Zim can unlock infrastructure potential through REITs
STAFF WRITER
Property experts have called upon players in the real estate sector to utilise Real Estate Investment Trusts(REITS) to unlock the much needed funding in the wake of limited finance.
A REIT is a company that owns, operates, or finances income-generating real estate across a range of property sectors.
REITs allow investors to invest in a diversified portfolio of real estate assets without direct ownership and in Zimbabwe’s case, they must distribute a significant portion of their earnings as dividends, making them attractive investment vehicles due to their high dividend yields of 80%.
Dr Mike Juru, REIT Association of Zimbabwe chairperson, told this publication that REITs are the only viable solution to the country’s limited fiscal space.
“REITs offer a viable avenue for Zimbabwe to engage the private and public sectors in funding and managing infrastructure projects. Drawing lessons from experiences elsewhere, Zimbabwe can leverage REITs as a tool for infrastructure development, fostering partnerships between the public and private sectors. By examining pivotal steps taken by other nations, we can identify critical strategies for successful implementation in Zimbabwe, paving the way for sustainable economic growth and development,” Dr Juru said.
He said infrastructure development is a cornerstone of economic growth and societal progress but funding and managing large-scale infrastructure projects pose significant challenges for many governments, particularly in developing nations like Zimbabwe.
“Limited fiscal capacity, coupled with constraints in accessing international financing, regulatory constraints, and resource constraints, often hinder the implementation of vital infrastructure projects. In light of these challenges, exploring innovative financing mechanisms becomes imperative.
“REITs have emerged as a viable global vehicle for financing infrastructure projects. REITs pool funds from investors to invest in income-generating real estate assets, providing a steady income stream. Leveraging REITs for infrastructure development can offer numerous benefits, including access to capital markets, risk diversification, and efficient project management. Zimbabwe can harness the potential of REITs to address its infrastructure needs by forging partnerships with the private and public sectors,” he said.
According to Dr Juru, Zimbabwe stands at a crossroads, facing the challenge of inadequate infrastructure hindering its economic development and by exploring partnerships with private and public sectors through REITs, the country can unlock a sustainable and innovative financing mechanism for infrastructure projects.
He said drawing inspiration from successful models in Australia, the United States, Singapore, Canada, and South Africa, Zimbabwe can tailor its approach to suit its unique economic and social context.
“The pivotal steps can be taken, including creating a robust legal and regulatory framework, leveraging the sovereign wealth fund, conducting public awareness campaigns, and collaborating with international financial institutions to provide a roadmap for Zimbabwe to successfully implement REITs in infrastructure development. As the country embarks on this transformative journey, careful consideration of lessons learned from other nations will be instrumental in ensuring the success of REITs as a catalyst for economic growth and prosperity in Zimbabwe,”REITs boss said.
“Zimbabwe’s real estate sector holds immense potential for REIT-based infrastructure development. With a growing demand for housing, commercial spaces, and infrastructure facilities, a significant opportunity exists to attract investments through REITs. Additionally, Zimbabwe’s strategic location and natural resources further enhance its appeal to investors seeking long-term returns.
“One of the primary advantages of REITs is their ability to mobilize capital from domestic and international investors. By structuring infrastructure projects as REITs, Zimbabwe can tap into a broader pool of investors. This diversified funding base reduces reliance on traditional sources of financing and mitigates risks associated with project finance.”
Property experts posited that REITs offer transparency and liquidity, which are essential for attracting investment in infrastructure projects. Investors benefit from regular income distributions and the potential for capital appreciation, while the underlying assets provide a tangible value proposition.
“By listing infrastructure REITs on stock exchanges, Zimbabwe can enhance market liquidity and facilitate price discovery, fostering investor confidence in the real estate sector. Successful implementation of REIT-based infrastructure projects in Zimbabwe requires effective partnerships between the private and public sectors. Collaboration between government agencies, regulatory bodies, financial institutions, and real estate developers is essential to overcome regulatory hurdles, streamline project approvals, and ensure compliance with industry standards.
“Private sector participation brings expertise in project development, financing, and management, while the public sector provides policy support, regulatory oversight, and infrastructure planning. By leveraging the strengths of both sectors, Zimbabwe can create an enabling environment for REIT investments in infrastructure,” Dr Juru said.
The REITS Association boss said international experiences offer valuable insights into forging public-private partnerships (PPPs) for infrastructure development through REITs.
Countries like Singapore, Australia, and the United States have successfully implemented REIT-based infrastructure projects, demonstrating the efficacy of this financing model in diverse contexts.
Infrastructure REITs originated as traditional real estate investment trusts established in the United States in the 1960s and over the years, as investors sought diversification and stable income streams, the concept of infrastructure REITs emerged.
These REITs typically invest in assets essential for a society’s functioning, such as transportation, energy, water systems and communication infrastructure.
By pooling funds from various investors, including institutional and individual investors, pension funds, and retail investors, REITs can generate substantial capital for infrastructure projects and these projects can include both greenfield developments and the upgrade of existing infrastructure.
The evolution of infrastructure REITs has been influenced by factors such as changing investor preferences, regulatory frameworks, and market dynamics.
Property players said as global infrastructure needs have grown, so too has investor interest in infrastructure assets as a means of generating reliable returns and this has led to developing specialized infrastructure REITs targeting specific sectors or geographic regions.