NAIROBI, Kenya, Aug 1 – The Capital Markets Authority (CMA) is in the final stages of finalizing regulation in its real estate investment trust (REITs) product which it hopes will help address the housing deficit in the country.
CMA Chairman Kung’u Gatabaki said he hopes the new product will be up and running by the end of the year to spur more housing development by empowering small investment groups to participate more actively in the property market.
“REITs is a new product in the market, but what we are trying to do is make it local and domesticated so it will have the developmental and construction phase which is missing in other countries where it is operating,” he explained.
Gatabaki added that the Authority will be looking to involve the county development and investment agencies in participating in the REITs as government devolves.
“We would like to make sure that housing is a product that is distributed within the counties. If we can structure investments in REITS at the county level through agencies that can make sure they invest in the product that is what we are trying to do,” he said.
REITs that facilitate collective investment in real estate, would give small investor groups, keen on entering the property market, assurance of secure investment under the regulatory framework.
Often property transactions done informally are riddled with structural and market risks that are not known to investors.
In the draft framework, the REITs are categorized as either development REITs that requires a Sh100 million initial asset to invest into the development and construction of property by professional investors.
The other being investment REITS requires Sh300 million initial asset to be invested in income generating real estate that can be listed on the capital markets.
With investment REITs, the Trustee managing the property will be required to pay out 80 percent of the net income to investors.
The ongoing stakeholder sessions are being held in collaboration with the International Securities Consultants of Australia that are helping to guide the drafting process.