Real estate investments need a systematic approach
Wednesday, November 07, 2018

The last few weeks have seen an upsurge in queries about real estate investments in Kigali. The increased interest comes from both individuals and entities with a view to diversify their portfolio.

Upsurges such as this are always exciting to those of us who work to professionalise the real estate industry.

The excitement comes not just from a potential increase in revenues if the queries lead to closed transactions but also from the idea that real estate investment remains one of the surest bets for securing a monetary future for so many people.

What an increase in the number of queries about real estate in Rwanda also indicates is that the market is maturing; that the potential threat to the market of simply building and imagining what rental rates to charge is weaning.

Any industry not governed by even a semblance of research and feasibility analysis is at risk. This risk is not always visible in the short term but for the long term its impact will become quite clear to even those not directly involved in that particular industry.

Rwanda’s real estate market has had this risk for some time hence the excitement from the growing number of queries about real estate opportunities.

What is somewhat concerning with the queries, however, is the noticeable trend when the source of these queries is analyzed. By quite a margin, the largest number of queries are from foreign investors.

That is, individuals and organisations from outside Rwanda and the East African community form the largest group seeking advice on how to invest in properties in the Land of a Thousand Hills.

This is a matter for pause not because there should be a limit on the number of foreigners versus locals who invest. Instead the pause becomes important as we examine the information in more detail.

* Is it a situation where local buyers/investors are making huge financial investments without professional input?

* Could this be happening because a decade or in the past once a house was built there would be tenants for it?

* Could this be happening because in the local market the investors know someone who built a commercial building and it was successful so it must mean that the success is replicable? If the answers to the questions are yes then a problem exists which can serve as an explanation as to the number of houses which struggle to be rented and the empty commercial spaces across the city.

All sectors grow and develop as do countries such as Rwanda which are on a positive trajectory. With this growth comes the reality that opportunities which existed 3 years or 5 years ago may no longer exist as viable opportunities.

The growth in an industry such as real estate does not mean the industry no longer has possibilities. Quite the opposite. Here in Rwanda the growth has simply created new opportunities in different neighbourhoods as well as in different segments of the industry.

It is a lack of this understanding which is leading to less than the usual stellar returns which many have come to expect.

Real estate has been the cornerstone of wealth creation for many people in Rwanda, East Africa and globally. For this to continue in Rwanda, a more systematic approach has to be adopted by players in the industry.

With over five hundred houses in the rental marketplace there is no need to build more houses to be rented to expatriates. With many empty commercial spaces the questions for investors in this sphere is "what is different about your commercial space to make it more attractive?” "How will your building be managed to ensure a smooth operation on a daily basis?”

Let us not allow opportunities to pass us by due to a lack of analysis.

Twitter: @NatsCR

The views expressed in this article are of the authors.