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Kenya: Real Estate Firms Listing On NSE Delayed
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Business Daily (Nairobi)
5 May 2008
Posted to the web 5 May 2008
Morris Aron
Plans to list real estate firms to trade at the stock market appear headed for an indefinite delay after Capital Markets Authority confirmed that it was yet to commence a study that would result in a critical document needed to guide the process.
CMA corporate communications manager Samuel Njoroge said the institution would soon sponsor feasibility study to determine whether Real Estate Investment Trust (REITs) are viable in Kenya.
"CMA is at an advanced stage of commissioning a study on viability of real estate investment trusts in Kenya. The study should inform on viability, and if found viable then it should inform on appropriate policy and legal framework," said Njoroge.
The Nairobi Stock Exchange chairman Jimnah Mbaru had set the end of March as the date when REITS would be introduced to the market.
REITs are public or private traded companies that own, develop and operate commercial properties. In developed countries they have been the main avenue for raising liquidity in the property sectors, alleviating shortages in critical segments like urban residential housing.
Four international and local real estate companies had expressed interest in listing at the stock exchange to "open up" commercial real estate business in the country.'
Among the companies that have been eyeing such an opportunity includes Rutleys Capital-the property arm of Knight Frank which is listed in London Stock Exchange which launched a Sh13 billion fund for the East African market.
Another local company with US ties Bora Capital was also keen to venture into the market using REITs.
The feasibility study launch, however, is the first in a process that may result in a policy paper to guide the formation and eventual listing of a REITs at the NSE.
Once a REIT is listed at NSE, anybody can buy and sell their shares to trade in real estate business. Listing a REIT would create a pool of resources that can be used to develop the property market and address the current shortages in the residential, commercial and industrial housing.
However before such a listing is done, a number of changes on the rules governing collective investment schemes have to be adjusted to suit REITs, experts say.Among the issues was the proportion of a company's assets that can be invested in real estate as set by the Retirement Benefits Authority.
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Changes in the CMA collective investment scheme (CIS) rules would, for instance, be needed to allow companies invest a 100 per cent of their deposits in property as opposed to the current ceiling of 25 per cent.
Under current laws, pooled resources fall under collective investment schemes (CIS), with no separate provisions for those dealing in specialized areas like property. Presently, most of the resources are invested in equities, fixed income securities and mutual funds.Real estate players say REITs will increase activity at the bourse.
Individuals and companies - including the National Social Security Fund (NSSF) and insurance companies - have been finding it hard to dispose of properties due to low liquidity among individual buyers to meet asset allocation levels set by regulatory authorities.
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