Africa’s REIT sector is being positioned as a key bridge between domestic capital and large-scale infrastructure financing, with industry players calling for a more consistent tax framework to unlock its full potential.
The African REIT market remains relatively small by global standards, with a total market capitalization of approximately US$30 billion, around 95% of which is concentrated in South Africa. Kenya’s REIT market is gradually evolving, with a current market cap of US$189.5 million.
During a three-day conference organized by the REITs Association of Kenya (RAK), industry participants noted that temporary exemptions on stamp duty and other transaction taxes had previously led to a modest increase in REIT activity. However, many of these incentives lapsed in 2022, slowing deal flow in the sector.
In Kenya, registered REITs are exempt from corporate income tax on qualifying property income, and transfers of property into REIT structures may qualify for VAT exemptions. Despite these incentives, gaps remain in the tax framework that continue to affect market activity.
Speakers at the event emphasized that a favourable framework—one that enhances stability and predictability in the sector—should lower transaction costs, protect investor returns, and align with global standards.
The REITs Association of Kenya and other market stakeholders have been actively advocating for the reinstatement of stamp duty and capital gain exemptions, noting that eliminating the 4% levy on property transfers within REIT structures would materially lower entry costs and improve the economics of listing infrastructure assets.
Conference discussions also stressed the importance of tax clarity, consistency, and harmonisation across African jurisdictions, noting that fragmented and uneven regulatory frameworks continue to constrain cross-border investment flows and limit the scalability of REIT markets. Participants highlighted that greater alignment of tax policies would reduce compliance complexity, lower transaction costs for regional investors, and improve capital mobility, ultimately supporting deeper and more integrated real estate and infrastructure investment markets across the continent.
Defining Eligible Assets
The REIT market is also being constrained by regulatory ambiguity over what qualifies as an eligible asset. During a panel discussion, industry stakeholders warned that inconsistent interpretations risk narrowing the scope of investment. Current regulations draw distinctions between “real estate” in the legal sense and broader REIT-eligible assets, leaving room for differing views.
The uncertainty has created a cautious environment in which investors default to traditional property classes such as land and buildings, limiting innovation in sectors like digital and telecom infrastructure. The attending participants are now pushing for clearer policy direction to explicitly include non-traditional assets such as telecom towers and data centers, arguing that expanding the definition would align Africa with more developed REIT markets.
In jurisdictions like the United States, such infrastructure assets are already embedded within REIT frameworks, helping drive diversification and deepen investor participation. By contrast, Kenya and other African countries currently operate under a regime that leaves these categories in a regulatory grey area, limiting their inclusion in investment structures despite growing demand for digital infrastructure assets.
Beyond asset definitions, structural requirements such as minimum public float thresholds and investor participation rules are also shaping market development. Regional comparisons suggest that while such rules are designed to broaden ownership and deepen capital pools, they may be ill-suited to early-stage markets with limited investor bases. REIT stakeholders urged for a more flexible approach such as allowing privately held or closely held REITs in the initial phases could help build momentum before transitioning to wider public participation, offering a more gradual path toward a fully developed REIT ecosystem.
Reform the Structure
Kenya’s REIT framework is also being weighed down by structural uncertainty, as market participants grapple with the legal complexity of trust-based vehicles that underpin the regime. Practitioners said that the concept of an “incorporated common law trust” remains poorly understood, creating confusion not only among lawyers and fund managers but also among potential investors.
“There is a lot of confusion around the law of trust in Kenya, and if it’s not well understood by practitioners, then even the investment public finds it very difficult to understand,” said Kimani Njane, Partner at Mboya Wang’ong’u and Waiyaki Advocates.
The ambiguity has contributed to challenges in strengthening trust in REIT structures, adding to existing tax-related considerations that have already moderated the pace of adoption. To address these issues, regulators and industry stakeholders are increasingly examining recent reforms in collective investment schemes as a potential reference point for improving clarity and strengthening the framework. Updated rules in 2023 expanded the range of permissible structures to include companies and limited liability partnerships, offering greater flexibility than the traditional unit trust model that REITs currently rely on.
Comparisons with more mature markets also shaped the debate. In jurisdictions such as the United States and the United Kingdom, REITs are typically structured as companies, a model credited with supporting deeper market growth and stronger investor participation. Meanwhile, hybrid structures pioneered in markets like Australia, known as “stapled securities”, combine income-generating assets with development arms.
The direction of reform in Kenya appears to be shifting toward a corporate REIT model, a move industry executives say could address both governance and alignment concerns. A company structure would allow promoters to retain clearer strategic control while providing investors with more familiar oversight mechanisms such as boards and shareholder rights.
If combined with a more coherent tax framework, such changes could further momentum in REIT development, positioning them as an attractive and viable channel for mobilizing long-term capital flows into the country’s property and infrastructure sectors.
