Real Estate Investment Trusts: Watumishi Housing Company

Extract from Issue 49 of the African Union for Housing Finance newsletter:


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Investors are constantly looking to invest in new markets. Though, variation in regulation and opaque investing instruments can make investors too wary to commit to even the most enticing opportunities, such as with residential real estate across Africa. The introduction of real estate investment trusts (REITs) may change this: a vehicle that investors understand and can trust, aggregating diverse sources of funding from international and institutional investors through to households, and funneling them into a portfolio that extends beyond the limitations of individual projects. There appear to be various types of REITs: equity REITs derive an income from rentals, mortgage REITs buy mortgages and mortgage backed securities, wihle hybrid REITs are a mix of the two.

REITs are new in Africa, as the promulgation of legislation and issuing of regulations has only happened in the past three years in Ghana, Kenya, Morocco, Nigeria, South Africa, Tanzania and Zimbabwe. Initially predominantly used for the retail and commercial real estate sectors, residential REITs are now emerging.

In Tanzania, the Capital Markets and Securities Authority (CMSA) approved the Watumishi Housing Company REIT in early 2015, It is the first fully-fledged REIT to be established in Tanzania and East Africa, with an initial funding of TZS 68 billion (US$ 31 million). The REIT is expected to grow gradually to TZS 358 billion (US$ 164.7 million) in the next five years. Together, with the development of commercial properties, the WHC-REIT aims to mobilise funding for the development of low-middle income housing (differentiating it from other developers), both for sale and for rent.  The target house price is between US$ 10 000 – US$ 40 000, with US$ 20 000 considered the sweet spot, according to Tanzania Invest.

WHC-REIT was created to help fill the gap for housing for public servants, demand for which is strong in Tanzania. The Public Service Pension Fund, Government Employees Provident Fund, PPF Pension Fund, LAPF Pension Fund, National Security Authority, National Health Insurance Fund, and the National Housing Corporation are the all stakeholders in the REIT.

A result of this is that the WHC-REIT is the main implementer of the Tanzania Public Servant Housing Scheme, and is tasked with building 50 000 housing units over five phases. The first phase, launched in December 2015, consists of 1 500 units spread across 11 regions.; the houses are to be sold under mortgage arrangements to public servants. According to Tanzania Invest, only 1.5% of public servants are provided accommodation through mortgages or any other type of housing finance. The WHC-REIT has attempted to mitigate this by entering into agreements with various banks so that workers can access mortgages at lower interest rates (11 – 13 percent, as opposed to 22 percent) for longer bond terms (up to 25 years), making the cost of accessing mortgages much lower.

WHC-REIT is a closed fund, which means that the general public cannot access units. This is planned for only three years, of which one year is left. After this, WHC-REIT units will be traded on the Dar Es Salaam Stock Exchange (DSE). The advantage of listing the REIT on the stock exchange, according to with Mr Msemwa, the CEO of WHC, is that it would allow the company to expand its capital base and allow foreign investment in the company. By trading at DSE, the general public will be able to invest in REITs by buying and selling units in the same manner they can buy and sell shares.The WHC notes that REITs are a new concept in Tanzania that have the potential to provide a unique opportunity for the general public to create personal wealth by investing in housing, and also have the ability contribute towards overall economic development. As a mission, WHC-REIT seeks to work with other national and international fund managers and other stakeholders to develop this market in a manner that is beneficial to all parties.

As listed groups – REITs and others – explore the affordable property sector, investors can begin to develop an understanding of the opportunities in the market through their arms-length relationships with developments that their investments in the REITs facilitate.

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