Mortgage law gets bankers’ nod

Mortgage lenders have accepted changes in the long awaited mortgage bill, saying it sufficient enough to protect the interests of different stakeholders including developers and brokers.
Social Security Fund Rwanda's estate at Gaciriro (file photo)
Social Security Fund Rwanda's estate at Gaciriro (file photo)

Mortgage lenders have accepted changes in the long awaited mortgage bill, saying it sufficient enough to protect the interests of different stakeholders including developers and brokers.

The amendments were approved by parliament recently following complains from stakeholder including real estate developers, commercial banks and residential home owners who said that if implemented, the mortgage law, would  stifle the growth and development of the budding mortgage industry.

Seeking permission before financiers recover their money was scaring banks from financing mortgage and contributing 70 percent of the mortgage cost was not a regional practice.

According to Steve Caley, the Chairman of Rwanda Bankers Association, the mortgage lenders are now comfortable with the amended law. 

“The maximum of 30 percent was driven by the restriction in the law that only 30 percent of a property’s value could be subject to mortgage. Now that this has been removed, lenders are free to lend against the value of the property,” Caley told Business Times last week.

Without the amendment and 30 percent restriction, Caley said what all lenders would advance as any percentage above would be unsecured and risky.

“Customers were being asked for a 70 percent down payment which is practically impossible,” 

While a number of banks have resumed offering their mortgage product to borrowers, Caley observed that the contribution request of approximately 20-30 percent is often too high to promote savings. 

“The (amended) law is acceptable. It is only in the administrative part of registering a mortgage that we (bankers) think there is room for improvement. However, it is an evolving process that we believe will be sorted out in time,” Maurice Toroitich, the Managing Director of KCB Rwanda said in an interview recently.

He specifically referred to the process of registering a mortgage and acquiring a title deed, as these processes are not directly controlled by the bank.

“We have to work with the lands registry to make sure that the documentation process is fast, sufficient and foolproof. Currently it is possible to register a mortgage without a title deed. The question is what happens when the title deed is issued?”

However, Toroitich said he was optimistic with regard to government’s commitment to develop the industry; adding that such concerns will be resolved paving way for “good mortgage business.”

Earlier last year KCB had announced that this would include mortgage financing on its investment portfolio but the plans were negatively affected by gaps in Rwanda’s mortgage law.

Toroitich said the bank intends to invest some of its additional capital worth Rwf3 billion from the Kshs12.4 billion capital raised by KCB Group rights issue.

“We would like to assign some of that money to funding mortgages; we will grow strong in mortgages as we go into next year ; this will be one of our biggest products going into 2011,” Toroitich said.

Nathan Loyd, the Chief Executive Officer of DN International— a real estate development company— told Business Times that the pending mortgage law had crippled their operations.

“As developers we are suffering because we were developing houses we can not sell; it is difficult to sell without bank’s protection.”

Loyd said his company has approximately 40 housing units pending to sell with each valued at Rwf75 million.  

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