The new land law and its impact on investment
By Distelle Nana Mbeuyo. Published : April 04, 2022
The real estate sector is a crucial sector and a potential driver of future economic growth. According to the Visit Rwanda campaign, the country needs 5.5M (150,000 dwelling units to be constructed annually) to cater for 22M by 2050.
With the recent approved investment law, Rwanda has an array of investment incentives for investors in Real Estate, Agriculture, Mining, Energy, Tourism, ICT, tourism and financial services.
The new Land law n° 27/2021 of 10/06/2021 comes at a time when Rwanda is seeking to attract regional and international investments through Kigali International Financial Centre (KIFC), which is an initiative that intends to position the country as a preferred financial jurisdiction for investments into Africa, as well as reforming the domestic industry
In Rwanda both national and foreigner may own land in form of leasehold or freehold. The new land law has considerably affected foreigner’s rights on land in Rwanda; indeed, significant amendments were made regarding existing rights (emphyteutic lease and freehold) while new rights were added (land concession and State lands lease), all with the purpose of enhancing the country’s efforts to promote investments.
A foreigner is described under the new land law as an individual without Rwandan nationality, individuals who co-own land, a company, an international organization or cooperative with legal personality from a foreign country.
The amendments on existing foreigner’s rights on land consist on extension of the emphyteutic lease term and restriction on freehold.
Extension of emphyteutic lease term:
An emphyteutic lease is a type of land ownership based on a long-term contract between the State and a person granting him or her rights on land. The repealed law of 2013 restricted the lease term for investment to 49 years and that of emphyteutic lease for residential house to 20 years, but the new land law extends the term to 99 years for both types of lease.
Residential Property may also be owned by foreigners in Rwanda through emphyteutic lease as provided under the ministerial instructions n° 001 of 09/9/2021 determining modalities of the possession of residential land. The instructions detail that a foreigner may possess a plot of land for a single family residential house in residential area not exceeding the size and standards provided in accordance with relevant laws. In case a foreigner intends to exceed the size above mentioned, or to own more than a single unit in condominium building, he/she must submit a business plan for investment approved by the competent authority.
This extension of term of lease is likely to improve investments on real estate. It also serves as incentive to invest as it reduces effort and cost of lease term renewal.
Restriction on freehold:
This form of land tenure, based on a contract between a person and the State, grants that person full and indefinite rights over the land. With the previous repealed land law, there were three ways for a foreigner to acquire freehold title on land.
As such, a foreigner could be granted freehold, if provided by an international convention signed by Rwanda or under condition of reciprocity deriving from bilateral agreements, when the land was located to a foreigner in a special economic zone and if the foreigner co-owns the with a Rwandan citizen who must have at least 51% ownership stake.
The current law provides that a foreigner may own a freehold land tenure only if approved by a presidential order in exceptional circumstances of strategic national interest; although the new law does not define “circumstances of strategic national interest”, hopefully the said presidential order will provide further clarifications or we may simply categorize such as all investments undertakings as embedded in the special investments law that offers other incentives to foreigners.
The new land tenures include the following:
This type of land tenure that does not exceed 49 years, with an option to renew upon assessment grants the concessionaire the right to use private State land for strategic investment like agriculture, livestock, forestry, tourism, sports, mining, quarrying, scientific research and improvement of social welfare. Pursuant to the definition provided by the new law, a strategic investment is an investment approved as such by the competent authority. This definition may be slightly vague with lack of detail but the new investment law gives a more precise explanation of strategic investment.
All projects of National Importance are deemed as strategic investments, such projects focus on special impact to the development of the country and its people; a number of criteria are looked including an anchor investment with first-mover demonstration effects; impact on the value chain; development of a proof of concept established in Rwanda for Rwanda, the rest of Africa or global markets to validate the feasibility of a new way of doing things, either to solve existing problems or to execute new strategies; other criteria focus on creation of market, innovations, job creations and mass production.
State lands lease:
State lands lease is a State private domain land lease agreement between the State and an investor for strategic investment in construction of infrastructure for commercial purposes such as trade centers, hotels, real estate, restaurants, public parks, tourism sites, schools, hospitals passengers or goods transportation stations and industries.
The term of this lease cannot exceed 99 years, renewable upon assessment of exploitation of the land. An investor granted this lease is not allowed to change the activities related to his/her initial purpose for State land lease without the approval of the competent authority.
Furthermore, the investor has the right to mortgage the land and activities developed on that land in accordance with relevant laws and agreement signed with the State.
It is important to note that with Rwanda’s strict regulatory environment, irrespective of the types of rights on land, the new land law provides for rights and obligations attached to the use of land. Thus if a foreigner enjoys full rights in exploiting the land in accordance with legal provision, he/she/it has the obligation to (i) fulfill the obligations of the State agreement; (ii) register the land with the registrar of land titles; (iii) pay tax and fees, (iv) protect, conserve and exploit the land etc.; failure to respect these obligations will result to termination of lease.
The above changes on foreigner’s rights on land together with the simplified registration procedures are factors that will lead to improvement of investments environment in Rwanda.
The author is a lawyer at Fountain Advocates