Kenyan real estate segment has experienced exponential growth over the years, with several high-rise sky scrapers and expensive shopping malls being constructed. However, the high capital outlay required for real estate development is a major hindrance to real estate development in Kenya. This has led to an undersupply of housing especially in the low income and affordable housing segments. REITs provide an opportunity to bridge the gap on the current housing shortage in Kenya by providing an avenue for capital raising to facilitate investment and development in real estate.

REITs were first established in the United States of America back in 1960 to allow small-scale investors participate in the large-scale real estate sector. Following this establishment which was until then a preserve, of the wealthy individuals. While REITs have undergone several developments since then, the overall goal has remained the same; to provide a channel for the masses to invest in real estate and earn returns the same way that shareholders of companies do.

REITs were introduced in Kenya in 2013 with the promulgation of the Capital Markets (Real Estate Investment Trusts) (Collective Investment Schemes) Regulations, 2013. Currently there are 3 registered REITS listed in the Nairobi Securities Exchange, namely; ICEA Lion I–REIT (formerly Ilam Fahari I-REIT), Acorn D-REIT and Acorn I-REIT.

Despite a slow start in the Kenyan market, Real Estate Investment Trusts or REITs, as they are commonly known, are slowly gaining traction and are expected to be at the forefront of the real estate sector in Kenya.

What is a REIT?

A REIT is a collective investment scheme where investors contribute money (or money’s worth) to acquire rights or interests in a trust that is divided into units. The intention is to earning profits or income from real estate as beneficiaries of the trust.

An investor in a REIT can own a part of a high-quality real estate, such as office blocks, high-rise apartments, hotels, shopping malls and warehouses without having to pay the high acquisition costs. These high costs associated with such real estate property. These investors have the opportunity of having the real estate property managed by professionals in the real estate industry, thereby reducing investment risks while enjoying the benefits of high dividend and return on investment (ROI).

The trust owns and operates the income-generating real estate and the investors will earn a share of the income earned from the real asset. The trustee acquires and holds the real estate on behalf of the investors as beneficiaries. The trustee also appoints the Manager, who ensures that assets are well managed and distributions made to the investors are in accordance with the Trust Deed and Offer Memorandum.

REIT is established with the sole purpose of pooling resources and channelling them into real estate investments. REIT can either be a I-REIT, D–REIT or Islamic REIT.

  • An I-REIT trust is a REIT which purely invests in income generating income. It owns and manages income generating real estate for the benefit of its investors.
  • A D–REIT is a type of REIT in which resources are pooled together for the purpose of acquiring eligible real estate for development and construction projects. Once the project is complete, the investors of a D–REIT can choose to convert the same to an I–REIT or sell their units in the REIT and hence exit from their investment.
  • A Islamic REIT on the other hand is a REIT which is Shariah compliant with reference to the tenants it leases the property to. The method and terms of borrowing, insurance contracts, and the type of real estate it invests in. Islamic REITS are required to have a Shariah adviser to ensure compliance with the Shariah principles.

Structure of a REIT

In accordance with the regulations, a REIT:

  • Should be structured as an unincorporated trust which is divided into units;
  • Should be established under a trust deed which shall bind the promoter of the trust, the REIT Manager and all investors in the trust;
  • Should have a trustee who shall specifically acknowledge the fiduciary obligations and specifically the fact that they hold the assets for the benefit of the unit holders; and
  • Should have a REIT Manager which is a company authorised to provide real estate management services in respect of a REIT. The trustee cannot be a REIT manager.

Authorisation of REITs

Once the above requirements are met, the promoter of the REIT together with the trustee should submit a joint application to the Capital Markets Authority for the granting of authorisation as a REIT. The authorisation is critical as only authorised REITs can offer units to the public and also be exempt from corporate income tax as per the Income Tax Act.

Taxation in REITs

A REIT that complies with the REIT Regulations and remains registered with the Capital Markets Authority and the Commissioner of Taxes as well as a REIT investee corporation enjoys corporate tax exemption as provided by the Income Tax Act, section 20.

However, REITs are not exempt from withholding tax on interest income and dividends. Withholding tax on dividends is charged at 5% for residents and 10% for non-residents, while WTH on interest earned is charged at 15% for both resident and non-resident unit holders.

When a REIT distributes its income to its unitholders, the same will be deemed to have already been taxed. Therefore, unitholders are not required to account for further taxation.

Additionally, capital gains tax is charged on gains made in the transfer of shares in a REIT or redemption of units from the REIT, but such transaction is not subject to stamp duty as per Section 96A (1) (b) of the Stamp Duty Act.



This is the individual or company deemed the initial offeror or issuer of the REIT security and is involved with setting up the REIT scheme. Jointly with the Trustee, the Promoter seeks for authorization and approvals of the REIT scheme from CMA.


It’s a bank, subsidiary of a bank or CMA-approved corporation appointed under a trust deed and licensed by CMA to hold, protect, and control all the assets of the REIT Scheme on behalf of the beneficiaries. The Trustee is independent of a Promoter and REIT Manager and is further responsible for the appointment and supervision of the REIT Manager.

It is also the Trustee’s responsibility to ensure that the assets of the scheme are invested in accordance with the Trust Deed and the Offering Memorandum and ensures that distributions from the assets of the REIT are made in accordance to the Trust Deed and the Offering Memorandum.

REIT Manager

A REIT Manager is licensed by CMA and is responsible for conducting daily valuation of cash, bank deposits, bonds, other assets of a similar type and listed securities and submits these reports to the trustee. They are also responsible for the strategic direction of the REIT and decides on the acquisition, divestment or enhancement of assets; responsible for all activities related to issue and listing of units; further makes decisions on distribution to unitholders; also makes disclosures to various stakeholders as per regulations as well as ensures redressal of investor grievances.

Benefits of Investing in Real Estate Investment Trusts (REITs)

  • Attractive relatively long-term investment as they provide long-term total returns as compared to other stocks.
  • Income stability especially for I-REITs which are required to distribute at least 80% of their cash flows annually through dividends.
  • Transparency and simplicity as strong governance framework and disclosure requirements by the CMA ensures high standards of corporate governance, financial reporting, and information disclosure.
  • Efficient access to commercial real estate and diversification benefits. As one is able to invest in a diversified portfolio across sectors. REITs offer exposure to a portfolio of properties, allowing the unitholder to be adequately diversified.
  • Liquidity as REIT units are freely traded in stock markets like equity shares, hence no need to sell entire assets for quick cash.
  • Taxation Benefits as REITs are generally exempted from taxation as discussed above.


 Investing in Real Estate Investment Trusts (REIT) enables numerous small investors to invest in a diversified portfolio of real estate assets and further have the benefit of professional management. Similar to other types of investment funds, REITs provide an opportunity to invest in large assets on a small scale.

Based on the significant growth of REITs in recent years in Kenya, the technical constraints as regards to high minimum investment amount, lengthy approval process of REITs, High Minimum Capital Requirements for a Trustee can be seen as a small price to pay for REITs. As REITs are here to stay, and the regulatory environment can only be made better and more conducive.

Additionally, note that, before investing in a REIT, due diligence as with every other transaction should be undertaken so as to inform your investment decision. One is also advised to invest in REITs that offer better transparency as the ultimate goal is to generate regular income or earn capital gains or both.

Contact us for more information on how to invest in a real estate investment trust feel free to reach out to us on 0746782724 or

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