Some commercial buildings are at the risk of being auctioned by banks as developers struggle to pay off loans amid low demand for rental space.

While many businesses successfully restructured their loan repayment as a result of Covid-19 pandemic outbreak, many have accumulated arrears that are increasingly becoming difficult to pay.

For instance, Rwanda Today has learnt that Inkundamahoro Modern Market in Nyabugogo car park is one of the properties that are facing auctioneer's hammer due to accumulated loan arrears.

The property was developed by the small and medium business owners to avail more space to former street vendors and other small and medium businesses.

However, since the lockdown in March last year, the property has struggled with occupancy after shops closed indefinitely during the pandemic.

Emile Rwamo Niyonshuti, managing director of Inkundamahoro Ltd told Rwanda Today that at least 190 rooms out of 687 rooms available in Inkundamahoro Modern market, which equates to 2,509 square metres reserved for the small and medium enterprises are vacant.

In addition, some large spaces occupied by big businesses are now vacant as some were forced to close due to coronavirus restrictions. Among the businesses which remain closed are bars and saunas.

“Much of space meant for service providers such as bars, saunas among other businesses are empty,” Niyonshuti said. Inkundamahoro Modern Market was developed after the group collected Rwf2.5 billion, and acquired a Rwf6 billion loan from the Development Bank of Rwanda to expand and construct the market.

With the contract breaching issues during the construction process, along with the coronavirus pandemic related effects, servicing the loan has been difficult with the group is now accumulating arrears and penalties.

On the Rwf6 billion loan, Inkundamahoro Group has been able to pay Rwf4 billion; however the payment of the debt stalled and the penalties have accumulated to at least Rwf7 billion.

According to the property managers, the current economic circumstances have affected the payment schedule of the loan.

“We need help as the upper spaces that used to get us money to service the bank loan are closed due to the coronavirus pandemic,” Niyonshuti noted.

While some tenants negotiated their contracts and were given discounts, businesses still struggle to pay rent because expenses are higher than revenues.

“The high cost of renting commercial buildings is putting off business owners, because most of the businesses have been badly affected by the pandemic, yet some of the commercial property renting cost remains the same,” said Samuel Karemera, a tenant at the CHIC Building Kigali.

“We have negotiated for rent reduction because business is still low. We are operating below our capacity due to coronavirus regulations yet we still have to meet all obligations, including taxes,” he added.

CHIC Building, which was initially developed by a group of 67 small and medium business owners, is also struggling to service its loan.

Rwanda Today has learnt that the investors have submitted proposals to the government to intervene and bailout small businesses that are struggling.

However, negotiations whose details have not been made public appear to have stalled with Kigali City and Rwanda Revenue Authority advising traders to renegotiate their rent contracts.

According to the Institute of Policy Analysis and Research, before the pandemic Kigali's occupancy was estimated at 85 percent, with Remera which has the highest commercial building occupancy at 93.1 percent, followed by Nyabugogo (89.5 percent) and Kacyiru (89.3 percent).

Kicukiro has the lowest occupancy rate at 75.8 percent followed by Gisozi 77.6 per cent.