The year 2014 saw the licensing of more real estate investment trusts (REITs) by the Capital Markets Authority(CMA) in Kenya. This was sought to increase the rate of the sub-sector’s partaking in the Nairobi Securities Exchange (NSE). The regulator then approved the appointment of Stanlib Kenya Ltd, Fusion Investment Management Ltd and CIC Asset Management Ltd as REIT managers.
Centum Asset Managers Ltd and UAP Investments Ltd were the first two real estate companies to be licensed for operation after the newly approved REIT managers. This was done in December the year 2013.
According to the regulations of Kenya, A REIT manager must be a company established in the country and licensed by the Capital Markets Authority to provide real estate services that serve the purpose of a Real Estate Investment Trust. To be a REIT manager, the company must be independently audited and have a minimum of 10million paid up as capital. Also, it’s a requirement of a REITs manager to have enough experience and skills to manage and enforce the objectives of the scheme.
Capital Markets’ Real Estate Investment Trusts and Collective Investment Schemes Regulations expectations of a REITs manager is to obtain, manage, sustain and dispose assets of the program and conduct development and construction activities where allowed.
The manager is also expected to take all necessary steps and practice due diligence to make sure the assets of the scheme are invested heeding with the scheme’s directions.
In a statement, the regulator made it clear that the three companies that were licensed for operations by REITS had earned as they had all the required qualifications by the Capital Markets’ Real Estate Investment Trusts and Collective Investment Schemes Regulations.
So what is REITS?
Real estate investment trust or REITS can be defined as a real estate company that is based on mutual funds. In Kenya, REITS allows Kenyans to invest in income-producing real estate without having to physically participate in the management and other operations involved in real estate. Take it as the way one invests in stocks and bonds through mutual funding.
REITs have various ways of getting income; they may invest in properties which generate income through rent collection or they may opt to invest in mortgages or mortgage security chained to the properties, where they benefit by financing properties and getting interests. The introduction of REITs into the market attracted many property developers to the capital market to raise funds. Also, Real estate investment trusts pushed bank financing to become more competitive by aiding in the reduction of the development costs.
The Capital Markets Authority played a big role in the improvement of the real estate industry as the introduction of REITs to the market is not only a good investment opportunity but also added to the industry financial tools it needed. This is said to be one of the ways that the government will be able to achieve its vision of 2030 to affordable housing.