Lawmakers Reject Proposal to Reinstate Stamp Duty Exemption for Real Estate Investment Trusts (Reits)

Lawmakers have rejected a proposal to reinstate stamp duty exemption on property purchased under Real Estate Investment Trusts (Reits), despite arguments from the Nairobi Securities Exchange (NSE) Plc and other stakeholders that the tax benefit would boost the uptake of Reits in Kenya.

A Reit is a company that owns, operates, or finances income-generating real estate, allowing investors to earn dividends from real estate investments without individually managing properties. The proposal for the stamp duty exemption was put forward by a group led by the NSE, the Kenya Association of Stockbrokers and Investment Banks (Kasib), and other industry associations.

The National Assembly Finance and Planning Committee, led by Kuria Kimani, stated that the proposed amendment to reinstate the stamp duty exemption would require changes to the primary law, the Stamp Duty Act, and cannot be included in the Finance Bill 2024 as currently published.

Proponents of the reinstatement argued that the previous stamp duty exemption, which was in place for five years until December 2022, had attracted significant investment in Reits, with four funds valued at Sh27 billion and over 4,000 investors participating in their issuance.

However, the current subdued state of Kenya’s REIT market is attributed to high capital requirements for trustees and minimum investment amounts. Supporters of the exemption reinstatement believe that it would make it more affordable for property funds to acquire more properties, ultimately boosting the Reit market.

Despite the setback, Reits in Kenya are classified into two categories: Development Reits (D-Reits) for capital gains and Investment Reits (I-Reits) for rental income. Some Reits, such as ICEA Lion Asset Management’s Fahari, have faced challenges, with Fahari being delisted from the NSE in February.

Overall, the debate over the stamp duty exemption for Reits continues, with stakeholders advocating for measures to stimulate growth in the real estate investment sector.