By Stephen .T .Chifamba
Infrastructure Real Estate Investment Trusts (REITs), which have been rolled out in Zimbabwe for more than one year through the latest law amendment, have been receiving increasing attention from developers.
The interest from developers is seen as a way of facilitating the country’s high-quality economic growth target by analysts.
Real estate investment and finance markets in most developing countries are generally undeveloped, and Zimbabwe is no exception.
Most real estate developments are being financed by individuals and households using “sweat equity” over a period of time. The problem of illegal invasion of land, unplanned horizontal growth of cities as individuals seek to invest their money in real estate markets which are considered to be safe in unstable markets.
Analysts were basing their predictions on the premise of the law which stipulates that new developments after 2020 are the ones to be considered for REITs.
In terms of the Finance (No. 2) Act, 2020 the conditions with regards to establishment of REITs include the condition that, in the case of investors in the REIT other than a pension fund, income must accrue from real estate investment projects commenced on or after the date of commencement of the Finance (No. 2) Act, 2020).
Financial analyst Tafara Mtutu said, “The law is a progressive one as it makes sure the country goes forward with infrastructure development as companies cannot list old buildings. This will drive those with the passion to list a REIT to develop new infrastructure.”
The sentiments were echoed by Dr Zachary Tambudzai, a development economist at Midlands State University who said, “The development of REITs under such a law drives the economy to bridge the gap in infrastructure. If we take for instance the Tigere REIT has already given us two suburb tailored shopping centres and more is to come as they grow the REIT.”
More companies have said they want to list their REITs on the local bourse and this has led to the renewed hope of more development in the country.
Datvest chairperson Never Mhlanga in March during the launch of their Exchange Traded Fund said, “Beyond this we are looking at real estate (to see) to what extent we can deepen the markets. (We are) looking at what they are doing in other markets. We will launch a real estate investment trust (REIT), which will be listed on a stock exchange.
“Instead of you going to buy a bit of equity in Karigamombe House or Livingstone House (some of Harare’s biggest properties) or any commercial and residential property, you can do all that and cover all that, but purchasing a REIT … becomes a hedging instrument. Obviously, out of our innovativeness, we are always looking to enhance our impact and relationship with customers.”
However, property analyst Gerald Amon said the reservations for pension funds to list their old buildings will derail the efforts to bring pension funds to invest more in the economy.
“It defies the logic that pension funds are allowed to list old buildings when it is believed that they have idle money that anyone else in the economy. There has been a cry of how we can make pension funds contribute more to economic development and not just pile their money on the stock exchange,” he said.
Despite the concerns, the head of Real Estate and Conveyancing at Titan Law, advocate Priscilla Nyatsanga said, “At a macroeconomic level, the introduction of the highly transparent, well-regulated, tax-efficient REIT structure into the real estate sector of Zimbabwe has the potential to stimulate additional capital flows into the country’s property markets, thus positively impacting the job market and business dynamism of the economy.
“At a microeconomic level, REITs will provide an opportunity for private investors to play a significant role in the provision of the country’s commercial offices, industrial premises, retail real estate, residential units, and healthcare facilities. In other words, the REITs structure has the potential to serve as an effective policy tool for channelling professionally managed capital into the delivery and operation of the property market.”
The law is pro development and will surely lead to more development as more companies decide to list their own REITs, but concerns on pension funds listing old buildings will haunt the product as we have heard that the National Railways of Zimbabwe also wants to spruce up its old buildings and list a REIT – Harare
