RSSB should seek lasting solution to low occupancy rate of its office blocks

 

As the custodian of workers pension funds, the real estate sector presents one of the highest returns on investment. The Rwanda Social Security Board’s real estate projects spread across various parts of the country will definitely benefit the country in the long run.

In any case, such pension plazas, as they are dubbed, have set the bar in terms of construction of modern buildings, especially in rural areas. Secondly, these developments remain purposeful when demand is high. Besides, the developments have anchored the commercial sectors of most of the rural townships and solidified them as premier investment areas. 

However, RSSB’s investment in commercial buildings may be undermined by low demand due to a number of factors. One is due to cutthroat competition from individual investors who charge less for floor space and secondly due to high rental charges that may dissuade would-be tenants. Or perhaps, this could be as a result of short-term bubbles in the sector. Further still, such areas may not appeal to high end tenants.

According to reports, only 54 per cent of the Pension Plaza in Nyanza and Karongi districts is occupied. On the other hand, only 20 percent of the buildings in Rwamagana and Musanze districts is  taken up.

This is a worrying trend that would have some effect on future investments. According to RSSB, the US$13 rent per square metre they charge for the pension plazas located upcountry is not much money. However, various district authorities and potential tenants demonstrate otherwise, pointing out that the said amount is to blame.

While marketing would be a strategy towards upping the occupancy rate, this is not guaranteed to attract tenants in droves. RSSB, hence, needs to devise other strategies to persuade tenants. These include lowering the current rental fee substantially in order to contend with competition, or as a last resort, selling some of the structures.

Otherwise, it is of nobody’s interest to have unoccupied office space.

Editorial cartoon of the day

 
Rwandans who have previously worked in Burundi’s public sector now have reason to smile after officials in Bujumbura accepted to transfer their entire pension through the Rwanda Social Security Board (RSSB).

City evictees to get title deeds for new homes

• By Eugene Kwibuka

Part of Batsinda estate in Gasabo District. The New Times/Timothy Kisambira.

The Rwanda Social Security Board (RSSB) could soon embark on building more low-cost houses in Batsinda, Gasabo District, after one-third of occupants of the 250 units the board previously constructed in the area have finished paying.

HOME SWEET HOME

One unit of the estate was sold at Rwf3.5 million to city residents who were relocated from the town’s from the suburbs of  Kiyovu, Muhima, and Kimicanga. One unit  has two bedrooms, a living room, a was

Latest information from RSSB indicates that, of 250 housing units built in Batsinda, 101 units have been bought and fully paid for, whereas the remaining 149 units are being paid for in instalments.

According to the board’s Director of Public Relations, Communication and Education, Moses Kazoora, the board has embarked on feasibility studies to build another batch of similar units in the same area.

“There is Batsinda Project Phase 2 of constructing more units of low-cost housing, but it is still under pilot study,” Kazoora told The New Times.

Kazoora said that a total amount of Rwf384.6 million has been paid and a balance of Rwf490.3 million is to be collected from occupants of Batsinda estates.

One unit of the estates was sold at Rwf 3.5 million to city residents who were relocated from the suburbs of Kiyovu, Muhima, and Kimicanga. One unit has two bedrooms, a sitting room, a washroom, and a kitchen.

Francine Uwiragiye, a mother of five children that she is raising with her husband, has completed paying for the house through a bank loan that the family acquired after showing a payment agreement that the Kigali City gave them after they were expropriated from Kiyovu.

The Kigali City is one of RSSB’s developmental partners in the Batsinda project which assists in reinforcing payments after expropriated occupants were moved to the houses when their previous homes were razed to pave way for buildings that meet the standard of Kigali City Master plan.

“We like this place. We have water and electricity nearby and buying food in this area costs less than in Kiyovu,” Uwiragiye said as she explained how she had been coping with the new area since the family moved there in 2008.

“There are some people who sold their units but for us we were afraid of losing ours because we like this place.”

Kigali City Council is currently processing leasehold titles for those who have completed full payments of the houses.

The Director of Kigali Construction One-Stop Centre, which currently helps with construction permits and oversees the planning of the city’s construction, Lillian Mupende, said it was time to start issuing the title deeds because a significant number of occupants have already paid for their property.

“We would have done this earlier but because we are trying to follow a systematic registration we wanted to be able to register all the properties at the same time,” she said in an interview. “But it’s very obvious that there are different case scenarios per different property owners so now we are looking for a way of facilitating those who have completed payment. There is no need to be worried, this is their home.”

Mupende says the city needs more of such residential areas in order to conduct large scale expropriation projects.

In an earlier interview, Mupende said some  areas to host low-cost houses will be in Gasabo and Nyarugenge districts. Gasabo district’s Batsinda, Kinyinya, and Gacuriro  is where the Rwanda Social Security Board (RSSB) is set to build 3,000 housing units in the next three years, while Kigali City, in a joint venture with the housing financial institution Shelter-Afrique and the Development Bank of Rwanda (BRD) will build residential houses in Nyarugenge district’s 39 hectare Akumunigo area.

RSSB overshoots target by Rwf2.5b By Ivan R. Mugisha February 18, 2013 Over Rwf39.4b was collected by the Rwanda Social Security Board (RSSB) in the first semester of 2012/2013 financial year, a feat attributed to increased in compliance from both private and public entities. This was Rwf2.5b above the targeted collections over the period. The pension body had targeted Rwf36.9b collections over the first half of the financial year, from July to December 2012. The board collected Rwf33.09b over the same period in the 2011/2012 financial year, with new registered employers and employees at 4,347 and 36,246 respectively. The resounding performance stems from a higher registration of employers in the body’s pension and medical schemes since the merger between the former Social Security Fund of Rwanda and Rwanda Medical Insurance Company in 2011. “The newly registered employers in the pension scheme during the period under review were 5,050, against a target of 4,750. We also registered a total of 43,935 new employees,” Moses Kazoora, the RSSB public relations and communications unit director, said. Kazoora added that the registered number of new members in the medical scheme was 19,826, which was almost double the projected figure of 10,000 new members. He said RSSB paid benefits amounting to Rwf10.1b to both pension and medical claims over the period, which was an increase compared to the same period of last financial year, where benefits paid amounted to Rwf8.1b. Kazoora said the body was urging more entities to register for social security, adding that they projected Rwf40.62b collections in the second half of the 2012/2013 financial year. “Companies are currently undergoing auditing processes to ascertain their level of compliance as regards to registering pension and health benefits for their employees with the board,” Kazoora added. Available statistics from the body indicate that by 2011, close to 40 per cent of Rwanda’s businesses did not pay monthly contributions to the body as required by law, a situation that left several citizens’ accounts empty on retirement. To solve the problem, the body introduced a tracking system that identifies defaulters and takes appropriate action, including slapping them with fines of up to three per cent on each unpaid month, as well as auctioning their property, if the problem persists. RSSB has spent over 30 per cent of the monies collected, equivalent to Rwf94.4b on its investment portfolio, with real estate development as the major project.

 
 Parliament in session. President Mwai Kibaki will be earning more in retirement than he did when in office if Parliament endorses two Bills tabled Thursday seeking to increase the pension of designated State officers. Photo/File  Nation Media Group

Over Rwf39.4b was collected by the Rwanda Social Security Board (RSSB) in the first semester of 2012/2013 financial year, a feat attributed to increased in compliance from both private and public entities.

This was Rwf2.5b above the targeted collections over the period. The pension body had targeted Rwf36.9b collections over the first half of the financial year, from July to December 2012.

The board collected Rwf33.09b over the same period in the 2011/2012 financial year, with new registered employers and employees at 4,347 and 36,246 respectively.

The resounding performance stems from a higher registration of employers in the body’s pension and medical schemes since the merger between the former Social Security Fund of Rwanda and Rwanda Medical Insurance Company in 2011.

“The newly registered employers in the pension scheme during the period under review were 5,050, against a target of 4,750. We also registered a total of 43,935 new employees,” Moses Kazoora, the RSSB public relations and communications unit director, said.

Kazoora added that the registered number of new members in the medical scheme was 19,826, which was almost double the projected figure of 10,000 new members.

He said RSSB paid benefits amounting to Rwf10.1b to both pension and medical claims over the period, which was an increase compared to the same period of last financial year, where benefits paid amounted to Rwf8.1b.

Kazoora said the body was urging more entities to register for social security, adding that they projected Rwf40.62b collections in the second half of the 2012/2013 financial year.

“Companies are currently undergoing auditing processes to ascertain their level of compliance as regards to registering pension and health benefits for their employees with the board,” Kazoora added.

Available statistics from the body indicate that by 2011, close to 40 per cent of Rwanda’s businesses did not pay monthly contributions to the body as required by law,  a situation that left several citizens’ accounts empty on retirement.

To solve the problem, the body introduced a tracking system that identifies defaulters and takes appropriate action, including slapping them with fines of up to three per cent on each unpaid month, as well as auctioning their property, if the problem persists.

RSSB has spent over 30 per cent of the monies collected, equivalent to Rwf94.4b on its investment portfolio, with real estate development as the major project.

Burundi agrees to pay Rwandan claimants

• By Eric Kabeera

RSSB’s Kantengwa and Munyandekwe say negotiations with Burundi are positive. The New Times/File.

Rwandans who have previously worked in Burundi’s public sector now have reason to smile after officials in Bujumbura accepted to transfer their entire pension through the Rwanda Social Security Board (RSSB).

All the transfers will be completed by the end of June 2013, according to Oswald Munyandekwe, the director of pensions and occupational hazards at RSSB.

After the transfer, Munyandekwe said RSSB will integrate the money into local pension scheme before paying the beneficiaries as the law stipulates.

“Negotiations are still going on and National Institute of Social Security (INSS) has accepted to pay 3 per cent of the employees’ contribution from their salaries during the time of employment in Burundi,” he said.

Rwandan professionals who served in various organs in Burundi have for years, been complaining that their pensions were inaccessible after they moved to Rwanda.

This was a result of a law in Burundi that prohibits any pensioner residing outside Burundi to access their benefits.

According to Munyandekwe, the contribution rates were 3 per cent by the employee and 4.5 per cent by the employer.

So far, only the 3 per cent contributions are being transferred and are catered for in this financial year 2012-2013 of the Burundian government’s Budget though the negotiations are ongoing to secure the remaining 4.5 per cent.   

The development comes after the establishment of a joint permanent commission comprising senior officials from the Ministries of Public Service and Foreign Affairs from the two countries as well as RSSB and INSS to spearhead the fast tracking of the pension to Rwandans who worked in public services.

About Rwf32 million has already been channelled to RSSB’s account from November 2012 and January 2013.

So far 2,000, Rwandans who worked in Burundi have registered their claims according to statement from the RSSB.

“RSSB will first verify the funds transferred and their rates of contributions considering what an individual earned when they were working in Burundi. After the verification process, the institution will now apply the laws governing the pension scheme to allocate funds in terms of pension or lump-sum to the claimants,” the Director General of RSSB, Angelique Kantengwa explained in a statement to The New Times.

She added that the nationals who were in private sector and made their pension contributions through the National Institute of Social Security (INSS) in Burundi are now receiving their pension benefits on a quarterly basis as part of the arrangement between the two social security institutions - of Burundi and Rwanda.

Burundians who were employed in Kigali in the past receive their pension on quarterly basis, with about Rwf10 million sent to Burundi for that cause.

 DRC dilemma

Meanwhile Munyandekwe clarified that the case of Rwandans who served in public service in Democratic Republic of Congo (DRC) is complicated because of the current political turmoil in the neighbouring country which does not favor negotiations.

He pointed out that in 2011 the team visited DRC and the Congolese government accepted to pay the pension, however, adding that the beneficiaries will have to wait for the conflicts to end.

A total of 2,303 Rwandans who worked in DRC are claiming for their pension contributions.  However, only 268 are considered since they are the ones that contributed to the pension scheme.

There is a memorandum of understanding of 1978 that binds The Economic Community of the Great Lakes Countries (CEPGL) states concerning portability of pension benefits. Member states are Burundi, DRC and Rwanda.

CIC Insurance acquires Sh1 billion land for real estate

CIC raised the Sh1 billion from internal resources. Photo/File 

By VICTOR JUMA

Posted  Monday, January 7  2013 at  20:35

In Summary

• The insurer bought the land from various individuals at a cost of between Sh1.7 million and Sh2.1 million per acre and will use it to build maisonettes priced at between Sh7 million and Sh12 million.
• The company will rely on buyers’ deposits and mortgage financiers to fund the multi-billion-shilling development.

CIC Insurance has acquired 400 acres of land in Isinya and Kitengela area at a cost of Sh1 billion for a multi-billion-shilling property development targeting the middle class.

The insurer bought the land from various individuals at a cost of between Sh1.7 million and Sh2.1 million per acre and will use it to build maisonettes priced at between Sh7 million and Sh12 million.

This is the second major land purchase by CIC which in 2010 acquired 200 acres in Kiambu for Sh560 million on which it plans a mixed development comprising residential and office blocks.

The listed firm joins a growing number of high networth investors including pension schemes, PE funds and insurers that are turning to the property market.

READ: CIC reveals Sh1 billion property investments

“We are targeting Kenyans in the diaspora and the local middle class with the maisonettes we are going to build in the Isinya/Kitengela area,” said Nelson Kuria, the chief executive of CIC Insurance.

The company will rely on buyers’ deposits and mortgage financiers to fund the multi-billion-shilling development that will diversify its earnings from insurance premiums, equities and fixed income markets. CIC raised the Sh1 billion from internal resources.

The company listed at the Nairobi Securities Exchange (NSE) in June and its share has shed eight per cent over the past three months to the current price of Sh3.45—which is below the bourse debut price of Sh4.50.

Its net profit increased 20.1 per cent to Sh584.2 million in 2011 and it’s the fourth largest in the general insurance market with assets worth Sh9.4 billion in December 2011.

Rapid urbanisation, population growth and expansion of the middle class remain the main drivers of Kenya’s property market that is riding on nearly three decades of under investment in mid-tier segment of housing. 

At present, 32.2 per cent of Kenyans or 12.4 million live in urban residents, up from 23.6 per cent or 5.6 million in 1990—assuring property developers of demand that has seen the prices of apartments in Nairobi’s middle-income areas more than double in the five years.

Property market analysts say the rising rent and home prices that has gripped Nairobi and other urban centres will continue to hold further underlining real estate as an asset class of premium returns relative to equities, bonds and bank deposits.

This is what is attracting high net worth investors like Centum Investment, UAP Insurance and Renaissance Capital to real estate.

In its land in Kiambu, CIC Insurance will construct homes, office blocks and shopping malls for sale, with consultants set to advice on the finer details of the projects.

The project comes at a time when the Kiambu/Runda area, also known as the diplomatic community, has generated a lot of interest from developers seeking to cash in on demand from high net worth city dwellers.

Some of the upcoming developments in the area include the Sh200 billion Tatu City project—which is expected to house 60,000 people and Centum’s Two Rivers project on a 100-acre land where the investment is set to build hotels, apartments, and offices, and shopping centres.

RBA licenses CIC subsidiary to manage pension funds

CIC Insurance Group's subsidiary, CIC Asset Management, has been licensed to manage pension funds. Photo/File 

By George Ngigi

In Summary

• CIC Asset Management became operational in mid 2011 and plans to ride on partnerships with co-operatives and investment clubs across the country to grow its business.
• It joins other 17 fund managers licensed by RBA as at December 2011, in an industry which has assets worth Sh403 billion.inShare

The Retirement Benefits Authority (RBA) has licensed CIC Asset Management, a subsidiary of CIC Insurance Group, to manage pension funds.

The subsidiary became operational in mid 2011 and plans to ride on partnerships with co-operatives and investment clubs across the country to grow its business.

“We want individuals and corporates to enjoy the benefits of pension funds run professionally,” said CIC

He said the firm would use information and communication technology (ICT) to reduce the cost of doing business and pass on benefits to customers. The fund manager expects to grow its portfolio fast, taking business from its unit trust business which had Sh2.4 billion last year.

The parent company Wednesday traded at four shilling per share with 281,600 stocks traded.

With an expanding middle class, the level of contributions in pension funds is expected to grow in the country with co-operative and Chamas providing a platform for fund managers to market themselves to the masses.

Sales force

“We have established a sales force that will go to the market and look for pension schemes that are not being run professionally so that we can turn them into funds that can generate more wealth for pensioners,” said Mr Mwaura.

RBA has also introduced the Mbao Pension Scheme which aims to grow the saving culture among people at the bottom of the pyramid.

CIC Asset Management joins other 17 fund managers licensed by RBA as at December 2011, in an industry which has assets worth Sh403 billion. Pinebridge is the largest player, followed by Genesis, and CFC Stanbic.

The CIC subsidiary joins the industry at a time when it’s picking itself up having experience a huge value depreciation in assets held in 2011 as stock prices and the value of government securities slumped.

Due to the volatility witnessed at the stock market, there are propositions to cut the level of exposure that pension funds can have in ordinary and preference shares — and that in government securities increased.

Research conducted by consultants hired by the World Bank proposes that the limit of funds investable in listed shares be set between 20 per cent and 40 per cent of a fund’s total investments compared to the current 70 per cent.

The proposals also seek to remove the limit on the amount a retirement fund can invest in government securities, currently capped at 30 per cent of total assets.