Politics and policy
Kigali’s real estate boom pulls investors as State moves to cut bureaucracy
Posted Wednesday, May 12 2010 at 00:00
From the large fleet of open-top trucks ferrying workers and materials to construction sites in the main business district to a skyline littered with giant cranes, the real estate boom in Rwanda’s capital is moving at full speed.
Barely a year after it was slightly slowed down by the effects of the global financial crisis, Kigali’s real estate has once again come alive as investors mainly from Asia and Europe jostle for a pie of office space and housing demand.
Last June, the International Monetary Fund (IMF) projected that Rwanda’s economic growth would slow to 5.3 per cent in both 2009 and 2010, from an impressive 11.2 per cent in 2008, due to the global economic crisis with its effects hitting key sectors such as real estate.
“At least I’m able to secure work shifts throughout the week unlike last year when we could only get a day or so because of bad economic times,” Fidele Hakizimana told Business Daily in broken swahili as he waited for a truck to ferry him to a construction site on Umuganda Boulevard within Kigali’s central business district. “There is more and more work all around town today and people are happy. The future looks bright for us,”
Moments later, Mr Hakizimana joins about 30 other construction workers on a truck headed for work and sure of bringing back home some food for his young family.
Across the road a giant crane is busy at the construction site of the proposed $226 million (Rwf1 28 billion) Kigali Convention Complex as workers erect steel rods that will support the ultra-modern structure.
A drive across the suburbs of Kigali confirms a huge boom in the construction industry from the high end areas such as Gacuriro,Gisozi and Kacyiru to the middle level regions such as Kicukiro and Mahima.
“Our real estate and construction sector is booming and we are looking up to having new facilities on every other hill around town. The effects of the financial melt-down have substantially fizzled out and the economy looks up to the construction and agriculture sectors for growth,” Rwanda’s Foreign Affairs minister, Louise Mushikiwabo told Business Daily.
Analyses by the Rwanda Development Board (RDB) showed that the current phase of the construction boom started in 2007 when the country’s development and public works sectors experienced a sharp 10 per cent growth, thus creating a shortage of office space and residential housing.
The growth of this sector has since climbed to about 15 per cent as at last year with estimates showing that it contributed about $141million to the country’s Gross Domestic Product (GDP).
“The recent increase in foreign investments has created a shortage of high-end office space with fully equipped telecommunications, utilities, and power,” the board said noting that from 2003 to 2006 alone rent in high-end office buildings increased between 50-200 per cent.
In order to support this shift in demand, huge volumes of investment were poured in to try and match the supply of housing.
For instance between 2003 and 2008 alone, investment in the construction sector grew by 250 per cent from $100million to $350 million, indicating the rush by investors to try and capitalise on the housing deficit with Rwanda importing $64.6 million worth of construction materials in 2007 compared to $140 million in 2008.
Investors have been duly rewarded for their efforts with the board revealing that in 2008, revenues from the general construction sector increased by 51 per cent driven by a myriad of factors including a population growth of 2.8 per cent combined with urban growth currently at 4 per cent per annum, a fast expanding middle class and diaspora returning to Rwanda.