First published in the Business Daily on January 21, 2015.
After reading Dr Edward Omete’s article last week, calling on mortgage firms to come up with products for the health sector, several points caught my attention.
Devolution has made investors curious about areas previously considered unproductive, with investment comes settlement, construction of healthcare infrastructure remains an expensive venture and private medical insurance is on the rise.
These points lay the ground for analysis of possible contribution of Real Estate Investment Trusts (REITS) in the health sector, a concept that has worked in other countries. The REITS Regulations 2013 opened the doors for real estate developers to access a wide fund base in raising capital through pooling of funds from individual investors.
REITS raise capital from investors through a collective investment scheme model and the investors get dividends from gains from disposal of the property acquired or developed. They may be listed at a stocks exchange where they are traded publicly.
Though not a single Reit is currently operational in Kenya, licensing of REITS managers and trustees, the latest being KCB, 2015 is potentially the year when we see the first one.
In other countries where REITS have been alive for quite a while, such as the US where they were launched in the 1960s, they have developed into sector specific products, notable among them healthcare REITS.
Healthcare REITS are types of property developed specifically for use by the health sector. For instance, a building may be tailor made to house dentists, psychiatrists and an outpatient hospital, among others.
The dividends, based on the demand for healthcare and appreciation in value of real estate, tend to be high.
As we look forward to the first Reit, the health sector and investors, including low income earners, stand to gain.
A growing economy, an ever increasing population, settlement effects of devolution, access to health insurance and changing healthcare preferences can be viewed as opportunities by potential investors in REITS.