The dream of owning a piece of Kenya’s booming real estate market is often overshadowed by one harsh reality: the astronomical entry cost. For most professionals, the thought of saving millions for that 50 by 100 plot somewhere in Kamulu, paying layers of legal fees, and then dealing with the headache of tenants and maintenance is simply overwhelming.

But what if you could invest in prime, income-producing real estate—the high-end malls, the institutional-grade office blocks, the specialized student accommodation like Qwetu and Qejani—with just a few thousand shillings, all while a professional management team handles every single detail?

Welcome to the world of Real Estate Investment Trusts, or REITs. If you are serious about building generational wealth and generating passive income in Kenya, understanding REITs is not just an option—it is the accessible gateway you have been looking for.

The Accessible Gateway: How to Invest in Kenyan Real Estate Trusts (REITs) for Passive Income

If you’ve ever felt locked out of the property market, this guide is your key. We are going to demystify Kenyan REITs, show you exactly how they work, walk you through the investment process, and, most importantly, equip you with the knowledge to navigate the market’s biggest challenge: liquidity.

1. What Exactly is a REIT, and Why Should a Kenyan Investor Care?

At its simplest, a Real Estate Investment Trust (REIT) is a publicly traded company that owns, and often operates, a portfolio of diverse, income-generating real estate assets. Think of it this way: instead of buying one small, risky house, you are buying a tiny, fractional stake (a unit) in a massive, professionally managed portfolio that might include five different student housing complexes, three office towers, and two shopping centres. You are buying a unitized property portfolio that trades like a stock.

The Mandatory Income Magnet: The CMA Rule

The true draw for you, the income-seeking investor, lies in the regulatory structure enforced by the Capital Markets Authority (CMA). This is what sets REITs apart from every other listed company in Kenya: REITs are legally mandated to distribute a high percentage of their taxable income back to you, the unit holder, as dividends.

This mandatory payout is defined as at least 80% to 90% of the REIT’s taxable profits. This stringent rule ensures the manager prioritizes cash flow, positioning REITs as one of the best vehicles for generating consistent, passive income, with distributions usually arriving in your account either semi-annually or quarterly.

If you are currently looking at other wealth creation avenues, you might want to check out our articles on investing here

2. Understanding the Kenyan REIT Landscape: Two Crucial Types

The CMA has defined two primary types of REITs, each tailored to a different investor appetite for risk and income. Understanding this difference is critical before you commit your capital.

A. Income REITs (I-REITs): The Stability Play

I-REITs are established to acquire and manage real estate that is already built, operational, and generating stable, long-term rental income.

• Focus: Existing properties like established malls, corporate office blocks, or specialized student accommodation.
• Income Source: Primarily stable rental revenue and lease income.
• Risk Profile: Moderate, dependent on occupancy rates and tenant stability.

You might encounter two categories within I-REITs: Unrestricted (theoretically open to all) and Restricted. This leads us to the crucial difference in accessibility.

B. Development REITs (D-REITs): The Growth Play

D-REITs are fundamentally different. They are designed to raise capital specifically to fund the construction of new projects.

• Focus: Financing the building of new real estate, such as large residential complexes or commercial hubs.
• Income Source: Capital gains upon the sale of the completed property, or the eventual transition into an I-REIT once the assets are stabilized and fully leased.
• Risk Profile: High. You are exposed to construction delays, cost overruns, and market risk during the development cycle.

The KES 5 Million Barrier: Know Your Investor Class

The regulatory framework introduces a significant access distinction: the KES 5 million threshold.

• Retail Investors: You can invest in Unrestricted I-REITs, often with a low minimum investment (sometimes as low as the unit price itself).
• Professional Investors: To invest in the higher-risk D-REITs or Restricted I-REITs, you must qualify as a “Professional Investor” by subscribing for units worth at least KES 5 million. This threshold confirms that the regulatory structure naturally steers large, institutional money toward the higher-risk, less-liquid projects, while retail investors remain largely confined to the proven, income-generating schemes.

3. Who Are the Active Players and Where Do They Trade?

The Kenyan REIT market is small but concentrated, and the location of where these units trade dictates your ability to buy and sell them.

The Specialized Acorn REITs

Acorn Holdings operates two specialized REITs focusing exclusively on the student accommodation sector :

1. Acorn Student Accommodation I-REIT (Acorn I-REIT): Focuses on existing student housing. Units trade around KES 22.03 .
2. Acorn Student Accommodation D-REIT (Acorn D-REIT): Funds new student housing developments. Units trade around KES 24.54 .

• Key Trading Note: Both Acorn REITs trade on the Unquoted Securities Platform (USP) . This is an Over-The-Counter (OTC) segment of the Nairobi Securities Exchange (NSE). While accessible, trading here is not as fast or liquid as the main NSE board.

The High-Yield LAPTRUST Imara I-REIT

This Income REIT is focused on mixed, existing property portfolios.

• Key Insight: This scheme has demonstrated high-income potential, posting an annualized dividend yield of 8.2% in FY’2024, with a payout ratio consistently above 85%.
• Key Trading Note: LAPTRUST Imara I-REIT is listed on a Restricted Segment of the NSE, trading at approximately KES 20.00 per unit . The high yield here often comes with higher barriers to entry and lower liquidity.

The Institutional Batian Income Property Fund

Managed by GenAfrica Asset Managers , this fund targets a substantial KSh 10 billion size. It has focused on institutional-grade commercial property, notably acquiring key assets like The Cube commercial property.

• Key Trading Note: Batian Income Property Fund is listed on the USP, trading at roughly KES 100.00 per unit. This fund’s institutional focus makes it a significant player in the commercial space.

The Warning Sign: The Fahari I-REIT Conversion

Kenya’s first REIT, ILAM Fahari, originally an Unrestricted I-REIT listed on the main NSE board, struggled with market liquidity. In a critical move, unit holders approved its conversion to a Restricted I-REIT and its subsequent delisting from the main NSE board. Its units were then transferred to the low-liquidity USP.

This case study is a crucial warning: it confirms that while the regulatory environment is set up for REITs, the market depth may not yet exist to support highly liquid, publicly traded schemes. For you, it means that liquidity risk is the single greatest challenge to manage in this asset class.

4. Your Step-by-Step Guide: How to Execute the Investment

Investing in REITs, particularly those trading on the USP, requires a specific approach. Follow these steps to move from novice to unit holder:

Step 1: Open Your Central Depository System (CDS) Account

This is the prerequisite for investing in virtually any capital market security in Kenya, including REIT units. Your CDS account is your personal electronic ledger for holding these investments.

• The Agent: You must open this account through a CMA-licensed Central Depository Agent (CDA) . These are typically stockbrokers, investment banks, or custodian banks like Equity Bank Group or Co-operative Bank of Kenya.
• Documentation: Be prepared with your Kenyan National ID or Passport, your KRA PIN, a recent passport photo, and a fully completed CDS mandate form, often requiring certification and stamping by your commercial bank.

Step 2: Choose a USP-Capable Stockbroker

This is the most critical decision when investing in active Kenyan REITs. Because all the currently trading schemes (Acorn, Batian, and the Restricted REITs) operate on the USP , you need a broker specifically authorized and experienced in facilitating trades on this Over-The-Counter segment.

• Look for Proven Experience: Firms like Dyer & Blair Investment Bank, Kingdom Securities, or Genghis Capital, which are licensed by the CMA, are among the key intermediaries in the market and are often authorized for this type of trading. Their experience will determine how efficiently your trade is executed in a low-volume environment. For instance, Kingdom Securities, a subsidiary of The Co-operative Bank of Kenya, has handled complex transactions like the Fahari conversion, confirming their capability in restricted market trading.
• Actionable Tip: When selecting your broker, specifically ask them about their experience trading on the Unquoted Securities Platform (USP) and the typical trading timelines for REIT units.

Step 3: Fund Your Account and Place Your Order

1. Fund Your Account: Deposit the capital you wish to invest into your designated trading account with your chosen CDA. Many brokers offer convenient methods, including M-Pesa Paybill numbers or direct bank transfers.
2. Place the Order: Based on your risk appetite (I-REIT for income, D-REIT for growth, noting the KES 5 million limit for the latter) , instruct your broker to purchase the units. You can typically do this through online trading portals (if available), email instructions, or by physically placing an order at one of their branch offices.

Understanding USP Execution: Unlike trading mainstream stocks, which execute instantaneously on a visible order book, trading on the USP is an OTC process. This means your broker must facilitate a negotiation with another counterparty’s broker . Be patient—execution might take longer, and the unit price might be subject to negotiation due to lower market volume .

5. Pros and Cons: Weighing the Investment Decision

Every great investment comes with trade-offs. You must weigh the tremendous benefits of REITs against their structural risks.

✅ The Pros: Why REITs Belong in Your Portfolio

1. Low Barrier to Entry and Democratized Access

This is the game-changer. You gain exposure to Grade A properties—assets previously reserved for large corporations or pension funds—without having to raise millions. For Unrestricted I-REITs, entry is often just the unit price, and specialized platforms can lower the barrier even further, with some entry points starting from as low as KES 220 or KES 50,000 for regular investment.

2. The Power of Diversification

By buying a single REIT unit, you immediately own a piece of a professionally managed, diversified portfolio (e.g., student housing, office parks, etc.). This insulation protects you from the catastrophic risk of a single property failing or a single tenant defaulting.

3. Reliable, Mandatory Income Stream

The CMA’s distribution rule (80%–90% payout of taxable profits) provides you with a structurally reliable, passive cash flow. If you are looking to build a source of income that can cover your expenses, a high-yield I-REIT that adheres closely to this mandate (like LAPTRUST Imara at 8.2% yield in FY’2024) is a formidable tool. You can find more insights on this in our piece, Structuring Your Retirement Portfolio for Consistent Yield.

4. Liquidity Superior to Direct Ownership

While we will discuss liquidity risk shortly, a REIT unit is significantly more liquid than a physical building. You can sell your units through your broker in days or weeks, as opposed to the months or years it takes to sell land or a house, complete with legal due diligence and land registry processes.

5. Professional, Hands-Off Management

The fund manager handles all the tedious work—tenant screening, maintenance, legal administration, property acquisition, and statutory compliance. Your role is purely as a passive investor receiving distributions.

❌ The Cons: Understanding the Risks

1. The Liquidity Trap (The Major Concern)

This is the single most important risk you must manage. Since the majority of active Kenyan REITs trade on the USP/Restricted segments , trading volumes are thin . This translates directly to liquidity risk. You might find it difficult or slow to sell your units quickly, and in the event of needing to exit fast, you may have to accept a steep price discount compared to the last traded price. The conversion of the pioneer Fahari REIT to a Restricted, delisted instrument underscores this systemic market challenge.

2. Occupancy and Market Risk

While your portfolio is diversified, your income is directly tied to the underlying rental market. If the economy slows, vacancies rise, or tenants default on rent, your REIT’s distributable income—and thus your mandatory dividend payment—will fall. For example, if you invest solely in student housing REITs, a significant downturn in university enrollment could immediately affect your returns.

3. Regulatory Restructuring Risk

The Fahari case demonstrated that an Unrestricted REIT can convert to a Restricted I-REIT. If this happens, your access and exit options are drastically curtailed, and you might be forced into a mandatory redemption offer or be relegated to the low-volume USP.

4. Price-to-NAV Discrepancy

In a low-liquidity environment like the USP, the quoted price for the REIT unit may not always accurately reflect the true Net Asset Value (NAV) of the underlying properties . The limited trading volume makes it difficult for the unit price to truly reflect the intrinsic value, creating a potential valuation risk. Always monitor the published NAV and not just the last traded price.

6. Conclusion: Is a REIT Right for Your Portfolio?

For the income-seeking Kenyan investor who wants real estate exposure without the crippling capital outlay and management headache, REITs are a powerful and regulated tool. They offer an unparalleled combination of low entry barriers and mandatory cash flow, making them excellent assets for long-term wealth preservation and building passive income streams.

However, success in this market is conditional. You must approach Kenyan REITs not as rapid stock market trades but as long-term, illiquid, fixed-income substitutes. The market’s structural reliance on the USP means you must invest with a holding period of five years or more and only with capital you are comfortable locking away.

Your due diligence must focus on the asset base, the manager’s track record, the consistency of the mandatory payout, and, critically, the competence of your chosen CMA-licensed CDA in navigating the Unquoted Securities Platform.

The final actionable advice is clear: Always consult a CMA-licensed financial advisor before initiating any investment decisions. Ensure the specific REIT you choose aligns perfectly with your financial goals—whether you prioritize stable income (I-REITs) or long-term capital growth (D-REITs, if you meet the professional investor threshold).

If you are ready to take the next step in your investment journey, be sure to read our companion guide,