Zimbabwe's Real Estate Investment Trust (REIT) market is still in its infancy, requiring careful nurturing to reach maturity and achieve the desired objectives, which include world-class standards. Adopting international best practices is crucial in this journey, providing a blueprint for success and ensuring that Zimbabwean REITs are attractive to local and global investors.
Zimbabwe's REITs are currently facing challenges, including insufficient regulatory frameworks, limited participant confidence, and the nascent stage of market development.
To foster a robust and attractive REIT market, it is crucial to address the glaring gap in effective investor protection policies. This reassurance will help trigger the desired growth and make the market more secure for all stakeholders.
Traditional investor protection policies on listed entities would incorporate the following: disclosure requirements, an independent board of directors, a functional and practical audit committee, internal controls, compliance with securities laws, investor grievance redressal, regulatory oversight, subjection to regulatory oversight by bodies such as the Securities and Exchange Commission (SEC), well-defined code of conduct, risk management and transparency in fees and expenses.
One of the key pillars of investor protection is the independent board of directors. Their oversight and protection of investor interests, coupled with an effective audit committee to review financial statements and ensure compliance with accounting standards, and adequate internal controls to safeguard assets and ensure accurate financial reporting, instills confidence and trust in the market. Compliance with securities laws, investor grievance redressal, and a well-defined code of conduct further enhance this trust, but when it comes to real estate, additional regulations are necessary to sustain the burgeoning REIT market in Zimbabwe.
Real estate is more than financial; it transcends legal and technical issues that involve more statutory bodies, making it a unique asset class.
The Estate Agents Council regulates the property managers, and The Valuers Council regulates the Valuers.
At the same time, the operations of buildings fall under the Urban Councils and are regulated under the Regional, Town and Country Planning Act; Safety laws are superintended under the National Social Security Act, Environmental Laws under the Environmental Management Act, Residential Rent Regulation, Commercial Premises Regulations etc.
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One is pushed to advocate for a wholesale review of all Real Estate laws to ensure this asset class is given attention, recognition, and respect.
We have more than a million citizens seeking accommodation with a desire to have a house of their own or to rent decent accommodation, which can be availed through REITs if and only if the asset class is given due respect.
For any investor, local or international, the need for upfront clarity on leasing and treatment of defaulting tenants needs to clear. Treating tenancy as a social justice issue has led investors to shy away from residential development.
To further explore nurturing the REIT market to maturity successfully, Zimbabwe must prioritise the adoption of a governance framework that aligns with international standards.
This involves several strategic steps: Transitioning to a governance model with independent boards is critical. These boards should be composed of individuals with diverse expertise and a strong commitment to fiduciary responsibility, ensuring that all decisions are made in the best interests of investors.
Enhancing regulatory frameworks to provide robust oversight and enforce stringent compliance is essential. Regulatory bodies must be empowered to hold REITs accountable, ensuring transparency and protecting investor interests. Clear guidelines and standards should be established for REIT operations, reporting, and risk management.
Implementing practices that enhance transparency and accountability is vital for building investor confidence.
This includes comprehensive reporting requirements, clear communication channels with investors, and mechanisms for regular audits and reviews.
Independent boards should oversee these processes, ensuring all actions are transparent and accountable.
Investor protection is a critical issue that, if attended to, will significantly boost the growth of Zimbabwe’s REIT sector. This involves establishing robust governance frameworks and educating investors about the benefits and risks associated with REITs.
Building a culture of trust and confidence is crucial for attracting and retaining investors.
Zimbabwe can benefit from international expertise by collaborating with established REIT markets and learning from their experiences. Engaging with international advisors and incorporating best practices from developing and developed countries can provide valuable insights and guidance.
Conclusion
The success of REITs is intrinsically linked to robust governance structures that ensure holistic transparency, accountability, investor protection and review of legal frameworks that support and enable the real estate sector to thrive.
Adopting a governance model that includes independent boards and aligns with international standards is imperative for Zimbabwe's REIT market to thrive.
This approach will address the current governance gaps, enhance investor confidence, and position Zimbabwe as a competitive player in the global REIT market.
By prioritising fiduciary responsibilities and embracing comprehensive governance practices,
Zimbabwe can unlock the full potential of its REIT sector, fostering sustainable growth and long-term success.
- Juru is the chairperson of the REIT Association of Zimbabwe.
