Kenya CMA Proposes KSh100,000 Minimum Investment for REITs
Kenya’s Capital Markets Authority (CMA) has proposed reducing the minimum investment required for regulated real estate investment trusts (REITs) from KSh5 million to KSh100,000. The proposed change represents a 98% reduction and could make property-backed investment products accessible to a wider group of investors.
The existing KSh5 million threshold was introduced in 2013, when Kenya launched its REIT market. It was intended to ensure that investors participating in these schemes had sufficient understanding of the associated risks. However, the amount has also restricted participation among investors unable to commit such large sums.
Under the proposed changes, the regulator also wants to revise the ownership requirements governing REITs. The minimum public ownership requirement would fall from 25% to 15%. This could give institutional investors, including pension funds and insurance companies, more flexibility to maintain larger stakes in property investment vehicles.
CMA has pointed out that the current requirement can force major investors to sell part of their holdings simply to comply with public ownership rules. Such sales can dilute their ownership and affect decision-making.
Changes to REIT conversion costs and financing
Another proposal concerns the cost of converting one type of REIT into another. CMA wants to standardise the conversion fee at KSh150,000. Previously, converting a Development REIT (D-REIT) into an Income REIT (I-REIT) could cost issuers as much as KSh7.5 million.
The distinction is important for property developers. D-REITs help raise capital for new projects, while I-REITs hold completed, income-generating properties and distribute returns linked to rental income.
The regulator is also considering allowing REIT managers to guarantee loans taken by associated projects or special-purpose vehicles (SPVs). The proposed arrangement is intended to improve access to financing by providing lenders with additional security.
Recent REIT offerings attract investor interest
The proposed reforms come after two Kenyan REIT offerings recorded subscriptions above their initial targets.
ALP Investment REIT's initial public offering achieved a 115% subscription rate, while TRIFIC Green I-REIT recorded subscriptions equivalent to 103.3% of its offer.
Three REITs are currently trading on the Nairobi Securities Exchange (NSE), with two denominated in US dollars.
The proposed changes form part of CMA's wider effort to strengthen property investment as a source of funding for real estate development, including projects connected to Kenya's affordable housing agenda.
The recommendations would require the necessary regulatory and legislative changes before taking effect. The proposed KSh100,000 threshold should therefore not be treated as an already implemented investment requirement.
