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The REITs Association of Kenya (RAK) has been officially launched in a conference that convened stakeholders in the real estate sector and market stakeholders such as the Capital Markets Authority (CMA), the Nairobi Securities Exchange (NSE) and the Retirement Benefits Authority (RBA).

Players in the real estate and capital markets sectors established RAK in 2017 with the aim of promoting real estate investment trusts (REITs) in the country. Presently, the Association has 14 members that include the Kenya Property Developers Association, the Kenya Association of Stockbrokers and Investment Bankers, NSE, among others.

The launch comes at a time when the Kenyan government is driving the agenda on affordable housing, with an aim of offering Kenyans 500,000 house units.

Speaking at the launch, the Cabinet Secretary for Transport, Infrastructure, Housing, and Urban Development James Macharia observed that the Ministry is engaging with the National Assembly and the Senate to have the recently rejected housing levy approved. The levy is supposed to be a contribution by employees towards the National Housing Development Fund for the achievement of affordable housing.

The Fund will have a board and proper structures to ensure efficiency and avoid the recurrence of corruption that has taken place in some of the other national funds in the country, Macharia said.

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In addition, the RAK Chairman Edward Kirathe observed that regulators are taking the lead with regards to REITs as opposed to the private sector taking the lead and regulators playing catch-up. “This is a bold initiative,” he said.

Stanlib Fahari I-REIT is the first Kenyan REIT which posted a net profit of Sh171.1 million for the year ended December 2017 compared to Sh106 million in the previous year. Stanlib Fahari I-REIT is listed on the NSE.

REITs To Diversify Investment Options for Kenyans

Currently, investment in REITs stands at only 0.04 per cent with only 19 per cent of REITS contributing to RBA’s assets according to the Authority’s chief executive Nzomo Mutuku.

REITs are good for pension schemes because they increase liquidity, eliminate opacity, make valuation easier, and increase access for small pension schemes to invest in real estate, Mutuku said.

Additionally, REITs offer a great investment opportunity for people with large property assets that are difficult to manage according to RAK Chairman Kirathe.

REITs Regulation

During the launch, the director general of the budget, fiscal, and economic affairs at the National Treasury Geoffrey Mwau proposed a review of the regulation tax gap with regards to REITs through the Finance Bill 2018.

Moreover, Kirathe noted that there is a need for clarification through the Finance Bill 2018 on the law guiding subsidiaries owned by REITs. Currently, REITs are exempt from stamp duty and withholding tax.

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