Cash-flush pension funds want President William Ruto to set up a real estate investment trust (REIT) and offer tax incentives as a pre-condition to unlock billions of shillings to finance his dream affordable housing projects.
A REIT is a company that owns, operates, or finances income-generating real estate and offers investors both income and capital appreciation.
Through their lobby, the Association of Pension Trustees and Administrators of Kenya (APTAK), the fund said a national REIT would provide a legal basis for engagement with the State that is eyeing its Sh1.55 trillion assets.
“The pension industry can support and fund affordable housing in an end-to-end process through a legal entity. Our proposal which we have shared with the Head of State is the establishment of what we call the Kenya National Real Estate Investment Trust, which is backed by all major pension schemes and regulators to guarantee its legitimacy,” said APTAK chairperson Hosea Kiili.
Affordable houses target
The government targets to deliver about 250,000 affordable houses every year.
“We believe we need to get our REITS market vibrant and moving as it has happened in other jurisdictions. We propose that the national REIT will be the mobiliser of funds from the pensions industry as well as other subsidiary avenues like saccos. The REIT will aggregate our resources into a vehicle that will deliver the offtake guarantee required by the supply side of the market,” said Mr Kiili.
According to data from the Retirement Benefits Authority, only 0.02 per cent of pension industry assets, translating to Sh370.0 million, under management are currently invested in the REITS market. This makes REITS the smallest asset class in pension funds’ portfolio mix which is dominated by government securities at 45.7 per cent and quotes equities at 16.5 per cent.
APTAK argues that a pipeline of incentives for the national REIT will enable them to reverse this trend and the market’s and pension funds’ appetite for investing in the national REIT.
Pension funds also called for Value Added Tax exemption for inputs used in the affordable housing undertaking as well as exclusive provision of land and horizontal infrastructure, such as feeder roads, by the government.