July 28, 2016 | Filed under: Business,Daily News,National |
COPCOM Building in Gacuriro, Gisozi Sector in Gasabo District. (All photos by Jean d’Amour Mugabo)
Venturing into real estate may regress as the low uptake of Kigali commercial buildings keep stirring up fears among investors on making returns.
The government has been encouraging investors to venture into real estate developments and as a result, Kigali city and secondary cities have seen many new multi-storied buildings and more are coming up quickly. However, finding clientele to fill those magnificent buildings remain a nightmare among developers.
The ideal behind this investment is to present a more attractive investment environment with adequate offices and commercial buildings while contributing to the country’s infrastructure development too.
They are also being developed in line with the 2013 Kigali master plan and master plans of other areas across the country in a bid to have a smart Rwanda devoid of slums, whichever.
ADARWA Building in Gacuriro, Gisozi Sector in Gasabo District.
That move has changed the country’s outlook and one of the most significant changes can be observed in Gacuriro centre, a former slum in Gisozi sector, a Kigali suburb, now turning into a nice looking area thanks to at least, five magnificent commercial buildings which were completed in the area two years ago.
The area has become a beehive of activity involving nearly 1,000 cooperative members who own five buildings worth about Rwf 15 billion, and have turned the commercial centre into a home to the biggest furniture market in Kigali.
However, the low occupancy of these buildings, which is still below 60% after two years, arouses doubts on whether all these buildings were really needed in the area or developers are not carrying out a thorough study on demand before erecting these posh estates.
Developers spill it all : During The Rwanda Focus’s visit, Gacuriro estate developers expressed their thirsty for clients, pushing them to slash rent prices to the minimum possible but still uptake remain insignificant, adding that the government is aware of the problem.
Jean Baptiste Rudasingwa, president of SOPROCOGI.
Expressing hope for a better plaza’s occupancy in the near future especially thanks to the expected government’s support, Jean-Baptiste Rudasingwa, the president of SOPROCOGI, a society that owns a plaza known as Umukindo Center, says the low occupancy of their four-storey building has caused difficulties in repaying bank loan.
“It is not so bad with the current uptake but it does not match with our early expectations. We built this plaza with Rwf 6 billion and over Rwf 3 billion was a loan from GT bank to be repaid in 10 years. But seeing a small income from the plaza, we had to negotiate the transfer of the loan to Bank of Kigali (BK) which has extended the repayment time according to our revenues,” he said, adding that clientele is slowly increasing.
Rudasingwa added that Umukindo Center, which is currently occupied at 50%, eyes a boost from the Ministry of Trade and Industry (MINICOM) which pledged to send tailors cooperatives to occupy a significant space in the plaza which has 448 rooms. “Rent prices are negotiable here and we never reject a client because we highly need them,” he said.
Bienvenu Mutware, the manager of COPCOM, a cooperative of 321 sellers of construction materials who owns a 410-room plaza, says the occupancy currently stands at 57% yet the building opened two years ago.
“We constructed it at the tune of Rwf 3.6 billion, of which Rwf 1.9 billion was a bank loan and we wanted to repay it quickly but we have now sought repayment time extension as we pay according to a monthly income from this building. We have slashed rent prices to the amount ranging between Rwf 59,000 and Rwf 300,000, and our clientele is increasing,” he said.
Umukindo Center in Gacuriro, Gisozi Sector in Gasabo District.
ADARWA building, another 162-room building worth about Rwf 2.5billion is also rented at about 57%, having opened over the last two years the owners are also suffering loan repayment challenges.
Model Garment Centre : Alex Ruzibukira, the director-general for industry development at MINICOM told this newspaper a few days ago that government has planned to set up a model garment centre in Gisozi and that will significantly increase the occupancy of the plazas.
“We want to bring together all tailors working in Kigali and their association will start a model garment centre in Gisozi. It will occupy a big part of Umukindo Center. The budget to support textile industry has been approved in the fiscal year 2016/17 and we have already visited the rooms that tailors will use. It is just a matter of time,” he said.
New Kigali mayor Monique Mukaruriza. (photo Denis Kato Rutahunga)
Mayor of the City of Kigali, Monique Mukaruriza said their policy encourages people to build according to Kigali Master Plan and different strategies put in place will keep increasing clientele for the buildings.
“We are phasing out inadequate buildings and their occupants move to the newly coming up buildings. We are also grouping small vendors into cooperatives so that they consolidate means to increase their capacities and they will be able to rent rooms in smart commercial buildings,” she said.
Noting that some commercial buildings are fully booked even before they are completed, Mukaruriza advised developers to market their buildings and check with their rent prices to ensure that they are not higher than the capacities of interested tenants.
Lack of tenants for the buildings has been a general issue not only to private investors but also to government institutions like Rwanda Social Security Board (RSSB) which ventured in real estate to compete with other developers.
The Rwanda Social Security Board head office. (File photo)
RSSB owns six multi-story complexes (known as Pension plazas) in different districts around the country in addition to Grand Pension Plaza which dominates Kigali’s skyline. However, the plazas, especially those ones upcountry, have been suffering low uptake and it was said that RSSB mulled selling them last year.
The Auditor-General’s value for money report for 2013/14, which was released last year, raised the red flag after its findings showed that 85% of the Nyanza Pension Plaza was empty while 78% of the Rwamagana Pension Plaza had not been booked
Source: http://www.focus.rw/wp/2016/07/28/kigali-plazas-battle-low-occupancy-who-will-save-developers/
