Capital markets Authority has prioritized I-REITS whose main objective is to collect income in form of rent over D-REITS which are focused on development, construction and selling of Real Estate at a profit. The capital (Kampala) has a housing deficit close to 300,000 units, 1 million city dwellers are scantily housed with 68.5% housing units classified as slums that can’t exist for more than 3 year. The future is D-REITS. firstname.lastname@example.org. +256758096306
D-REITS connote a corporation authorized by Capital Markets Authority to own and develop property to dispose it off or collect rent. D-REITS aim at acquiring eligible real estate, investing in development and Construction of the property for purpose of selling it off or renting it out. Marketing of real estate etc.
D-REITS differ from I-REITS though the two are used interchangeably. The requirements for establishment of each differ. Before approval of a D-REITS the investors must be professionals, a minimum of 7 investors is allowable, the minimum subscription of each parcel is UGX 150m (7500 currency points), minimum value of initial assets shall be UGX 5Billion (250,000 Currency points), 25% of the total value shall be free float before the trust is Authorized by CMA.
I-REITS require a threshold of UGX 9 BILLION value of assets to be set up yet D-REITS call for 5 billion this is almost doubles. Most D-REITS aim at disposing of the assets to purchasers this reduces operational cost; investors get a quicker return on the investment upon sale as compared to rental in I-REITS which come in small bites.
Upon sale of the Property in D-REITS operational costs reduce, Tax and other liabilities are transferred to the new landlord. Uganda’s Economy is relatively small; investors need to be smart to minimize the cost of investment in order to get the highest return.
Sauces of Raising funds in D-REITS is open according to the REITS regulations 13 ,a trustee may access funds from the public or through debit financing unlike I-REITS which are limited to public offers. This provides D-REITS with a wider pool of resources.
Most Ugandans do not have titled land; according to the Torrens system they don’t own land at all. The main objective of D-REITS is to construct and development real estate for sale, upon sale purchasers acquire ownership of land. Why would CMA focus on schemes intended to make Ugandans tenants rather than Landowners.
Mr. Karugaba (Best Commercial Lawyer ULS) says prohibiting charging rent in dollars and analogy system Land registry is among the key challenges to development of REITS. There is hope; the Ministry of Lands is in final stages of computerizing all titles and documents at the registry. This will means that forged fake documents can be sorted out at ago or online. This will solve the issue of defrauding clients.
According to the 2017 Income Tax Amendment act, section 5 prohibits execution of rental agreements in any other currency other than Ugandan shillings; this is only a challenge to international bodies investing in Uganda through I-REITS because they are Rental based. Charging Rent in dollars isn’t a challenge per say because it can be mitigated by setting out a standard currency rate as compared to Bank of Uganda rate. The Income Tax amendment act came after landlords were over charging resident tenants exorbitant rent dues in foreign currencies.
Finally D-REITS only involve professional investors this means they are better managed because participants are experienced, exposed, educated and well informed about the sector. Uganda has very few professional investors, it’s worsened by rigid pension sector, and it becomes very hard to solicit for professional investors locally. Save for the above mentioned reason, D-REITS still present a clear picture and solution to housing crisis lin.uuUganda as compared to I-REITS. CMA ought to promote both.