A Comprehensive Guide to REITs Regulations in Kenya
In Kenya, real estate investment trusts (REITs) offer investors a unique opportunity to invest in real estate and earn passive income. REITs are structured as trusts rather than companies and operate under the Capital Markets (Real Estate Investment Trusts) (Collective Investment Schemes) Regulations, 2013. In Kenya, REITs may be listed or unlisted, with listed REITs trading on the Nairobi Securities Exchange (NSE).
Listed REITs offer investors a liquid stake in real estate as their units are traded on the NSE, providing the opportunity to invest in a diversified portfolio of real estate assets. Listed REITs like STANLIB Fahari I-REIT have allowed individual and corporate investors to subscribe to public offers, with a minimum subscription of KES. 20,000 at 1,000 units and a nominal value of KES. 20.00 each.
The Trustee acquires the property and holds it on behalf of the beneficiaries, who are individual and corporate investors. The Trustee is responsible for the appointment and supervision of the REIT Manager and ensuring that the assets of the scheme are invested in accordance with the Trust Deed and the Offering Memorandum. The investment properties are held in the name of a corporate trustee who is the custodian of the REIT assets but managed by a corporate REIT manager, who must be licensed by the Capital Markets Authority (CMA).
REITs are required to distribute most of their net income to the unitholders, with at least 80% of distributable earnings being distributed to unitholders in Kenya. Listed REITs are held to the same standards and requirements of disclosure to investors on financial information and reports on material business developments and risks as other publicly traded companies. As such, transparency in REITs operations provides a basis for investors to analyze and appraise REITs assets independently.
While listed REITs are available for purchase by the general public, D-REITs are restricted to professional investors only. However, the lower middle-income segment of the residential market presents attractive opportunities for investors, as does the development of student accommodation in Kenya for university and post-secondary college students. If appropriately promoted, student housing could become a powerful alternative asset that guarantees tenanting.
In conclusion, REITs in Kenya offer investors an opportunity to invest in real estate and earn passive income through a diversified portfolio of assets. Listed REITs are traded on the NSE, providing investors with a liquid stake in real estate. The transparency in REITs operations provides a basis for investors to analyze and appraise REITs assets independently, while the regulations require REITs to distribute most of their net income to the unitholders, ensuring attractive returns for investors