By Nicholas Waitathu
Nairobi, Kenya: Small investors and individuals in real estate will soon have the right to own shares in huge property development and earn an income at the end of every year.
This comes after the Finance Minister Njeru Githae approved the new rules governing the implementation of the Real Estate Investment Trust (REITs).
Industry stakeholders have lauded the government action, saying the endorsement of the new procedures will enhance house production as developers gain more impetus to undertake huge projects.
The new REITs rules mean that shares of real estate developments will be traded at the Nairobi Securities Exchange (NSE) the first time in Kenya, enabling even small investors to own property by buying shares of such properties.
Githae approved the new rules last week and promised that they will be gazetted in this week Kenya Gazette.
“The approval of the rules will revolutionise the real estate and widen property owners finance generation avenues. Further the REITs idea is geared towards mobilising more savings with the economy,” Githae stated.
Housing Ministry Permanent Secretary Tirop Kosgey recently says the regulations will open a new dawn in financing property projects locally and in the region.
“Low investments have hindered the production of houses in the country,” he said.
The rules were supposed to have been gazetted by end of the first quarter, which ended on Thursday last week. Real estate stakeholders had been pressurising the Government to gazette the guidelines by the deadline to allow fast listing by property developers at Nairobi Securities Exchange.
But Githae explained that the delay was occasioned the bulky rules, which forced technical experts at his office and Attorney General Chambers to take time to work on the final legal language with the view to making it understandable to users.
“We took time before approving the rules as they were quite massive and we had to involve the industry stakeholders and other experts to fine tune them. However, with the guidelines now in place, we expect a new scenario in the property industry as developers will now be able to generate more money to fund their projects,” he explained.
Capital Markets Authority Acting Chief Executive Officer Paul Muthaura early last week said property development would enhance liquidity and price discovery in the local property market, promote portfolio diversification, and flexibility in real estate investments.
Over and above REITs introduction, Githae added that Government has been encouraging partnership between landowners, individuals and institutions to develop idle land. In most cases the individuals owning huge chunks of land fail to develop the land owing to lack of adequate finance.
“We are sure the huge supply gap prevailing in the market at the moment will be reduced,” Mr Githae added.
Demand for houses in the country is currently over 400, 000 housing units with a supply of slightly over 100,000 units.
The minister also said property developers undertaking projects for low cost housing would benefit from a Value Added Tax exemption on all items they use to put up the units — including cement, steel.
The minister confirmed that two developers — one in Mavoko and Embakasi area that are constructing a total of 2,300 housing units — had already been exempted from paying VAT on materials they have used to put up the housing units.