Home buyers in the cold as Kenyan investor faces auction
Friday June 15 2012
Hill View estate in Kigali. DN International (DNI) defaulted on a loan acquired from KCB Rwanda in 2010 to construct a housing estate, Green ark Villas prompting KCB to auction the facility. Photo/File
Several senior Rwanda government officials were last week left facing the prospect of huge losses after a Kenyan investor who had sold them houses was slapped with an auction notice by KCB Rwanda over a Rwf3 billion ($5 million) debt.
DN International (DNI), registered in Rwanda but run by Kenyan investor Nathan Lloyd, defaulted on the loan acquired in 2010 to construct a housing estate, prompting KCB to auction the facility. An auction planned for Thursday last week was stopped on site by the police.
DNI had taken out the loan to construct Green ark 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). KCB Rwanda managing director Maurice Toroitich said the auction would take place as the two parties had failed to reach an amicable solution on the debt.
The company is also facing a potential action by Fina Bank over another project — Hill Park Villas — in which the senior government officers had bought houses.
Among those who had bought houses are Senate president Jean Damascene Ntawukuriryayo, Deputy Commissioner General of Rwanda Correctional Service Mary Gahonzire and East African Legislative Assembly MP Patricia Hajabakiga.
Fina Bank had signalled plans to auction the 28-unit Hill View Estate property, worth close to Rwf850 billion ($1.5 million), late last year but the government intervened and suspended the auction.
The saga over the houses, which has been running since early last year, has left the government embarrassed since it had sanctioned the DNI investments.
On the face of it, the entry of DNI into Rwanda’s real estate business four years ago was to be a game-changer. With much fanfare —a presidential welcome to boot — the firm went after high-profile deals.
Apart from the two estate projects, the firm clinched several other lucrative contracts including one to build the American embassy in Kacyiru on the outskirts of Kigali.
Victims of the saga who spoke to The EastAfrican said the Kenyan government was doing little to apprehend the investor, who Rwanda says is on the run and for whom the police have issued warrants of arrest.
The Kenya police could not confirm this.
“We are relying on the goodwill of the government, although we have hired a lawyer to handle this. There is no assurance that we will not lose our houses,” said a senior government official who had bought a house at Hill View Estate.
DNI is also said to be facing a barrage of demands by suppliers who are claiming over Rwf 72 million ($623,000) owed to them.
So what went wrong for the DNI?
An executive at Fina Bank who did not wish to be quoted said DNI’s problems arose after the firm took deposits (for Hill View Estate) and used them as security to take a loan from the KCB to embark on the Green Park project, leaving it with no money to repay the initial loan.
Fina Bank currently holds all the titles of Hill View Estate in addition to the land title of a separate chunk of land that DN International had acquired.
Negotiations are at an advanced stage with the different stakeholders, including the government, which is keen to resolve the issue. The options being weighed, the Fina Bank executive said, included selling DNI’s large plot of undeveloped land to recover the bank’s money.
Fina Bank is said to be getting impatient with the pace at which this process is moving, as the loan has left it with a dent in its non-performing loans book.
Two years ago, Rwanda had a mortgage law that housing players rejected for holding back uptake of home loans.
Banks too were against restrictions in the previous Act that required financiers to seek permission from mortgagees to recover their money in case of default.
The mortgage law — which also required 70 per cent down payment by clients — was deemed too expensive for the market and was amended in late 2010. The amendment lowered this figure to 30 per cent.
In the amended law, banks are allowed to sell the client’s security to recover their money.
“DNI’s biggest challenge came after it was unable to manage and settle the Fina Bank debt, which spoiled its reputation, keeping away prospective buyers,” said a source involved in the dispute.
“Again, for DNI, this was a typical case of over-optimism. The company bit off more than it could swallow.”
Following the amendment of the mortgage law, Rwanda’s mortgage business has taken off with the majority of Rwandan commercial banks repackaging their home loan products.