REIT is an acronym for Real Estate Investment Trust. REITs are funds pooled together by different investors in a trust scheme of income generating real estate. It is a financial instrument that falls under the stocks asset class, which makes them highly liquid. REITs allow individuals and entities to invest in real estate through public trading on major securities exchanges, where they can buy and sell them.
REITs allows investors to diversify their real estate holdings without the need for direct home ownership. They own, manage, operate and finance income generating real estate like apartments, offices, medical centers, hotels, shopping centers, etc.
How Do REITs in Kenya Work?
Real Estate Investment Trusts are investment vehicles that allow individuals to invest in a diversified portfolio of income-producing real estate assets. They offer a way for investors to gain exposure to real estate markets without directly owning, managing, or financing properties themselves.
Once an investor trades REITs registered under the National Securities Exchange(NSE), they will receive dividends from income and rent collected from the properties.
How to Invest in REITS
You can start building passive income by investing in REITS. Like any other real estate investment, you have to know why you want to invest in REITS. It could be to either to grow your wealth, build passive income or to start your journey to financial independence.
There are two types of REITS;
D-REITS allows you to invest in the development/construction of an infrastructure such as residential or commercial and gain profits through the return on investment as dividends.
I-REITS allows you to invest on similar infrastructure and gain profits through rent paid back by the tenants as dividends.
Currently, there are three REITs in Kenya. That is, FAHARI I-REIT, Acorn ASA D-REIT and Acorn ASA I-REIT. Similar to bonds and stocks, you will need a CDSC account to buy your shares for the FAHARI I-REIT which costs approximately Ksh. 800 for 100 shares.
For Acorn ASA D-REIT and I-REIT, there are relevant selling agents also known Unquoted Securities Platform in the NSE who participate in selling these shares. They include;
- Liaison Financial Services Group
- Standard Investment Bank
- Faida Investment Bank
- Waanzilishi Capital Limited
Why Invest in REITs in Kenya
There are many advantages associated with Real Estate Investment Trusts in Kenya. These include;
- Access to Real Estate Market: Invest in real estate without owning physical properties.
- Steady Income: REITs offer consistent dividend income.
- Diversification: Spread risk across various property types and locations.
- Professional Management: Expert teams handle property management and tenant issues.
- Liquidity: Easily buy and sell REIT shares on public exchanges.
- Capital Appreciation: Potential for share prices to increase over time.
- Tax Benefits: Enjoy tax advantages like pass-through taxation and potentially lower tax rates on dividends.
- Environmental and Social Impact: Invest in sustainable and socially responsible properties.
- No Property Hassles: Avoid the headaches of direct property ownership.
- Accessibility: Suitable for both seasoned investors and newcomers.
REITs do not require large amount of money for you to buy your shares which makes it a fast and easier option to invest in real estate without directly owning the property
In order to understand more about REITs, do thorough research and contact financial advisor in the real estate sector to help you make a good decision.