Lack of awareness to blame for slow uptake of REITs in Kenya

By @steveumidha

Listed real estate investment stocks in Kenya have so far delivered below par track record and low subscriptions level among Kenyans.

This follows investors’ lukewarm appetite for Real Estate Investment Trusts (REITs) witnessed in the industry in which all the three firms namely; Stanlib Fahari I-REIT, Home Afrika and Fusion D-REIT failed to live up to the buildup of the investment vehicles introduced by capital markets regulators to help individual investors own pieces of the property market.

Analysts are now blaming the lack of broad investor education and workable illustrations by companies that own and operate income-generating property projects to the current state of affairs and want improved corporate governance around issuance of REITs.

The Cytonn weekly report on the industry has recommended on a complete fix of the initiative and a new drive by industry players.

“It is time for the industry players in financial services, real estate and regulators to review the initiative and give it new impetus. Failure to rejuvenate the REIT market would be very negative to the market,” said the report released yesterday.

The high minimum cost required to invest in REITs have also been blamed on the low uptake which has since the Fusion D-REIT Sh5million offering for instance extended twice indicating failure to raise required amounts. There is also little clarity on its closure which was scheduled for 4th August, 2016.

The Stanlib Fahari I-REIT on the other hand achieved only 29 per cent subscription, and is now trading at just Sh 16.35, 18.25 per cent below its issuance price of Sh 20, while Home Afrika which went public in 2013 at Sh 12 per share is now trading at Sh 1.25, which is 89.6 per cent below its issuance price.

Stanlib REIT has since applied for regulatory extension to meet reporting obligations.

The report comes on the back of another report by Oxford Business Group last year which showed only four per cent of Kenyans actively invest in the NSE stock market largely due to low awareness of the bourse’ products.