Capital markets players have established the Real Estate Investment Trusts (REITs) association to champion the growth of this asset class. This week, our assistant editor Shame Makoshori (SM) talked to Mike Juru (MK), the interim chairperson, to get insights into the new association. Below are excerpts from their discussion…
SM: For the benefit of our readers, what are REITs?
MJ: REITs, or real estate investment trusts, are investment vehicles that allow individuals to invest in real estate assets without actually owning physical properties.
By their very nature, REITs own, operate, and finance income-producing real estate such as apartments, hotels, office buildings, shopping centres, and warehouses.
The unique ability of REITs to generate income from rents, leases and property sales has made them a viable and preferred investment option by astute investors the world over.
SM: Since the promulgation of a statutory instrument to pave the way for listing REITs in Zimbabwe, we have only had one listing. What do you attribute this low uptake to?
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MJ: The low uptake of REITs in Zimbabwe can be attributed to various factors.
Firstly, REITs are a new investment vehicle in Zimbabwe, and there is still a knowledge gap in understanding REITs and their unique advantages to various stakeholders, including investors.
Secondly, the regulatory framework for REITs in Zimbabwe is yet to be fully aligned with existing legislation.
Lastly, in the absence of a recognised body to raise awareness of the unique advantages of this rewarding asset class to various stakeholders, the uptake of REITs has been low.
However, the recent launch of the REITs Association in Zimbabwe is a vote of confidence and a game changer.
Already, the Ministry of Finance and Economic Development has pledged its support to the growth of REITs initiative in Zimbabwe through the implementation of different regulatory frameworks that promote its expansion, which is quite commendable.
SM: Tell us about the role that you expect to play as an association
MJ: A boat cannot reach the shore without a pilot. This adage aptly sums up the significance of the REITs Association in promoting their growth as a capital market instrument in Zimbabwe.
The association provides a platform for education and awareness-raising, advocates for supportive policies and regulations and facilitates networking and collaboration among REIT stakeholders.
Our mission is to create a more sustainable path for eligible businesses to raise funds for capital projects, for investors to generate healthier returns on their free funds, and for the government to broaden its income and investment options.
SM: Who is eligible for REIT listings?
MJ: In Zimbabwe, any property company that owns or operates income-generating real estate assets can be eligible for REIT listings.
However, the company must meet certain criteria, such as at least 75% of the applicant issuer's revenue must come from real estate rental, and interest/mortgage funding, to mention a few.
SM: Zimbabwe has a well-documented infrastructure development gap. In your view, will REITs assist in closing this developmental gap?
MJ: REITs have the potential to assist in closing the infrastructure development gap in Zimbabwe by providing a new source of financing for real estate development projects.
By pooling funds from multiple investors, REITs can invest in large-scale infrastructure projects that may be too expensive for individual investors or developers to undertake on their own. And with the additional tax revenue added the government will be in a better position to provide funds for strategic infrastructure investments.
SM: In your view, who stands to benefit more from REITs?
MJ: The win-win-win nature of REITs has made them an attractive capital investment option at a global scale. Besides the investing public and the REITs listed entity, the government also stands to benefit from REITs.
Here are some of the benefits of REITs to the investing public: Access to a diversity of real estate investment opportunities that would otherwise be difficult to afford as individual investors, a steady income stream generated by REITs has historically delivered competitive total returns based on high, steady dividend income and long-term capital appreciation of real estate assets and portfolio diversification, as REITs have a low correlation with other assets and can help reduce overall portfolio risk and increase returns.
There are many more benefits.
SM: What are the unique benefits of REITs as a capital investment instrument?
MJ: REITs offer several unique benefits as a capital investment instrument. These include a stable income stream, being highly liquid and easy to buy and sell and protection again inflationary shocks. Again, there are many more benefits.
SM: What are your final words to the investing public?
MJ: REITs can be a viable investment instrument for individuals looking to accrue the unique benefits of investing in real estate assets without the hassles of owning and managing physical property.
By investing in REITs, individuals can gain exposure to a diversified portfolio of income-producing real estate assets and potentially earn regular income from dividends.
The REITs Association is committed to promoting the growth and development of REITs in Zimbabwe and invites eligible corporates and potential investors to explore this exciting investment opportunity.