How could new land ownership termination order affect real estate?

The 2024 ministerial order on Temporary Land Requisition and Termination of Land Ownership Contracts has sparked mixed reaction within Rwanda’s real estate sector, where some developers have raised concerns about the practical challenges of adhering to such policies, while others suggest that the order could spur further investment in real estate. The order outlines the government’s authority to reclaim land that remains undeveloped for over one year. The termination process begins after one year of non-compliance, with the full process taking up to five years to complete. ALSO READ: What you need to know about termination of land ownership contracts Article 22 of the order states that once a land ownership contract is terminated, the land owner forfeits rights to the land and any structures built on it. This regulation aims to encourage active development and prevent valuable urban plots from remaining idle, according to the officials. However, developers have voiced concerns about the practical challenges of adhering to the order. Byegeka Geofrey, a real estate developer with projects in Kabeza and Rusororo, expressed frustration with the order’s demands. “My project in Rusororo involves building 75 to 80 units across different blocks, an endeavor that’s impossible to complete or start the same projects within a year, and this will make my land remain idle for some time, ” he said. He also highlighted issues with the current “complicated” system for acquiring construction permits. “Permits expire in one year, and renewals only grant six additional months. It is unrealistic to expect developers to meet these deadlines, especially when construction permits are repeatedly declined,”Byegeka noted. His sentiments were echoed by other developers who highlighted that they face bureaucratic hurdles that hinder timely project completion. “I have spent a year seeking a construction permit without success. The government should resolve these challenges before enforcing strict land development requirements. Developers who cannot meet the new regulations may be forced to sell their plots, potentially affecting land prices and the sector as well,” he said. The Kigali-based developer argued that the new order will only serve to increase price speculation of land, insisting that developers develop according to demand and supply. “We cannot build units that will sit unused, especially with rising bank loan interest rates. For the new regulations to be effective, the government must address existing challenges within the construction permit system and city planning frameworks,” he said. ALSO READ: Land disputes now resolved differently pursuant to new land law in Rwanda Implication on real estate investment The order highlights that the person bringing up a project should comply with the master plan. However, developers have indicated that there are still issues in the master plan. Sunny Xi, a Chinese real estate developer for several projects including Green Land estate and two upcoming projects, said that the order introduces more stringent land transactions. Xi does not necessarily agree with Byegeka. Although the new order could potentially lead to a shift in investment strategies, Xi said the order could lead to efficient land development. “The order may lead to a more regulated and efficient use of land, stimulating growth in actively developed areas while limiting speculative holding,” he weighed in. On the other hand, Xi cautioned that real estate developers might face obstacles in maintaining ownership if projects are delayed or fail to meet usage criteria, as the government could reclaim underused land. “While the heightened government oversight may dissuade some foreign investors, those committed to active development could find opportunities in adhering to these regulations,” he said. Developers have also pointed to the fact that the process of land transactions could become stricter, with failure to comply with development guidelines risking ownership rights being rescinded. Paul Rwigamba, Director of Projects and Property Management at Century Real Estate also weighed in on the broader implications for the sector, pointing out that while Kigali has approximately 80 undeveloped plots, not all will be developed in the required frame line due to varying developer timelines and strategies. ALSO READ: City of Kigali vows to repossess unexploited prime land property “The concern stemmed from the significant amount of idle land. Authorities likely want to push developers to present clear plans. When developers outline their intentions and proposed projects, like residential or office buildings, I think the pressure on city authorities and government bodies eases,” he said. This, he added, may lead to a more understanding approach from the government, acknowledging that not all projects can progress at once. According to Rwigamba, while rapid development could stimulate job creation and economic growth, developers should caution against the risk of oversupply. “For instance, constructing multiple high-rise buildings at once could saturate the market. Developers need to plan strategically to maintain a balance in supply and demand,” he said. Rwigamba believes further implication of such policy could include attracting regional and international investors. “This approach, combined with government marketing and support, can position Kigali as an attractive city for investment, fostering long-term growth and urban development,” he said.

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How could new land ownership termination order affect real estate?