Real Estate Investment Trusts (REITs) were introduced in Kenya by The Capital Markets (Real Estate Investment Trusts) (Collective Investment Schemes) Regulations in 2013.  The Regulations specified three models of REITs: -

1. Development Real Estate Investment Trusts (D-REITs) in which investors pool their capital together for purposes of acquiring greenfield or brownfield real estate with a view to undertaking development and construction projects,

2. Income Real Estate Investment Trusts (I-REITs) in which investors pool their capital for purposes of acquiring long term income generating real estate including housing and commercial real estate, and

3. Islamic Real Estate Investment Trusts which only undertake Shariah compliant activities. 

Since their introduction in 2013, Kenya has so far registered seven REITs.  These are Acorn Development Real Estate Investment Trust (Acorn D-REIT), Acorn Income Real Estate Investment Trust (Acorn I-REIT), Acorn Build-To-Rent Development Real Estate Investment Trust (ABTR D-REIT), ILAM Fahari I-REIT, LAPTRUST Imara Income Real Estate Investment Trust (LAPTRUST IMARA I-REIT),

ALP Industrial Real Estate Investment Trust, and TRIFIC Green USD Income Real Estate Investment Trust.

Kenya is a front runner in the African REITs market share and has a budding potential for growth, having previously been listed as the third largest market in Africa.  South Africa is currently leading as the largest REITs market in Africa with 33 listed REITs as at 2024-2025, followed by Nigeria.  In Kenya the REITs sector has recorded significant growth, with total market capitalization reaching approximately KShs.24.6 Billion as at 2025 based on market information provided by the REITS Association of Kenya.

In Kenya, REITs are structured as common law unincorporated trusts rather than companies.  The trustee holds the real estate assets on behalf of investors, while professional managers handle acquisition, development, leasing, and day-to-day operations.  Investors, in turn, earn returns through income distributions and potential capital appreciation.

From a tax perspective, REITs are intended to be tax efficient vehicles that enjoy several exemptions.  The availability of these exemptions is directly linked to the growth of the REITs market segment.  Some of the exemptions that REITs currently enjoy in Kenya are income tax, Value Added Tax (VAT) and stamp duty exemptions.

The Income Tax Act (ITA) provides under Section 20(1)(c) and (d) that upon application to the Commissioner of Domestic Taxes and the subsequent approval and issuance of the income tax exemption by the Commissioner, the income of a REIT and the investee company of a REIT becomes exempted from income tax.  However, the income tax exemption does not extend to withholding tax on dividend and interest income earned by unit holders who are not exempted under the First Schedule to the ITA.  It is also worth noting that payments for redemption of units or sale of shares received by unit holders or shareholders in a REIT are deemed to have already been tax paid as provided for under Section 20(2).

In addition, REITs also enjoy an exemption under the VAT Act, that is provided for under Paragraph 33 of Part II of the First Schedule to the VAT Act on the transfer of assets and other transactions related to the transfer of assets into REITs and asset-backed securities.

REITs further enjoy some stamp duty exemptions that are provided for under Paragraph 96A of the Stamp Duty Act.  The first being the transfer of beneficial interest in property from one trustee to another trustee or to an additional trustee.  Additionally, Paragraph 96(A)(1)(b) of the Stamp Duty Act also provided for an exemption on the transfer of beneficial interest in property from one person to another for the transfer of units in the REIT.  However, this exemption only applied to transfer instruments executed before 31st December 2022.

In a bid to remedy this position, the Business Laws (Amendment) Bill, 2025 sought to introduce under Paragraph 96A of the Stamp Duty Act two new exemption provisions - the first being an exemption on the transfer of beneficial interest from a trustee to the REIT, and secondly, a reintroduction of the expired exemption on the transfer of beneficial interest in property from a person or persons into a REIT in exchange for units in the REIT, with no expiry on the term duration.  This position has been supported by various industry stakeholders who have advocated their unequivocal support towards the reintroduction of the stamp duty exemption. 

While the income tax and VAT exemptions continue to elevate the growth of REITs in Kenya, the expiry of the Stamp Duty Act’s Paragraph 96A(1)(b) has greatly impeded the growth of REITs in Kenya.  Statistically, out of the seven REITs approved in Kenya, only three (all in late 2025) have been registered since the expiry of the stamp duty exemption.  The reintroduction of the stamp duty exemption is important seeing that the potential for the growth of REITs in Kenya can be directly attributed to taxation; in that the higher the taxation at different levels of a REIT structure, the lower the distributable income to investors becomes.

In conclusion, from a practical standpoint it is noted that the number of REITs registered after the stamp duty exemption expired has been low, with an approximate three-year gap when no REIT came to market.  This calls to show the impact that taxation has on the growth of REITs in Kenya and the REIT market looks forward to the reinstatement of the stamp duty exemption among the introduction of various other incentives specific to this market segment.