Real Estate Investment Trust Is an investment vehicle that allows investors to pool funds for investment in the real estate sector. There are currently 4 operating REITS in the country with the trend in listing expected to grow.
Real Estate Investment Trusts (REITS) in Kenya target to bring investors to the real estate sector. This is a sector that has been offering some of the best returns in the market. It also carries low risk and is in high demand.
Some of the common examples of real estate investments include;
- Rental houses
- Hostels
- Commercial buildings
- Shopping malls
REITs in Kenya are regulated by the Capital Markets Authority and listed on the Nairobi Securities Exchange. This means that any Kenyan is eligible to invest as long as you meet the set requirements.
Types of REITS in Kenya
There are 2 common types of REITS. These include
- Income Real Estate Investment Trust (I-REIT)
This REIT owns and manages income-generating real estate such as rentals and leases. It then distributes the income to the investors regularly based on performance.
- Development Real Estate Investment Trust (D-REIT)
The D-REIT investors normally pool funds together to undertake construction real estate projects. These may include projects such as those for housing or commercial. In return, the investors make a return upon selling these projects.
Benefits of Investing in REITS
There are several benefits you get from investing in REITS. Some of these include;
- Liquidity
Due to the nature of this market, there has always been a challenge of liquidity for the traditional investors of real estate. This is because it takes time to sell a real estate asset. However, with REITs, you can easily sell and buy a stake as it is publicly traded in the capital market.
- Income Predictability
Due to the stable nature of the real estate market, it is possible to predict future income with less deviation.
As an example, you can project rent income or property appreciation value within a certain period. This makes it easier for the investors to plan due to this predictability.
- Little risk
The real estate market in Kenya has an almost total chance of value appreciation. This is opposed to other capital market assets such as shares that are highly volatile. Learn more on how to buy and sell shares in Kenya.
As such, the risk of investing in REITs is minimal making it attractive to risk-averse investors.
- Ability to invest with little capital
REITs allow you to invest in real estate with as little capital. This is because you can participate in the market with as little as 10,000 shillings.
On the contrary, it is almost impossible to invest in real estate as an individual with such an amount of capital.
- Regulation
This market is regulated by the capital markets authority of Kenya ensuring investments are done in accordance with the law. It also allows you to seek legal assistance in case of any illegal dealings.
REITs in Kenya
There are at least 4 operating REITs in the Kenyan market. These include;
- The ILAM Fahari (I-REIT)
- Acorn Student Accommodation Development Real Estate Investment Trust (D-REIT)
- Acorn Student Accommodation Income Real Estate Investment Trust (I-REIT)
- LAP Trust Imara (I-REIT)
ILAM Fahari I-REIT was the first one to get approval in 2015 with the most recent one being LAP Trust Imara I-REIT IN 2023.
How to invest in REITs in Kenya
Step 1: Open a CDS account. You need a CDS account to trade in REITs. This you can get through a broker or investment banker that allows CDS account opening. Here is a detailed process on how to open a CDS account.
Step 2: Top up your account. Most REITs have a minimum number of units that your can buy. With the majority of them set at 100. A unit is like a share. Hence to understand the minimum capital you require, you need to multiply the minimum units by the unit price.
Step 3: After putting in capital, you become eligible to buy and sell your units. Normally, most investors buy intending to benefit from the regular dividend payments and unit price gain.
Real Estate Investment Trusts (REITS) In Kenya are growing given more choice and opportunities for Kenyan investors.
