NAIROBI, Kenya: aw July 19 (Xinhua) — Kenya is in the final stages of establishing a legal framework that will allow financing of real estate developments through the capital markets, the financial market regulator said on Thursday.
Capital Markets Authority’s (CMA) acting CEO Paul Muthaura told journalists in Nairobi that the law will encourage and mobilize savings into the real estate sector of the economy by using the Real Estate Investment Trusts (REITs).
“The law will provide a framework for REITs which will provide a vehicle for small investors to reap from the booming real estate sector,” Muthaura said during a stakeholders’ workshop on REITs.
The one-day event brought together a team of over 100 professionals including property developers, fund managers, law and audit firms to draft a law. Muthaura said the law will encourage small investors to tap into the booming sector.
“The sector is currently dominated by large investors due to the huge capital requirements required to enter the industry,” the CMA official said.
The proposed law comes in the wake of the finance minister’s decision last month to exempt registered REITs from paying income tax. According to the CMA, the law will allow for the establishment of REITs that develop and construct real estate as well as those that own properties with tenants.
“We have decided to allow for these two provisions given that the real estate market in Kenya is not mature like those in the developed countries,” he said.
The CMA has contracted International Securities Consultancy (ISC) to help draft the law. ISC Director Kerry Adby said the proposed law will bring together a minimum of seven investors in collective investment schemes in a regulated way.
“Given that the real estate sector is not liquid in Kenya, the REITs will allow retail investors to own small transferable units, ” Adby said.
“The law borrows heavily from developed countries and takes into account the lessons learnt from the global financial crisis,” the ISC official said. (Xinhua)
