Uganda's REITs stalled: Nine years later, no property investment trusts listed

Uganda’s Capital Markets Authority (CMA) introduced rules for Real Estate Investment Trusts (REITs) in 2017, aiming to unlock capital for the illiquid property sector. REITs offer a way for property owners to sell shares in their assets, similar to how companies issue stock, promising patient capital for long-term development. However, nine years on, not a single REIT has been listed on the Uganda Securities Exchange. This contrasts with Kenya, which, despite similar regulations introduced in 2013, now boasts five REITs valued at approximately $235 million.

Several hurdles have prevented Uganda’s REIT market from taking off. Dickson Ssembuya from CMA points to a lack of precedent and a “proof of concept” for REITs in the country. Additionally, patchy property valuation standards, a shortage of practitioners experienced in structuring such deals, complexities in the land tenure system, and low awareness among property owners have contributed to the delay. While recent legislative changes, including a new valuation act and improved lease enforcement, are building a stronger framework, the market still faces challenges.

Regional comparisons highlight Uganda’s unique struggles. Kenya’s REIT market itself took time to mature, with early attempts hampered by high investment thresholds that excluded retail investors. It took a decade and a redesigned product to create a successful REIT. Rwanda, despite having a more advanced land administration system, has also not yet seen any REIT listings since introducing its regulations in 2024. This suggests that while clear land titles are important, they are not sufficient on their own to foster a REIT market.

Compounding Uganda’s issues are deeply entrenched problems with land titling, stemming from a complex historical tenure system and an ongoing, albeit incomplete, land registry modernization. Furthermore, a scarcity of professionals with direct experience in structuring REITs means that expertise often needs to be imported from regional markets. Beyond legal and technical readiness, there’s a commercial aspect: property owners must be prepared for the rigorous scrutiny, audited financials, and transparent disclosure expected by institutional investors.

A significant obstacle remains taxation, specifically a 1.5 percent stamp duty on transferring property into a REIT trust, for which exemptions are narrowly applied. While discussions between the CMA, Uganda Revenue Authority, and the Ministry of Finance are ongoing, no resolution has been reached. Potential candidates to launch the first REIT include the National Social Security Fund (NSSF), which holds significant undeveloped land, or private sector developers looking to finance future projects. However, the path forward remains complex, requiring not just regulatory improvements but also a fundamental shift in how property is viewed and managed as an investment product.

Source: Daily Monitor (Uganda)