Real estate has been a booming business in Kigali for the last couple of years. Drive around town and you will see new residential and commercial properties being built. Examine photos of Kigali 20 years ago, Kigali 10 years ago and the Kigali of 2017 and there is no doubt the city has grown significantly.
Nonetheless, along with the established property development and those under construction, you will also see empty homes and commercial spaces of all sizes. This has become of concern to onlookers, both local and foreign.
Not a week goes by where I am not asked if the Kigali real estate market is heading to a disaster. The nervousness is heightened by what is rumoured as a significant default rate on bank loans for real estate.
When asked about the industry failing, I am cautious with my response as the scenario is complex and not quite as easy to decipher. Yes the market is flooded with over 300 homes for rent; yes we are seeing rental prices fall slightly; yes there is need for intervention with the rental prices being charged for commercial space; and yes banks should stop giving loans for construction projects for the next few years.
However, while I posit these views, it does not mean I believe the industry is about to develop a crisis.
There are factors working for Rwanda which are not applicable to most if any other nation at the moment.
- The country’s unstable history has left it with numerous gaps. While other nations have petered along slowly building industries and sectors, Rwanda was simply staying afloat for a long time. This has now become an opportunity to start from ground zero and build upwards in ways other countries cannot even imagine. Hence the seemingly huge swell of properties all at once.
- Members of the wider African diaspora often want to retire to the continent but sometimes cannot or do not want to do so in their own countries of origin. Rwanda is now seen as the possible place for them to consider living out their older years. The country has security, beauty, stability and its progress invokes a sense of pride in people of colour. If the health system were significantly improved, retirement to Rwanda would become an industry unto itself.
- The middle class in Rwanda is growing. There are opportunities and the prospects for opportunities for a group of people who, before the last decade, never saw a way to being described as middle class. One thing we know is that people within the middle class buy homes. They put down roots to build upon what they have already earned and to start and settle their families.
- According to the National Institute of Statistics of Rwanda, “The Rwandan population is projected to increase from 10.5 million in 2012 to 16.9 million (high scenario) to 16.3 million (medium scenario) or 15.4 million (low scenario) by 2032. The absolute difference between the assumption scenarios is trivial, which suggests that the future size of Rwandan population would be about approximately 50% more than the current population. This projected population growth comes with its own worry but it is also an opportunity for the real estate industry.
These factors working for Rwanda present opportunities for ensuring that the real estate industry does not fail or develop a long term crisis. What is needed though is leadership. Note I did not say regulation, more regulation could stifle the industry. There are a few things to consider in the scope of leadership within the real estate sector:
- Proactively promote Rwanda’s housing market to the African diaspora in both North America and Europe.
- Professionalize the real estate marketing, rental and sales industry.
- Create learning opportunities for real estate developers.
- Grow and develop the investment industry to move Rwandans away from the idea that real estate is the only safe way to build on wealth in the country. Get the stock market going, improve the mechanisms to develop fund management companies.
- Pause with new construction for a few years to allow demand to catch up with the current supply.
Only time will tell how the story will actually unfold in Rwanda’s real estate industry but I see opportunities more than I do problems.
The writer is owner and operator of Forrest Jackson Properties, a real estate company based in Kigali, Rwanda
The views expressed in this article are of the author and do not necessarily represent those of The New Times.