Sh1 million rule for real estate trading 'to bar many'

A requirement by the Capital Markets Authority for buyers of Real Estate Investment Trusts (Reits) to have a minimum of Sh1 million has put the entry bar too high, property sector analysts say. The analysts are of the view that only upper middle-income earners may spare such savings to invest in Reits. A clause in the draft Reits regulations published by the Capital Markets Authority (CMA) says investors must have a minimum of Sh1 million to subscribe for Reits to be traded at the Nairobi Securities Exchange (NSE). The analysts say the minimum amount should be reduced to at least Sh50,000 like the case for bonds to enable more people channel their savings to real estate.

The collective real estate investment schemes are intended to provide a new tool to encourage and mobilise savings into real estate, while providing both retail and institutional investors with instruments to diversify risks. Reits securities will be traded in the form of unit trusts listed at the NSE once the regulations are enacted.

D-Reits (for property development) and I-Reits (purely for income generation) must have Sh100 million and Sh300 million respectively in minimum capital before they are approved by the CMA. Reits managers on the other hand must have at least Sh50 million in paid up capital. Reits must distribute at least 80 per cent of their annual net income to qualify for tax benefits introduced in the 2011/12 budget by the then Finance minister Uhuru Kenyatta.