The Rise of REITs in Zimbabwe: Benefits for Investors and Developers

A recent development on the Zimbabwe Stock Exchange (ZSE) has been the emergence of Real Estate Investment Trusts (REITs). According to a report, despite a slowdown in real US dollar terms in 2023, REITs are expected to drive growth prospects on the ZSE this year. 

The ZSE witnessed a milestone in its REIT landscape with the listing of the Revitus Property Opportunities REIT Fund last December. This became the second REIT to be listed after Terrace Africa’s Tigere Property Fund, which was the first REIT on the exchange following its listing in November 2022.

Although the Tigere REIT declined by 34 per cent in US dollar terms by the end of 2022, experts believe REITs remain lucrative opportunities for the ZSE. They also increase investment choices for investors by providing exposure to Zimbabwe’s property market.  

ZSE chief executive officer, Mr Justin Bgoni, indicated that the REIT market offers attractive growth potential for the exchange in the short to medium term. He said, “We see REITs as our main growth area... But on the ZSE side, the REITs is where we think a lot of our growth will come from in the short term to medium term.”

So what exactly are REITs and what are their benefits? REITs are entities that own and operate income-generating properties. They allow investors to participate in the real estate sector without having to directly purchase physical properties.  

Here are some of the main advantages of REITs for investors in Zimbabwe:

1. Portfolio diversification: Adding REITs provides a new asset class to investment portfolios, helping mitigate overall portfolio risk.

2. Regular income: REITs distribute a significant portion of taxable income as dividends to shareholders. This provides a potential source of regular dividend income.  

3. Accessibility: REITs make real estate investment more accessible compared to directly buying properties, opening up the market to more investors.

4. Affordability: With modest amounts of capital, investors can gain exposure to large-scale, income-producing real estate through REITs.

5. Liquidity: REITs provide a more liquid way to invest in real estate compared to physical property investment. It is easier to enter and exit REIT positions.

6. Transparency: REITs have regulatory oversight, adhering to listing and operational requirements, and promoting transparency.

Additionally, a thriving REIT market also benefits real estate developers and the broader Zimbabwean economy:

• REITs attract new investment to the property sector, allowing more development projects to be funded and supporting construction activity and jobs.  

• Increased trading activity improves liquidity in the real estate market. This makes it easier for developers to access financing.

• More participation by investors makes the pricing of properties more efficient. This helps developers align projects to market demand.  

• Regulatory compliance and operational discipline required of REITs lift industry standards, bringing positive changes to real estate development practices.

REITs offer major advantages for both investors seeking exposure to Zimbabwe’s property market as well as developers looking to raise funding for projects. If the early signs of growth in REITs on the ZSE convert to a thriving market, it could provide a major boost to the economy and real estate sector.