The Rwf34b investment in the local real estate industry announced by financial services group UAP Holdings will ease the housing shortage the country faces, especially in the City of Kigali.

Industry observers say the project could help reduce the current housing shortage and provide quality and affordable office rentals and residential units.

Speaking in an interview with Business Times, Charles Haba, chairman of the Real Estate Association of Rwanda, said the country currently faces a big shortage of both residential and commercial premises.

He said the UAP project will help fix the supply side, as well as create competition in the market. 

"This will be good, not only in terms of price controls, but also in the quality of the buildings. At the end of the day, clients will be able to acquire homes at affordable rates,” Haba noted.

The firm recently acquired prime land in Kigali where it intends to build residential and commercial houses.

"We shall undertake a commercial mixed development that is estimated at $50 million (Rwf34b),” UAP chief executive Dominic Kiarie was quoted saying by Kenyan media.

For UAP, the project in Kigali is expected to boost its earnings from investments as insurers look at real estate to deploy their own cash and premiums paid by customers.

Demand for both residential houses and office space in Kigali is going up, with most commercial buildings in the city doubling roles as retail stores and office rentals.

The demand for affordable housing in Kigali is estimated at over 30,000 per year, according to a survey done by the city authorities in 2012. The study also indicated that Kigali needs a supply deficit of 344,068 units by 2020 to cover all income groups.

The current annual supply of new dwellings in the formal market in Kigali ranges from 800 to 1,000 per year, according to the survey.

This is way below the demand across all market segments. Therefore, UAP’s project could go a long way in easing this pressure, especially among middle-income earners.

City of Kigali mayor Fidel Ndayisaba said in an interview with Business Times that the UAP project will play a big role in helping achieve the goals of city’s master plan by investing in the sector.

He said the real estate sector was profitable considering the demand, and urged the private sector to diversify their investment portfolios by investing in the sector thus enabling the attainment of the city’s development blueprint.

The city Master Plan that was unveiled last year is a comprehensive long-term plan intended to guide growth and development of Kigali City. 

"The Master Plan will help the citizens of Kigali to live in a better urban environment, which emphasises social inclusion, economic development, access to civic facilities and sustainable growth,” the city authority said at the launch of the initiative late last year.

"Companies like UAP Cogebanque and the Rwanda Social Security Board are doing well in their core business while at the same time investing in real estate to provide people with affordable homes and working space,” Ndayisaba said.

Allen Karungi Gatete, the Sonarwa communications manager, said insurance firms often invest some of their profits in the real estate industry "as a way of diversifying their investments”.