NAIROBI, Kenya, Oct 5 – Stanlib has announced plans to launch East Africa’s first Income Real Estate Investment Fund (I-REIT) on the Nairobi Securities Exchange at a proposed Sh12.5 billion.
According to Stanlib, the fund is a collective investment vehicle that will allow investors to pool capital. This will then be invested in a portfolio of selected properties for a return allowing investors to opt for capital appreciation or income from their investment.
To break it down, the amount of earnings investors make will be based on income generated from the portfolio of properties the funds are invested in, as opposed to capital appreciation alone.
Stanlib Regional Director James Muratha explained that through the Fund, investors will have an opportunity to invest in the property sector in a secure, regulated and professional manner.
“I can confirm that we have received regulatory approval to float and eventually list the I-REIT. This is a landmark for us. Through this instrument, we shall be giving investors, be they retail, individual or institutional players, a window to invest in a growing property sector in a secure, regulated and professional manner, while presenting them with a new asset class to enable them diversify their portfolios,” Muratha said.
Additionally, besides allowing investors to put their money in a wide array of properties, without having to raise huge amounts of capital required to own the same, the fund will also gives them access to professional decision-making and management.
The proposed Fund, which has been approved by the Capital Markets Authority, is to be listed at the Nairobi Securities Exchange’s Alternative Investment Market Segment and will pay clients returns at a pre-agreed rate.
By listing on the NSE, the future value of the I-REIT will be subject to market forces through secondary trading. According to Stanlib, another advantage of listing is that the I-REIT remains a liquid investment, meaning investors can enter and exit as they wish, thus aiding in price discovery.
Stanlib’s move comes at a time when property as an asset class in Kenya is receiving a lot of attention with sustained talk of a boom.
Quoting the latest Economic Survey, Stanlib states that growth in real estate and property sector is set to continue, driven by demand for new office space and urban housing. The survey notes that high demand for fixed assets, largely property, was a major contributor to a 5.3 per cent expansion in the Kenyan economy last year.
Demand for high quality commercial and residential property continues to grow in tandem with the country’s sustained strong economic growth and rising wealth. Even then, investment in property has always been fraught with risk, seen in instances of title deed revocations and condemnation of buildings.
Countries in Africa to have traded in Income Real Estate Investment Funds include South Africa, Ghana and Nigeria. Internationally, the US has the most advanced market. Other countries with active markets include Australia, France, Japan, Canada, the Netherlands, Singapore and Hong Kong.