Is Uganda Ready For REITs?

Introduction

The Ugandan Collective Investment Schemes (Real Estate Investment Trusts) Regulations, 2017 (the "REIT Regulations") are the latest initiative by the Capital Markets Authority (the "CMA") in Uganda. The REIT Regulations provide a regulatory framework for property owners to raise capital using their existing properties and for investors to acquire a part of these properties or for those seeking to acquire real estate and undertake development and construction activities as a collective scheme.

We set out below the key provisions of the REIT Regulations.

What is a REIT scheme?

A real estate investment trust ("REIT") scheme is an arrangement established for the purpose of collective investment by persons in real estate. The persons investing contribute money or money's worth as consideration to acquire rights or interest to gain benefits from pooling funds and investment in real estate and earn profits or income from the real estate.

What kinds of REITs are there?

A REIT may be structured either as a development and construction real estate investment scheme ("D-REIT") or an income real estate investment trust scheme ("I-REIT"). The objective of a D-REIT is to raise funds to acquire real estate and undertake development, construction projects and associated activities, which may include housing projects or commercial projects, to market and sell the real estate and to retain and manage the real estate with the object of earning income from the assets. The objective of an I-REIT is to enable the issuer to raise funds for purposes of acquiring long-term income-generating real estate (including housing, commercial and other real estate), marketing and sale of real estate, and retention and management of real estate assets of the trust with the objective of earning income from the assets of the trust. Although the distinction between the objectives of the D-REIT and the I-REIT appears blurred, the return on the former is on the sale of the property while that on the latter, is on rental income.

The I-REIT has demonstrated greater success over the D-REIT in other African jurisdictions with a track record in the issuance of REITs including South Africa and Nigeria. The CMA will therefore focus on the promotion of an I-REIT over a D-REIT.

Establishing the I-REIT

A promoter may establish an I-REIT by transferring real estate into a trust established under a trust deed. The property would be held in the name and under the control of a...