CMA sets Sh50m capital base for property managers

Property developers will be required to have a minimum capital base of Sh50 million to qualify for a licence as Real Estate Investment Trusts (REITs) managers.

The Capital Markets Authority (CMA) has proposed the requirement as part of draft rules for the REITs market, which are expected to come into operation later this year.

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REITs managers will have authority to administer real estate projects listed at the securities exchange.

“The REIT manager shall be a company that has a minimum paid up capital of Sh50 million, has key personnel who are, or has appointed a property manager who is, registered under the Estate Agents Act,” states the proposed law.

REITs are set to open up a regulated market for small investors in the lucrative real estate sector, which has been the preserve of wealthy developers who have cash to finance multi-million shilling projects.

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Investors in REITs will buy shares of development projects for a minimum of Sh1 million in a similar manner to the trading of shares of listed firms.

The REITs are also expected to attract more capital for property developers, helping to shrink the gap between demand and supply of both housing units and office space.

Kenya has an annual shortage of 150,000 housing units against an estimated construction rate of 30,000 units per year.

To qualify for listing at the exchange, each REITs will be required to be worth at least Sh300 million.

The draft regulations require key staff of the REITs to be registered under the Estate Agents Act.

The Estate Agents Act regulates persons who negotiate or are involved in the business of buying, selling and renting of land and buildings.
The REITs manager will also be independently audited.

The proposals apply to development and construction real estate investment trust (D-REITs), income investment trusts (I-REITs) and Sharia-compliant Reits.

“It is proposed that REIT securities shall be issued in respect of a real estate investment trust scheme which is to be offered or in any way represented as an Islamic REIT or Islamic securities, then in addition to complying with the provisions of the Act and of these Regulations,” says the draft laws.