Investing in real estate is about more than [IP1] just finding a place to call home. Real estate investment has become increasingly popular over the last two decades[IP2] . The economy has gone through hyperinflation phases in the past few years and [IP3] real estate investments played a role as an inflation hedge for corporates which had the capacity to invest in the sector. Some individuals and corporates lost much of their savings in the hyperinflation era. The situation can somewhat be blamed on very limited options available for individual investors and small corporates to enter the real estate market and enjoy the preserve of value the sector offers in these turbulent financial and monetary moments[IP4] .
Although the real estate market has plenty of opportunities for making big gains, buying and owning real estate is a lot more complicated than investing in stocks and bonds. That is why even if more people have the knowledge that real estate is a good inflation hedge, they didn’t find the chance or access to invest in it.
Buying rental properties is the oldest and most basic way of investing in real estate yet the fact remains that as long as there are no customized channels of encouraging investment from the locals the challenge remains. One way or the other, Real Estate Investment Trusts (REIT’s) [IP5] if introduced, they can be a good way of encouraging investment for corporates and individuals.
A REIT, or Real Estate Investment Trust, is a company that owns or finances income-producing real estate. Modeled after mutual funds or unit trusts, REITs provide investors of all types regular income streams, diversification and long-term capital appreciation.
REITs allow individuals and corporates to invest in portfolios of large-scale properties through the purchase of stock or units. In the same way shareholders benefit by owning stocks in other corporations, the stockholders or unit holders of a REIT earn a share of the income produced through real estate investment, without actually having to go out and buy or manage property.
Worldwide, REITs are traded on major stock exchanges, but there are also public non-listed and private REITs. Private REITs can be a good starting point in the Zimbabwean case in form of Real Estate Investment Groups (REIG). REITs generate income through the collection of rent on, and from sales of the properties they own for the long-term.
Currently much of the investments are done through Listed and Unlisted funds which are more traditional and unaffordable to the small willing investors out there. Unlisted funds are mainly composed of Pension Funds, Insurance firms, Banks and International investors. Pension funds are an arbitrary example of people coming together to save money for future use but the payouts are not so encouraging of late. Income on personal savings has also been eroded to depressed levels. In this regard REITs offer a lucrative, somewhat passive and secure investment option.
Since 2009, total real estate returns have outperformed other investment vehicles yet very few economic agents have enjoyed this performance, whilst, the real estate development sector has had difficulties accessing finance for several lucrative and useful projects. REITs will afford investors of all sizes and creed to access this well-performing sector and delivering the much needed finance to the real estate developers on conditions suitable for timeous delivery and of course the growth of the national infrastructure. Real Estate is one such option and REIT’s are an avenue worth exploring as a vehicle to offer individuals and corporates the chance to invest in real estate.
DisclaimerFrancis Chinjekure writes in his capacity as the Research Officer of The Real Estate Institute of Zimbabwe (REIZ). The views expressed in this article are his personal views and do not necessarily represent the views of his employer unless or otherwise stated. The article is for informational purposes only, for investment advice you can consult with your usual advisors. The Real Estate Institute of Zimbabwe and the writer do not accept responsibility for loss caused to any person who acts or refrains from acting in reliance on the material in this article, whether such loss is caused by negligence or otherwise. For feedback on this article you can get in touch with him on firstname.lastname@example.org
[IP2]Real Estate has always been a major investment option (Money & Stock Market being alternatives)
[IP3]A decade is 10 years and we did not go through 20 years of hyperinflation.
[IP4]Property investments is available at all levels hence we have high density to ultra low density, commercial and industrial, Leisure, etc,.
[IP5]Do we have REITs in Zim!?? Not at the moment.