The analysis, by Transparency International Rwanda (TI-Rwanda), conducted on a sample of 11 cases of property auctioning in 2023 found that properties worth over Rwf250 million were auctioned for only Rwf134 million.
This means that their properties were devalued by 62 per cent since the owners received only 38 per cent of their actual value, the analysis shows.
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The analysis revealed that one resident got a Rwf10 million loan from a bank and provided two collaterals.
One collateral was a Rwf23.5 million commercial house and the other was a Rwf7 million residential house.
When there was a failure to pay back the loan, the properties had to be auctioned.
However, the TI-Rwanda report found that the Rwf23.5 million commercial house was auctioned at only Rwf3.5 million while the Rwf7 million house was auctioned at Rwf2.5 million at different times.
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The analysis also indicates that a resident who got a Rwf29 million loan provided two collaterals in a bank—one was a Rwf30.3 million house and the other was a Rwf33 million plot of land.
But, during the auction, the house was sold at Rwf13.5 million.
The victim appealed and the property was auctioned at Rwf22.8 million but it was still below the actual value.
The Rwf33 million land was auctioned at Rwf8 million.
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The sampled cases are among 3,770 complaints about injustice in property auctioning which TI-Rwanda received in 2023.
Of these, 49 per cent were reported by females while 51 per cent were by male.
Previously the value of properties to be auctioned would be degraded by brokers who participate in auctioning without the intention to buy the property, but to ensure they engage in conspiracy with other people who want to buy it at lower prices
However, Odette Mukarukundo, Advocacy and Legal Advice Centre (ALAC) coordinator at TI-Rwanda said that although there is the 2020 Ministerial Order which came to eliminate brokers, the order still has a loophole that makes it easier to devalue a property during auctioning.
"When the victims seek to appeal against the carried out auctioning, they are told that they are late,” she said.
She said that those whose properties were auctioned are facing psychological effects and non-communicable diseases as a result.
"The situation is discouraging people from working with banks.”
She said the banks also count losses when the auctioned properties do not pay back the whole amount of the loan.
Frank Kajugu, an employee of the Central Bank said: "The victims who lose properties in these auctioning cases are becoming destitute. This is because when the auctioned property is unable to pay back the loan, the other properties they have are also auctioned even though they were not given as collateral.”
Request to change article 3 of 2021 law
TI-Rwanda has suggested changes in the law relating to civil, commercial, labour, and administrative procedure.
The article says that the bailiff publishes in an appropriate electronic system a reference price that is equivalent to the value indicated.
The highest bidder who provides a higher price is declared the successful bidder.
The owner of the property has the right to decline the price offered at the first round and at the second round in case no price reaches 75 per cent of the reference value.
In the third round, the property to be auctioned is given to the bidder who offered a price that is higher than other prices offered during all the rounds of the auction.
In this context, TI-Rwanda calls for change stating, "The room to give property to the bidder who offered the price that is higher than other prices offered during all the rounds of the auction is still a challenge because those who want to buy still wait for the 3rd round and provide the lower prices that is less than the property’s actual value”.
"We recommend that the article in the law be changed to ensure that there is no loophole to devalue a property during auctioning. Instead of selling the property to a person who provided a high price [which might be lower than the actual value), the selling should be based on the actual value of the property as mentioned by valuators or even above.”
Mukarukundo said the announcement about the forthcoming auction should mention that "a bidder must provide a price that is not lower than the actual value of the property as mentioned by valuators.”
Bonaventure Ntabwoba, the Head of Branch Business at Bank of Kigali urged property owners to "ensure their right to find themselves the buyers that can bid through the electronic procedure available.”