When a local real estate developer Ujenge Group announced sale of apartments in Kigali’s upscale suburb of Kagugu, the response was overwhelming. Excited home buyers parted with up to 70 per cent of the value of the apartments.
About 32 homes were on sale in the $12.6 million (about Rwf8.7 billion) Palm Estate project launched in 2011.
However, the excitement was short-lived as the project developer quickly run into financial problems, failing to deliver the homes in October 2013 as scheduled.
This means the developer never had enough resources and hoped to use money paid by customers, and credit from Ecobank Rwanda and Shelter Afrique to develop the multi-million dollar project.
Otherwise, how would the developer face financial problems not long after securing close to Rwf6 billion from financial institutions and an unknown amount from home buyers?
This incident is an eye opener that strict measures must be put in place to protect Rwandans who are trying to own a house using their hard earned income from such developers.
The funders were also at fault to release money without doing due diligence to gauge the capacity of the developer. They should have ascertained that Ujenge Group had enough funds on their account to cover their contribution.
The mess also raises questions of supervision by the sector regulator. One would assume that Rwanda Housing Authority would be interested in such projects, partly to support developers and also ensure the interests and rights of clients are not abused.
Because of the mess that could have been avoided, home owners in the estate are now dealing with a third party, Trust Law Chambers, the appointed receiver after sacrificing and paying 70 per cent for the apartments that cost Rwf28 million (two bedrooms); Rwf35 million and Rwf50 million for small and large three-bedroom units, respectively.