In Kenya, the high minimum investment requirement for Real Estate Investment Trusts (REITs), currently set at KES 5.0 million, has emerged as a significant impediment to the expansion of this investment instrument.
This challenge is compounded by protracted approval processes for creating REITs, stringent capital prerequisites for trustees, and intricate transfer procedures. These factors collectively limit investment in REITs to high net worth individuals meeting professional investor criteria and large institutional investors. Consequently, potential investors from the lower market segment are unable to access this asset class.
Recognizing that REITs present a viable solution aligned with its development strategy, the government aims to catalyze the creation of affordable housing units by addressing this issue. To this end, the government has revised the threshold for Development REITs (D-REITs) from KES 5.0 million to KES 100,000. This move, coupled with campaigns advocating for the establishment of the Kenya National REIT (KNR), underscores the Kenyan government’s proactive approach to addressing the affordable housing challenge through REITs.
During the annual general meeting of the REITs Association of Kenya (RAK) at Enashipai Resort and Spa in Naivasha, Investment Principal Secretary Mr. Abubakar Hassan acknowledged that the sector’s lackluster performance and stunted growth can be attributed to the aforementioned factors.
He also highlighted the rising demand for real estate due to urbanization and population growth, emphasizing that REITs offer an attractive option for pooling resources and capital to support housing development.
The reduction of the investment threshold is expected to significantly boost investment growth in Kenya. By making D-REITs more accessible to a wider array of investors, it has the potential to attract a more diverse pool of capital. This policy change now opens the door for retail investors and smaller-scale participants to engage in real estate investments, thereby broadening the investor base and increasing capital inflow into the real estate sector.
This, in turn, could stimulate the development of affordable housing units and contribute to the overall growth of the real estate investment market in Kenya, potentially fostering economic development and creating opportunities for a broader range of investors.
