AN EXPLORATORY STUDY INTO POTENTIAL OF REAL ESTATE INVESTMENT TRUSTS (REITs) AS A WINDOW FOR SMALL-SCALE INVESTORS IN THE REAL ESTATE INDUSTRY

ABSTRACT
Real estate investment has perceived higher rates of return overtime compared to other forms of
investment but standing on the way is a huge start-up capital requirement, expertise in running real
estate assets, illiquidity, professional management and other such requirements. These requirements
have been the stabling block for the small-scale investors to venture in the industry. The project thus
tries to explore the potential of Real Estate Investment Trust (REITs) as a tool for the small-scale
investors to invest in real estate. REITs concept has already been gazetted to be operational in
Kenyan real estate industry and therefore the study tries to explore the attributes of the concept in
relation to enabling small investors invest in real estate industry as the elite do.
The study provides the nature of real estate industry and its qualities including the requirement that
must be met when investing. It also defines the small investors by the income they earn and how
they earn it. Some of them earn income from informal jobs; informal activities and others are new in
the job market, employed with low income etc. It also discusses REITs concept and compares it with
other concepts such as co-operative and limited partnerships.
The study also discusses how small-investors have struggled in vain to invest in real estate industry.
The constraints that limit them include: high start-up capital requirement and increased expenses
from many regulations requirements, lack of expertise in running real estate assets, lack of
information in real estate markets, illiquidity nature of the investment and general management of
the investment etc. The study found out that small-investor have tried other channels such as cooperatives
and private partnerships but failed.
The study discusses the operation and performance of REITs concept in United States of America
where it was established many years ago (1960). The concept in U.S was established among other
aims to enable the small investors get same opportunities as there were for the elite. The study
concludes that REITs is a tool for poor to invest in real estate industry.
 

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