The Nairobi Securities Exchange (NSE), together with the REITs Association of Kenya (RAK), Acorn Holdings Limited and ILAM Fahari I-REIT, today conducted a media workshop on Real Estate Investment Trusts (REITs) in Kenya.
REITs are regulated Collective Investment Schemes where REIT managers source funds to construct or purchase real estate assets, which they sell or rent to generate income.
The income is then distributed to the investors. The property is held by a trustee on behalf of a unit holder and professionally managed by a REIT manager.
REITs provide Kenyan investors with an opportunity to invest in the Real Estate sector without requiring large sums of money and addresses the challenges facing Real Estate owners and developers.
REITs also mitigate the substantial risks faced by investors when investing directly in real estate by giving them access to professionally managed, regulated investment vehicles.
The Capital Markets Authority (CMA) Chief Executive Officer, Wyckliffe Shamiah, said that REITs have the potential of unlocking the value of the real estate sector by facilitating developers access capital that can stimulate growth in the capital markets.
Investors also get an opportunity to diversify their investment portfolios.
“We, therefore, encourage issuers (real estate developers) and investors to consider REITs which is a regulated product with safeguards to protect investors,’’ said Shamiah.
REITs have an unmatched potential to support local developer’s access capital through the capital markets to bridge the growing demand for purpose-built real estate solutions for the Kenyan populace.
“The introduction of REITs at the NSE was an innovative approach to enable property owners/developers address finance constraints that restrict the access to this asset class and offer investors with a matched opportunity to access real estate developments ,” said Geoffrey Odundo, Chief Executive Officer.
In 2013, Kenya became the third African country to establish REITs at the NSE as an investment vehicle with the Kenyan REIT regulations providing three types of REITs: I-REITs, D-REITs, and Islamic REITs.
The NSE currently has three REITs, i.e., the ILAM Fahari I-REIT, which started trading in November 2015 and the Acorn Student Accommodation I-REIT and D-REIT, launched in February 2021.
“Property in Kenya has always been an emotive subject. REITs have opened up a new investment asset class at the NSE that is accessible to large as well as retail investors.
REITs give the retail investor the ability to participate in the ownership of more significant developments that would otherwise be out of their reach. All this, while offering solutions to the traditional challenges involved with property investment, especially illiquidity, transparency and price discovery at the NSE”, said Kenneth Masika, RAK Chairman.
Speaking on lessons learnt from fundraising, feedback and the future of REITs, Raghav Gandhi, CIO Acorn Holdings Limited, said that globally, REITs are the ideal vehicle for investments by institutional investors in real estate. So, they present the perfect opportunity in Kenya towards institutionalizing investments in real estate.
“The success of this asset class is hinged upon continuous engagement among all stakeholders including regulators, developers, media and the exchange with a view to demystifying the risks, rewards and opportunities for potential investors,” said Gandhi.
ILAM Fahari I-REIT CEO Einstein Kihanda said the main objective of REITs is to deliver to Unit-Holders predictable, consistent and tax-efficient property returns comprised of annuity-style distributions, plus steady capital growth.
The sum of income returns and capital growth often outperform core inflation,” said Kihanda.
The NSE, in partnership with the Capital Markets Authority (CMA) and the REITs Association of Kenya, has been focused on exploring opportunities in the REITs Market and addressing the challenges impacting issuers and investors’ uptake of this product for the REITs market to improve and deepen the capital markets.
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