarugenge Market have come up in the CBD while others like Champion Investment Corporation (CHIC), and other commercial plazas are soon to be opened.
Other areas outside the CBD are also churni