Rwanda Social Security Board (RSSB), a public pensions fund, is considering cutting the prices of Vision City apartments to recover part of the Rwf102 billion it invested in the project.
However, real estate developers warn RSSB to go slow on further cutting the prices of its Vision City estate fearing it could distort the market.
Rwanda Today has learnt Ultimate Developers (UDL) recently proposed to RSSB board to reduce the sale prices to make the apartments affordable to local home buyers.
Director general of RSSB Jonathan Gatera confirmed receiving the sale price reduction proposal from UDL, saying the board will take a decision at the board’s 3rd quarter meeting in September.
Should RSSB board approve the proposal, this will be the second time. In July last year, UDL reduced the prices of each unit by 30 per cent after receiving an infrastructure tax rebate from the government.
To attract investors in high density housing, the government started footing costs on road network, drainage system, sewerage and electrification of sites with a minimum of 60 units.
For UDL’s Vision City high-end housing estate, a 30 per cent incentive pushed down a four-bedroom from Rwf180 million, from Rwf257 million.
A three-bedroom townhouse at Vision City costs Rwf166 million, from Rwf237 million.
A three-bedroom apartment, which was going for Rwf225 million, will now cost Rwf157 million, while a two-bedroom apartment that initially went for Rwf150 million, will now cost Rwf105 million.
The mortgage financing institutions in the country support the proposal the further reduction of prices of the apartments.
KCB Bank Rwanda and I&M Bank Rwanda which are about to sign memorandum of understanding with RSSB to start financing the mortgages said they are still in discussions.
RSSB approached several lenders in the country, promising to deposit workers’ savings in the banks. The condition of getting financing for lenders is to price their mortgages at 12 per cent for a 20 year-period.
The lenders have to cut the mortgage rates at Vision City by 550 basis points and anter into mortgage term of 20 years.
This means the banks will lend at 12 per cent, instead of the current 17.5 per and 19 per cent depending on the perceived risk of the borrower.
The lenders who talked to Rwanda Today suggested that reduction of prices by further between 30 to 20 per cent to attract local Rwandans to buy the apartments.
“If RSSB is to make further sales and faster one another reduction is needed,” said a banker, noting that UDL has not aggressively marketed the properties to diaspora.
As of April 11, only 142 units had been sold, leaving 362 units without buyers, a year after the project was completed.
However, real estate developers fear the price cut could distort the market and slowdown investments in apartments which are in line with the current city development master plan.