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.
A large number of Rwandese fled their country during the infamous 1994 genocide that claimed about a million lives in just 100 days.
But with the return of peace, following governance reforms, many are trooping back with huge capital for investments after nearly a decade and a half in exile.
Records by the RDB showed that about 10 real estate and construction companies, including Kenyan firms, have registered with it to possibly invest in real estate investment projects worth about $3.5 billion.
The Kenyan firms that have already registered with the RDB include Bora Capital, Graceland Holdings, Investeq and Kingsley International.
Those from Uganda that have shown interest in the Rwandese real estate market included the Sembule Group, the Darc Group, Costa Construction and the White Light Group.
“The real estate in Rwanda is fantastic in terms of growth prospects and everyone in rushing in there,” Joe Macharia,the CEO at Bora Capital told Business Daily. “We are even getting worried that nothing may be left on the table by the time we conclude all logistics of entering the market,”
And in what is likely to further boost this appetite for the real estate sector in Rwanda, the government projects that by 2020 approximately 30 per cent of the population will be residing in urban areas.
Currently, only about 5 per cent of residents in Kigali own modern-style houses.
“In Kigali alone, demand for housing is about 8,000 to 10,000 units per annum. The combined demand for housing country wide is estimated to be 25,000 units per annum,” Rwanda’s Infrastructure ministry estimates.
In May last year the RDB unveiled construction projects worth over $600 million to investors, and urged for input to help overhaul the country’s over stretched real estate sector.
Among the key projects proposed to investors by the RDB included 20 high end luxurious villas worth more than $14 million and each expected to cost between $600,000 and $800,000 in prime locations like Gacuriro,Kacyiru and Gisozi.
The board also floated proposals for the construction of 50 top range units around Gaculiro area at estimated cost of about $12million.
Mr Macharia said the development blue print of the real estate sector in Rwanda is “highly investor friendly” hence the rush even among international groups.
“The country’s leadership has a strong taste for order and addresses all aspects critical to a housing investor such as sewerage and infrastructure. They even go ahead to provide vehicles such as joint ventures where an investor only comes with the capital and land is provided,” he said.
With this huge appetite for housing in Rwanda, manufacturers of building materials from the region and beyond have an opportunity to tap the market.
“There is therefore an opportunity for import substitution and local manufacture,” the investment office in Rwanda said in a brief.
Rwanda has fast become a preferred destination for investors following a raft of reforms in the business front that saw it listed among the top performers in terms of ease of doing business by the World Bank.
“For the first time since Doing Business started tracking reforms, a Sub-Saharan African economy, Rwanda, led the world in reforms. Rwanda has steadily reformed its commercial laws and institutions since 2001,” the Bank’s lending arm, the International Finance Corporation (IFC) said in a statement last year when it released a scorecard in which Rwanda climbed from position 143 in 2008 to 67 in terms of ease of doing business.
For instance with regard to acquiring a certificate to start a business it initially involved an investor 8 procedures that lasted 14 days to complete with fees levied according to business activity.
The RDB Registrar General’s office however last year moved to cut the process to just two procedures and today issues registration certificates in 24 hours from the time of submission of application.
In addition, an investor is no longer required to notarise company documents or publish articles of association in the official Gazette.
Investors are also charged a flat fee of Rwf 25,000 for such permits regardless of the level of business activity.
Construction permits, with regard to acquiring construction permits, it previously involved 14 procedures over 210 days to complete to the rebuke of potential investors.
This has eased substantially after the leadership of Kigali formulated a client charter that puts specific time limits for the delivery of these permits.
Today securing a deed plan and location contract takes 15 days, while getting a building permit takes an investor 30 days.
Landing a final inspection and occupancy permit takes 30 days.
“In addition, Rwanda Development Board now has in house district officials to facilitate investors to acquire land and construction related documentation. The board also has an in house Electrogaz staff member to help businesses connect to the utilities,” the RDB said.
Electrogaz is the national utility company that distributes electricity and water in Rwanda since 1976 and has also launched a client charter that limits connections for water and electricity to 2 days upon application and payment.
The utility firm has since been split into two entities to separately handle water and electricity matter as part of efforts to boost efficiency.
“Kenya has a lot to emulate from Rwanda in terms of attracting real estate investors. The country requires a comprehensive blue print for real estate development if investors are to take it seriously,” Mr Macharia said.
Apart from reforms in the licensing front, Rwanda has also made a mark in terms of minimising corruption within its official ranks unlike in neighbouring Kenya, Uganda and Tanzania where investors still have to endure thieving public officials who take advantage of them to enrich themselves.
Rwanda President Paul Kagame has personally taken to leading the fight against corruption among government officials thus helping to keep graft at low levels.