I had the pleasure of speaking on a panel on the emergence of REITs during the 12th Annual East Africa Property Investment Summit, under the theme “Positioning for Opportunity”. The session, expertly facilitated by Ruth Okal RV MISK REA of ILAM Fahari I-REIT and joined by a distinguished panel Kabaki Wamwea Thomas Kabaki of Private Wealth Capital Limited and Asbury Maruza Chikwanha of Ivhu Logistics Real Estate, explored a timely and transformative topic: Unpacking the REIT Incubator – New Prospects and Growth in the Listed Space.
Here’s a summary of key points that I shared:
Why REITs, and Why Now?
Real Estate Investment Trusts (REITs) have long been viewed as a vehicle for democratizing access to real estate investment and injecting liquidity into the sector. But in Kenya, and indeed across East Africa, REITs are more than a financial instrument. They are a strategic lever for large-scale institutionalisation and transformation of the real estate sector, offering opportunities for innovation and specialisation of real estate investment products, including to address underserved or under-invested sectors.
At Construkt Africa , we are doubling down on what we view as high-impact, high-value areas for real estate investment:
- Affordable Housing, where institutional capital can unlock scaling, efficiency and economic viability, with positive social impact
- Commercial Office Space, where we aim to reposition and modernize strategically located existing stock, particularly in Nairobi, to enhance occupancies and yields, while optimizing operational and energy efficiency.
Scale as the Catalyst
To address the widening housing gap, particularly in urban centres, we believe scale is not optional, it’s essential, without which it will remain a challenge to enhance access to affordable housing . A 100-unit development won’t cut it. We’re focused on development of large-scale, master-planned mixed-use developments as sustainable integrated communities at strategic, interconnected nodes in Nairobi that are opening up with the extension of transport and digital infrastructure. Our ambition is aimed at matching the challenge of bridge the significant shortage of supply, while developing innovative end-user financing models that enable homeownership, as a mechanism for financial inclusion and wealth creation.
Meanwhile, the commercial office market contiunes to recover from the post-covid downturn, with Kenyan businesses generally preferring to return to the office, though with tenant expectations influenced by trends towards work-life balance, and a desire for more amenities, servcies, and a more user-friendly and environmentally conscience environments. With major commercial nodes rebounding and occupancies recovering, though not yet to pre-pandemic levels, and with a slow down in new stock in the market, we are purising an approach of aggregating, modernising and repositioining well located existing office as diversified portfolios, aimed at enhancing value and sustainability.
Local capital markets
Mobilisation of patient institutional capital within the domestic economy will be required to mitigate exposure to foreign exchange rate volatility, necessitating development of institutional-grade, future-proof product, that meets markets return expectations. Progressive asset management approaches that embed cost-effective technologies, economies of scale, energy and operaitonal efficiency will underpin sustainable financial viability, being critical factors in generating investor appetite, with policy driven incentives further enhancing the value proposition. Activation of the local capital markets, as opposed to dependancy on hard-currency international funding, will be a game-changer, with our conviction increasingly alinging with an evolving policy framework that supports this vision.
Relevance and vision for REITs
The emergence of REITs as tax efficient, professionally managed, regulated vehicles for the pooling of capital for investment across real estate asset classes, provides a framework for institutional-grade governance, transparency and performance monitoring, while enhancing liquidity in the capital markets, together with the benefit of improved returns as compared to owning and managing real estate directly.
As the REIT industry matures products are evolving from generalist strategies to more specialized, sector-specific platforms, including affordable housing, commercial, industrial and logistics, and infrastructure. This reflects an evolution of the players and a maturing of investors expectations, which progression was highlighted during our panel discussion, and which market deepening process we’re committed to actively drive forward.
We see real momentum in the REIT space. With the engagement of innovative players, mobilization of local capital markets, and an enabling policy environment, Kenya has the potential to lead the region in innovative, inclusive, and investment-ready real estate solutions. The future is not just promising, it’s now taking shape.
Paul Kavuma
Founder & CEO Construkt Africa
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