Staff Writer
Property entities seeking to receive a Real Estate Investment Trust (REIT) listing status from the Zimbabwe Stock Exchange, other than collective investment scheme in property, must have gross assets of at least $15 million.
According to draft ZSE Specialist Securities Listings Requirements, property companies interested in REIT listing must have gross assets of at least USD15,000,000 as reflected in either its audited or reviewed consolidated financial statements; or a pro forma consolidated balance sheet. Further to that, at least 75 percent of the revenue as reflected in the statement of comprehensive income must be derived from rental revenue, interest on mortgages financing real estate or from sales of real estate.
The move to introduce REITs on the stock exchange are part of efforts by the Securities and Exchange Commission to diversify local securities trading through the introduction of a wide variety of investment products, which also include derivatives and Exchange Traded Funds (ETFs).
Real Estate Institute of Zimbabwe, Mike Juru yesterday said the introduction of the proposed REITs would pave way for investors, small and large to own properties through the securities exchange. REITs will be an additional tool to encourage and mobilise savings into real estate. This is in view of expected high demand from real estate developers and offshore investors.
“Its work in progress,’ Juru told Business Times adding: “We are (Real Estate Institute) assisting SECZ, which is working on the REITs legislation. It’s not ready at the moment but we are working on it (legislation) so that we have a transparent sector.”
REITs are securities that are traded on stock exchange the same way as regular stocks like equities but, invest in real estate directly either through properties or mortgages. They play a critical role in providing investors to participate in real estate projects even with a small fund size.
In fact, REITs will help the investing public to participate in the real estate sector and get a regular return.
Juru said the introduction of REITs will see offshore investors coming to Zimbabwe.
“REITs are an end product of a transparent property sector,” Juru said.
“Achieving transparency is a process that requires the involvement of government, regulators, property investors, financiers and professionals. The Zimbabwe real estate market is largely characterised by local pension funds and real estate companies. However the introduction of REITs will see more foreign real estate investors,” he added.
Juru said the lack of REITs in the Zimbabwe market has “failed to attract investments in the sector to facilitate more activity that ignites growth”.
“I must acknowledge, it is my wish and intention to work with relevant authorities to actualize the operationalization of REITS and the process leading to that will help addressing of a lot of shortcomings in our market.
“I have been in the industry for more than 20 years and have observed the transmutation of challenges in the sector so my objective will be to ensure that the current challenges bedeviling the operations of Valuers and Estate Agents are addressed,” Juru said.
He added: “The world is changing at a fast pace and with it are client expectations and the need to raise our relevance as a profession in this new world is a must happen.
“Transparency in real estate has become mainstream world over and there is a global benchmarking standard set and acceptable which includes performance measurement, market fundamentals, governance of listed entities, transaction processes, regulatory and legal framework and lastly sustainability. These aspects basically call for introduction of enforceable standards and cooperation of all stakeholders in ensuring our real estate sector competes at global stage attracting the international capital,” he added.
Juru said standards would allow the industry to eliminate some of the current challenges like discrepancies in valuations, transaction processing and disclosure concerns.
“Real Estate is a recognized asset class which competes well with the money and stock market,’ Juru said.
“The influx of developments dotted around the country is nothing out of this world and just an indication that investors are prepared to tie down their money in tangible assets unlike maintaining a healthy cash balance at the bank. Real estate is one of the few assets that react proportionately to inflation. As inflation occurs, housing values go up and rents go up.”
