The government plans to offer an infrastructure rebate to developers of high density and affordable housing units in a bid to meet increasing demand.
The Rwanda Social Security Board is expected to offer this rebate to developers of Vision City, a residential development in Gacuriro.
Realtors project investments in the upper housing segment, which had slowed down to now increase while mortgage financers say the move will provide an opportunity to grow their loan book.
Liliane Mupende, the CEO of Ultimate Developers Ltd — the real estate investment arm of the Rwanda Social Security Board — said the government’s recent offer to foot 30 per cent of the costs developers incur in setting up infrastructure such as roads and utilities in high density residential developments had attracted interest.
Ultimate Developers Ltd responded to the incentive with price reductions for its units in Gacuriro. A three-bedroom townhouse reduced from Rwf237 million($285,000) to Rwf166 million($200,000) while a four-bedroom apartment reduced from Rwf257(309000) million to Rwf180 million($216,478).
“The market has responded positively and we are seeing increased uptake of homes in Vision City,” said Ms Mupende.
Ultimate Developers Ltd constructed 504 units in the first phase, which are ready for occupancy. However, home owners who made a 30 per cent deposit on the units were struggling to raise the remaining 70 per cent.
The price reduction should make it easier to clear the arrears.
According to Ms Mupende, confirmed purchases are at over 35 per cent with additional bookings at over 60 per cent. This means a huge amount of the Rwf109 billion ($130 million) investment that RSSB put into the project is still tied up.
The bigger challenge for Ultimate Developers Ltd and other construction companies is getting a ready market for high-end properties.
The market became somewhat saturated after extensive vacancies in older properties in Gacuriro and Nyarutarama forced a 40 per cent reduction in monthly rental charges.
According to realtors, this has led potential home owners to adopt a wait and see attitude as they anticipate further drops, which ties up investors’ capital.
“Three years ago, renting a house in Gacuriro cost Rwf2million ($2,500) per month but currently the same unit is available for Rwf1.2million ($1,500) and at times even Rwf831,490 ($1,000) per month,” said Kefa Angwenyi, a lecturer at the College of Architecture at the University of Rwanda.
He is also a regional property developer based in Kigali.
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He said opportunities are currently in mid-range houses near the city centre, which cost between Rwf30 million ($36000)and Rwf70 million ($84,000) as rent price are steady.
Despite the incentive, Ultimate Developers Ltd could face a difficult task in selling its Vision City units.
Oxyprop Rwanda Ltd’s Karibu Homes in Kagugu face the same challenge. The units cost Rwf100 million ($120,266) per unit and target the same home buyers as Vision City. Karibu Homes has 66 units.
Another competitor for buyers is Century Park Ltd, a real estate investment firm owned by Hatari Sekoko, the Rwandan magnate behind Marriot Hotel and Kigali City Tower. The firm is constructing 16 villas, two apartment blocks and a hotel.