Tanzania’s Real Estate Investment Trusts: how they operate and why they matter

A Real Estate Investment Trust (REIT) is a corporate entity or trust that pools investors’ funds to acquire, develop and manage income-generating real estate assets, ranging from residential complexes, shopping malls to office towers and industrial parks. REITs have gained international prominence due to their ability to deliver both steady income via rental or lease revenue and the potential for capital appreciation. This dual benefit has made REITs a sought-after investment vehicle for individuals and institutions looking to diversify away from traditional assets such as equities and bonds.

How REITs work

A REIT typically begins when a sponsor, often a development firm, investment company or government entity, forms a legal structure that complies with regulatory standards. In Tanzania, the Capital Markets and Securities Authority (CMSA) and the Dar es Salaam Stock Exchange (DSE) jointly oversee REIT establishment and trading. It then raises capital by issuing shares (or units) to the public, with proceeds directed towards purchasing or developing income-generating real estate asset(s). As tenants, whether commercial, residential or industrial, pay rent, the REIT’s revenue stream grows. Effective property management is vital here, ensuring high occupancy rates and stable cash flow. Once operational costs and any debt obligations are covered, the REIT distributes the returns to the unit holders, adding value to the investors.

The current status of REITs in Tanzania

Despite Tanzania’s rising real estate demand driven by ongoing urbanisation, significant infrastructure investments and a growing middle class, the REIT market remains in its early stages. The Watumishi Housing Investment REIT (WHI-REIT), established by the Watumishi Housing Company (WHC), currently stands as the only registered REIT in the country. Its core mission is to mobilise resources for developing, managing and selling affordable residential properties for public servants, with projects strategically located across Tanzania.

All WHI-REIT investments are presently not listed on the Dar es Salaam Stock Exchange (DSE). This arrangement stems from a planned lock-in period to stabilise the REIT’s asset base and allow its investments to mature before being publicly tradable. While this lock-in phase was initially expected to last three years, after which listing on the DSE would occur, the transition has yet to occur. Nonetheless, WHI-REIT’s work underscores the potential for pooling capital to address housing deficits. It demonstrates how future REITs could further contribute to Tanzania's growing real estate market, particularly in commercial, industrial and mixed-use sectors.

Benefits and risks for investors

Investing in REITs allows individuals to enter the real estate market with lower capital outlays while enjoying the potential for steady distributions income and long-term capital growth. The units can often be traded on an exchange, offering greater liquidity and fewer administrative burdens than direct property ownership. However, just like any other investments, REIT investments are not without risks. Market volatility can affect share prices and operational challenges, like vacancies or maintenance costs, can dent returns. Shifts in interest rates, regulatory policies, and currency values (for foreign investors) can influence performance, hence due diligence is necessary to establish the risks and be comfortable with the ability of the REIT to give the expected returns.

The importance of REITs for Tanzania’s economy

REITs and other collective investment schemes are vital in improving housing availability and infrastructure in Tanzania. By pooling resources and channelling them into real estate projects, these vehicles can help bridge existing housing gaps, particularly in the affordable segment, while financing commercial and mixed-use property development. In doing so, they enhance the country’s urban infrastructure, making it easier for communities to access quality housing, retail and business facilities.

Beyond physical development, REITs and the Construction Industry Scheme (CIS) are catalysts for capital market growth. Their ability to attract local and foreign investors adds depth and liquidity to Tanzania’s financial landscape. This influx of investment capital supports property development and stimulates secondary industries such as construction, property management and associated service sectors. As these industries expand, they create new jobs, ultimately contributing to overall GDP growth and promoting a more resilient, diversified economy.