# **3. Applying a Mass Valuation Model to Kigali**

Rwanda is of interest because it is the only African country that has established a complete and fully digital legal cadaster. While it is somewhat surprising that the data are not used for fiscal purposes, the registry reliably records prices for any transaction. Together with data on building heights or the volume of builtup area generated from high-resolution satellite imagery, this can feed into a CAMA model to impute the potential yield from a 1% tax on residential land and property. Beyond comparing the magnitude and incidence of such a tax to actual and potential yields from the current system, this also makes it possible to estimate the likely effects of proposed exemptions, thus laying the foundation for better-informed policy.

# **3.1 Context and Setting**

Rwanda stands out among African countries for having recently completed a nationwide first-registration program that covered 11.6 million parcels (Nkurunziza 2015), thereby helping to establish the full cadastral database now commonly referred to as LAIS—the land administration information system. LAIS contains spatial and textual data for all registered land parcels in Rwanda; each parcel is unambiguously identified and mapped via a unique parcel identifier (UPI). The UPI is used to link via web services to the mortgage registry maintained by the Rwanda Development Board (RDB) and can also be accessed by the Rwanda Revenue Authority (RRA). However, lease fees—the equivalent of property taxes—are still based on selfdeclaration. This fails to take into account changes in land prices or to realize the potential cost savings from automated billing and issuance of reminders. Exemptions may further reduce tax yield; for example, in Kigali city 60% of all parcels and 99% of agricultural parcels are exempted from paying lease fees.<sup>12</sup> Efforts to address these shortcomings include preparation and debate of a draft property tax law,<sup>13</sup> a recent version of which aims to impose a base lease fee of RWF 0-500/m<sup>2</sup> (plus a surcharge of half of the base fee on oversized land), and a tax of 1% on the value of buildings above a threshold of RWF 30 million. One likely scenario, for expositional purpose, is to use the current flat lease fee of RWF 70/m<sup>2</sup> , assigned to more than 85% of the parcels in Kigali city, for areas below 300 m<sup>2</sup> and then apply RWF 105/m<sup>2</sup> for the additional areas above 300 m<sup>2</sup> .

With some 6% of land parcels formally transferred annually (Ali et al. 2017), Rwanda’s land market is highly active in international terms. Sale prices are registered for all properties transferred and, because registration fees are independent of registered property values, incentives for misreporting are minimized.<sup>14</sup> Table 3 illustrates that, of some 11.6 million parcels covering 2.064 million ha nationwide (i.e., an average of 1,800 m<sup>2</sup> /parcel or 1,300 m<sup>2</sup> for residential and 1,900 m<sup>2</sup> for agricultural land), 0.4 million or about

> 12 Since a full exemption is granted to agricultural parcels smaller than 2 ha, with the average size of parcels being 0.19 ha virtually all agricultural land is exempt from paying lease fees.

> 13 As discussed below, only 30% of residential parcels in urban Kigali paid lease fees in 2015—only $1.95 million of a potential $6.74 million. 14 This is reinforced by the fact that reported land transfers and prices are similar to what emerges from household surveys.

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