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CMA finalises Real Estate Investment Trusts framework

NAIROBI, Kenya, Jul 19 – The Capital Markets Authority (CMA) says it is in the final stages of coming up with a framework that will facilitate the financing and managing of Real Estate Investment Trusts (REIT).

REITS are regulated investment vehicles that enable collective investment in real estate where investors, both retail and corporate, are allowed to pool their funds under the umbrella of the REIT and then engage in real estate projects.

CMA acting CEO Paul Muthaura said the retail REITS will be in form of a collective scheme structure where Kenyans from the lower end market will pool their funds to get a property which will be listed and their shares in the property trade freely at the Nairobi Securities Exchange (NSE).

They will also benefit from the rental income of the property.

“We are going through a very significant property boom in the country. The nature of the property sector needs very high investments because if you do not have several millions, it will be hard to invest. But through this kind of a collective structure, we will allow investors at smaller portions to partake of this,” said Muthaura.

The second product will be development REIT which will be targeted at the larger professional investors but their properties will not be listed.

Presently, Kenya does not have a formal framework that allows for efficient financing of large real estate developments, other than the usual mortgage financing.

“In the case of development rates, they are much of higher risks so they will really be targeting people like our pension’s funds; our Insurance companies, and generally large institution investors,” added the CMA acting boss.

Stakeholders in the sector have up to July 21 to give their input on the draft framework before it is taken by the CMA board for adoption. It will then be taken to the Ministry of Finance for approval and gazettement.

The Finance Bill 2011 has proposed various amendments to the Income Tax Act which seek to have income generated by REITS exempted from income tax (presently 30pc).

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