Dealers in the real estate industry have expressed concern over the recently gazetted Mortgage Law, saying that it is likely to ruin their businesses and hurt the entire mortgage sector.

Nathan Lyod, CEO of DN International said that the current law threatens banks from financing mortgages.

He explained that the new law stipulates that a mortgagee shall raise 70 percent of the mortgage value while the bank shall not finance up to 30 percent. The reverse was required in the old law.

"This means that many of our projects will stall. How many people can afford to raise the 70 percent?” Lyod questioned.

Charles Haba, Managing Director of Amani Holdings, said that the new procurement procedure freezes the projects since most houses are sold before the buyer gains full control of them. 

"There will be limited financing for further development,” he explained.

Complaints by the real estate dealers come at a time official figures by the National Bank of Rwanda show that the current demand for mortgage finance is much higher than its total supply. 

Quoting Article 26 of the new Mortgage Law, Haba said that there is a likelihood of disagreements between the mortgagees and mortgagors.

"This will be as a result of trying to apply new terms contrarily to what was agreed before,” he explained.

Article 26 of the new Mortgage Law stipulates that all mortgages entered into prior to this law shall remain valid for only two years, after which the new law shall be applicable.

However, according to Article 29, deals after the new law are supposed to comply with it since the day of its publication in the Official Gazette.

Haba also explained that having the registration of mortgages in the office of the Registrar General is not convenient enough like it would be if it was in the lands office.

He said that the new law was necessary but only lacked consultation of stakeholders.

"None of our comments were considered,” he said. 
It is also reported that all players (dealers, developers and financers) in the sector have petitioned against the law calling for adjustments in certain provisions.

The Rwanda Commercial Bank (BCR) Managing Director, Sanjeev Anand, confirmed the appeal for fear of collapsing the entire industry.

Patrick Nzirabatinyi, the Legal Advisor of Cogebanque said that banks have strongly spoken against the law.

"We have compiled our suggestions and forwarded them to the Economic and Social Council in the Prime Ministers’ Office for consideration. We hope that all will go well,” he said.

Cogebanque chairs the Bankers’ Association of Rwanda (BAR). There are eight commercial banks in the country, but only four finance mortgages.

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