The Rwanda Stock Exchange (RSE) will soon launch its first Social Real Estate Investment Trust (REIT), as the country seeks to uplift slum dwellers to live in better housing facilities.
REITs allow anyone to invest in portfolios of large-scale properties the same way they invest in other industries – such as the purchase of stock.
In the same way shareholders benefit by owning stocks in companies, the stockholders of a REIT earn a share of the income produced through real estate investment – without actually having to go out and buy or finance property.
“We want to facilitate investors to invest Real Estate Investment Trusts in Rwanda,” said Celestin Rwabukumba, the Chief Executive Officer of the RSE.
He noted social REITs to be one of the most important vehicles for making collective investment in commercial real estate.
The fund’s rigorous and prudent investment criteria will ensure quality assets backed by a sustainable underlying rental income streams.
The vehicle will be backed by a dedicated specialist team with in-depth collective experience in the local market and in real estate on the African continent.
The US has the world’s most advanced REIT market in the world. Australia, France, Japan, Canada, the Netherlands, Singapore and Hong Kong also have active markets for an asset class whose returns averaged 18 per cent in 2012.
In Africa, growth in this market has been limited by the absence of enabling legislation. South Africa has traded in REITs for the last 10 years, while Ghana has had access to REITs since 1994 and Nigeria 2007.
“The RSE is excited to be part of this constant evolution in the African capital markets and to empower investors. We are proud to be a contributor to the growth of the property sector and importantly, the economy. We look forward to making Rwanda’s first social REIT a success,” Rwabukumba said.
According to the property consultancy firm Knight Frank, Rwanda and East Africa are packed with real estate investment opportunities, which have seen it attract interest from international investors.
The City of Kigali currently needs over 1,000 housing units per year, especially for the lower and middle market segments.
“By creating another investment vehicle, REIT, we will be able to develop housing units on a sustainable basis since we will be mobilising money from public and private sectors,” Rwabukumba said.
The City of Kigali (CoK) and the Rwandan Capital Market Authority (CMA) are studying moves to spearhead a financial scheme to enable residents in unplanned settlements within the city to move into a decent modern housing.
The scheme which is under study, will also enable modern buildings as planned in the Master Plan of the City of Kigali. The study is expected to be completed by the end of this year.
A consultant, Dr Darin Gunesekera who set up the Real Estate Exchange (REEL) in Sri Lanka and was a CMA Kenya Advisor in the past has been engaged through IFC/ World Bank to study and develop a proposal in this regards.
At the meeting, Dr Darin explained a methodology called “Social REITs” for this purpose. It has been successfully used to convert unplanned settlements into regenerated planned parts of cities like Sri Lanka and Philippines.
The CoK and CMA shall determine whether the findings of the study can lead to fulfilling the City’s Master Plan within a reasonable time. It is their intention to reach this objective and address the challenges of unplanned settlements in the city.