Benefits of Investing in Real Estate Investment Trust Schemes (REITs)

1. Long term returns

The Capital Markets Authority requires REITs in Kenya to distribute at least 80% of their earnings to unit holders as dividends. Over the years real estate investment has consistently outperformed other traditional asset classes such as bonds by generating high returns of more than 25% per annum. This enables REITs to offer high consistent dividend yields and long-term capital appreciation to investors.

2. Financial Inclusion

REITs were introduced in Kenya to enable the common mwananchi that is you and me an opportunity to invest in large-scale real estate developments without requiring large sums of money.

3. Tax Benefits

REITs enjoy various tax benefits that make them attractive to investors. REITs are exempt from income tax, VAT and stamp duty on transfers. However, it should be noted that unit holders are still liable to pay withholding tax on interest income and dividends paid, and Capital Gain Tax for the gains received from a sale.

4. Liquidity

REITs offer investors enhanced liquidity since one can easily convert their real estate investment into cash by selling their units. This protects an investor from being in a situation where they are asset-rich (own several real estate investments) but are cash-poor (their real estate investments are not able to generate an income for their daily use).

5. Investment portfolio diversification

Many people still believe that the only way to invest in real estate is through purchasing land or owning rental units which may prove to be capital intensive. REITs offers investors a unique diversification tool where one invests in a variety of large-scale business developments such as student accommodation facilities (Qwetu), shopping malls or office blocks.

6. Transparency and Accountability

Real estate has been in the recent past associated with illegal activities such as fraud and corruption. The strict regulation of REITS by the Capital Markets Authority has ensured that the different actors in REITs adhere to high standards of corporate governance, disclosure of information and risks associated with investing in the platform and timely financial reporting to the unit holders.