Housing sector gets a boost from new financing laws

Previously, such trusts did not have caps or floors in terms of capital or even registration charges, thereby keeping their cost of operations low.

While agreeing to the regulations in principle, some players expressed fear the move would stifle free enterprise where market forces have guided operations.

“I have a problem with putting caps on the investments people should make or are allowed,” said Mr Wilberforce Oundo, managing director at Regent Management, the property consulting firm.

Mr Oundo said the definition of professionals such as valuers and property managers should be harmonised with those of existing Acts of Parliament.

The new rules propose that a principal valuer must have a minimum capital of Sh5 million.

The draft also puts property trusts under the same quarterly reporting regime as that of commercial banks, insurance companies and investment banks.

Stricts laws have been imposed on consultants in the sector, with property management firms being required to pay registration fees of Sh1 million, the same as that of a real estate investment management company.

The draft also promotes arm length dealings between the trust and the management company with at least half of the trustees required to be independent and not associated with the management firm.

Failing to get adequate support during the placement of the trust in the market, the promoters will pay interest to subscribers at the rate of 15 per cent six weeks after the listing closure as penalty.

The high cost of tying down capital appears to be aimed at safeguarding investors funds while ensuring money raised from Reits cannot be used for speculative purposes.