As access to finance continues to tighten due to fading liquidity in the banking system and the economy as whole, real estate prices are slightly falling across the country, according to a Business Times survey.
The Chief Executive Officer (CEO) of DN International, Nathan Loyd estimates house prices to have dropped by five to 10 percent.
“When there are no buyers, houses owners will definitely reduce prices of their houses,” he explained.
Loyd said buyers’ limited access to finance has impacted the entire industry.
DN International is one of the leading real estate developers with projects estimated at $22 million (Rwf12.4 billion).
Charles Haba, the General Manager of Amani Holdings, a local real estate brokerage firm said that house owners sell on the cheap because they are desperate to sell.
“Whenever there is a low turn up of buyers, you opt otherwise. Either reduce the price or hoard for a while.
But when banks are not giving loans, the option is to reduce the price and get some cash for your other projects,” he explained.
Official statistics by the Central Bank show that loans authorised by the banking sector dropped by 24 percent from Rwf94.4 billion in the first half of 2008 to Rwf71.7 billion in same period this year.
The mortgage industry is among the most underfinanced activity.It is estimated that mortgage financing is the most used scheme for owning a dream house.
However, this was greatly affected when the Commercial Bank of Rwanda (BCR) suspended its mortgage financing programme.
Real estate dealers predicted that the move by BCR could impact the entire industry as many people will miss out on owning their dream houses.
The Central Bank Governor, François Kanimba early this year said that the current demand for mortgage finance is much higher than the supply of houses.
“The banks’ capacity to sustain the past growth in real estate loans is constrained by the duration mismatch,” he explained during the Real Estate/Construction Sector Round Table.
Recent official estimates indicate that Rwanda needs about 25,000 housing units per year. And with a single house estimated at a cost of about Rwf20 million, it means that the country’s total housing demand would require an investment of up to Rwf500 billion per year
Despite the slight drop in the prices of houses, the rent costs have increased. Landlords argue that this is in relation to the increasing cost of leaving in the country.
“Who is not aware of the current economic crisis? Prices of food and transport fares have all increased meaning that this is supposed has to be compensated somewhere else,” argued Emmanuel Harimana, a landlord of a three bed roomed house in Kacyiru.