Sterling Real Estate Advisory predicts the Kenyan REIT market will grow past Sh100 billion by 2026 due to renewed interest from the pension industry and increasing demand for housing in counties.
Sterling Real Estate Advisory is the REIT manager for the recently listed LAPTRUST Imara I-REIT listed in the Nairobi Securities Exchange in March.
The growth of REITs is pegged on increasing interest by pension funds to listing the trusts with a target to invest in affordable housing in all counties, with research showing half of the population will be living in urban areas by 2050.
“The potential for local real estate players to leverage off and take advantage of REITs is significant. More developed markets like South Africa have market caps of $14 billion for the listed REITs about four percent of their GDP. The US REIT market is over $1.2 trillion equivalent to about five percent,” said Mumbi Njenga, CEO of Sterling Real Estate Advisory.
A REIT is a regulated collective investment vehicle that enables investors to contribute funds for the acquisition of rights to a trust to earn profits or income from real estate.
REITs allow individuals to invest in large-scale, income-producing real estate.
The current market cap for REITs on the Nairobi Securities Exchange is Sh18.5 billion.
ILAM Fahari I-REIT has a market cap of Sh1.1 billion, ACORN D-REIT and I-REIT with a market cap of Sh5.7 billion and Sh4.7 billion respectively while LAPTRUST Imara I-REIT with Sh6.9 billion.
The government has also triggered interest in addressing the significant shortage of affordable housing in the country and has called in stakeholders especially the private sector to address the shortage.
Among the stakeholders include capital market players like pension industry, investment banks and asset managers.
The investment is expected to close the gap in the housing deficit estimated at 250,000 houses annually.
The government through the National Treasury has set aside approximately $235 million for an affordable housing program for 2022/23 financial year.
The capital market players are expected to assist the government with funding in order to avoid burdening taxpayers with more debt.
“Players in more niche real estate segments such as industrial and logistics assets may join commercial real estate in showing interest in REITs in the near future,” added Mumbi
