What is a REIT?

A REIT is a regulated investment vehicle that enables persons to collectively contribute money or money’s worth as consideration for the acquisition of rights or interests in a trust that is divided into units with the intention of earning profits or income from real estate as beneficiaries of the trust.

Types of REITS

a) Income Real Estate Investment Trust (I-REIT)

This is a real estate investment scheme which owns and manages income generating real estate for the benefit of its investors therefore providing both liquidity and a stable income stream. Distributions to investors are underpinned by commercial leases. This means that income returns are generally predictable.

b) Development Real Estate Investment Trust (D-REIT)

A Development Real Estate Investment Trust (D-REIT) is a development and construction real estate trust involved in the development or construction projects for housing, commercial and other real estate assets.

Benefits of REITS to an Investor

Exposure to a wide variety of expertly managed properties.

Regular income stream with lease agreements which increase/ grow on an annual basis.

Well-regulated and subject to the REIT legislation particular to the country in which the company is incorporated.

Investors may gain exposure to immovable property with lower initial outlays.

Exemption from Capital Gains Tax (CGT) in respect of the disposal of its immovable property shares in another REIT or shares in a controlled property company.

Shareholders who sell their units in REITs listed on the Nairobi Securities Exchange (NSE) do not pay CGT or stamp duty.

The unit price of a listed REIT is determined by market forces (demand and supply) and is visible to the public.