Legal Issues In REITs In Nigeria | Regulatory, Tax & Investment Overview

Real Estate Investment Trusts (REITs) enable investors to pool resources and invest in income-generating real estate without the burden of direct ownership. Globally, REITs have proven effective for capital mobilisation, wealth creation, and real estate market growth, particularly in the US, Europe, and parts of Asia. In Nigeria, however, the REIT market remains underdeveloped. Despite a regulatory foundation provided by the Investments and Securities Act 2007 and SEC Rules, several challenges, such as taxation issues, property transfer bottlenecks, weak investor protection, governance concerns, and low market liquidity, limit growth. The Investment and Securities Act 2025 updates the regulatory framework for REITs by expanding securities definitions, strengthening investor protection, and recognizing collective investment schemes. However, it does not address core land law issues likethe Governor's consent or title uncertainties under the Land Use Act 1978. Thus, while the new Act improves REIT regulation and compliance, property acquisition challenges remain.

For REITs to achieve their full potential in Nigeria, stakeholders, including regulators, fund managers, institutional investors, and policymakers, must address these legal and structural barriers. Reforms in these areas could unlock REITs as a powerful tool for capital market deepening and sustainable real estate investment.

REGULATORY FRAMEWORK FOR REAL ESTATE INVESTMENT TRUSTS IN NIGERIA

• Investment and Securities Act (ISA) 2025: This act provides the statutory foundation for collective investment schemes, including REITs. It also empowers the Securities and Exchange Commission (SEC) to regulate the establishment and management of REITs.¹

• Securities and Exchange Commission (SEC) Rules and Regulations (Consolidated 2013, as amended 2019): The Securities and Exchange Commission (SEC) in Nigeria oversees REITs. The SEC makes the rules and standards that REITs must follow to keep the market honest, protect investors, and ensure clarity. This includes rules about how REITs can be set up, run, and managed, and how they must report and discuss their finances. By monitoring REITs, the SEC helps make the stock market a safe and reliable place for buyers.

• Listing Rules of the Nigerian Exchange Limited (NGX): For REITs listed on the stock exchange, compliance with NGX's listing requirements ensures transparency and liquidity.

TYPES OF REITS²

In Nigeria, there are three main types of REITs:

• Equity REITs: These REITs primarily invest in and own income-producing properties, such as residential or commercial buildings. They generate revenue through rental income.
• Mortgage REITs: These REITs provide financing for real estate by investing in mortgages and mortgage-backed securities. They earn income through interest payments.
• Hybrid REITs: These REITs combine the characteristics of both equity and mortgage REITs, diversifying their portfolios.

POPULAR NIGERIAN REAL ESTATE INVESTMENT TRUSTS

Here are a few well-known Nigerian REITs:

a. Union Homes REIT: This is one of the first REITs in Nigeria. It focuses on residential properties and offers attractive dividends.

1. Skye Shelter Fund: This REIT invests in a mix of residential, commercial, and industrial properties. It aims to provide a balanced and diversified portfolio.
2. UPDC REIT: Managed by UACN Property Development Company, this REIT focuses on commercial properties like office buildings and shopping malls. This is the largest REIT in Nigeria. People like UPDC REIT because it has a wide range of investments and a strong position in the market. This makes it a popular choice for investors who want to enter Nigeria's commercial real estate market. It is known as the country's best REIT partly because of its size and strong management.

LEGAL ISSUES IN REAL ESTATE INVESTMENT TRUSTS IN NIGERIA

a. PROPERTY LAW & ASSET TRANSFER COMPLEXITIES: One of the most pressing legal issues affecting REITs in Nigeria is the complexity of property law and asset transfer. The Land Use Act 1978 vests all land in each state in the Governor, to be held in trust for the people. This means that legal ownership of land is not vested in private individuals outright but rather in a statutory right of occupancy. Consequently, REITs seeking to acquire real estate must navigate the statutory procedures for obtaining and transferring valid rights of occupancy. These procedures involve obtaining the Governor's consent to transfer or mortgage interests, as required under section 22 of the Land Use Act.³ Delays in obtaining consent and the administrative inefficiencies of land registries create significant hurdles for REIT transactions.

In addition, uncertainties arising from overlapping customary and statutory rights in land can affect the validity of titles and, in turn, undermine investor confidence. Since REITs rely on clear, transferable property rights as the foundation of their income-generating assets, these complexities often inflate transaction costs and discourage rapid portfolio growth.⁴

I would recommend that the Governor's consent procedure under section 22 of the Land Use Act 1978 needs to be streamlined or delegated. Land registries should also be digitalized as this will decrease conflicts, expedite title verification, and increase transparency. Clarity of title rights will be ensured by improved coordination between the statutory and customary land systems. Lastly, state governments and regulators such as the SEC should collaborate to develop REIT-friendly regulations and uniform practices. When taken together, these reforms will increase investor trust in Nigeria's REIT sector, lower risks, and streamline real estate transactions.

b. TAXATION ISSUES: Taxation remains another central challenge in the Nigerian REIT framework. While the Companies Income Tax Act (CITA) provides certain exemptions for collective investment schemes, the scope and application to REITs have been contested. For instance, under section 23(1)(s) of CITA, the income of unit trust schemes is exempt from companies' income tax, provided that a minimum percentage of distributable profits is paid to unit holders.⁵ However, ambiguity remains as to whether all REIT structures qualify for this relief.

Further complications arise from the imposition of withholding tax on distributions, as well as stamp duties and value added tax (VAT) on property transfers. These additional levies reduce the net income available to REIT investors. Inconsistent tax treatment, combined with a lack of harmonisation across federal and state tax authorities, has often been cited as a deterrent to large-scale REIT adoption in Nigeria.⁶ Clearer statutory exemptions, similar to the regimes in developed markets, would provide greater certainty and boost investor participation.

c. GOVERNANCE AND INVESTOR PROTECTION: The Securities and Exchange Commission (SEC) Rules on Real Estate Investment Schemes impose requirements such as the appointment of trustees, custodians, and fund managers.⁷ Trustees are mandated to act in the interest of unit holders and ensure that the scheme complies with disclosure, investment, and distribution rules. Weak enforcement of fiduciary duties, potential conflicts of interest between REIT managers and related parties, and limited transparency in valuation practices undermine investor protection. In some cases, inadequate disclosure has contributed to poor unit performance and market apathy towards listed REITs in Nigeria.

The Companies and Allied Matters Act 2020 (CAMA) also reinforces governance expectations by mandating proper corporate structures, independent directors, and accountability frameworks.⁸ For REITs, aligning with global best practices in governance, such as enhanced reporting standards, stronger independent oversight, and investor participation in decision-making,g would be vital to improving trust in the system.⁹

CHALLENGES OF REAL ESTATE INVESTMENT TRUST IN NIGERIA

a. LACK OF PUBLIC AWARENESS: Despite the fact that Nigeria was the first African country to have a REIT, which was floated by Skye Shelter Fund in 2008, studies show that REIT is still at infancy in Nigeria; A survey 7 conducted shows that only 58% of persons that participated in the survey are aware of REIT as a concept and its operation. Mrs. Bola Adigun, a Director at PricewaterhouseCoopers (PwC), is of the opinion that lack of investor's familiarity with REITs and real estate as an asset class has limited the growth of the sector, and most individual investors are also unaware of REITs as an investment choice due to poor public enlightenment by authorities and non-visibility in terms of publication of financials of REITs companies. It is therefore pertinent that more should be done by stakeholders, the media, and the government to create more awareness about REITS to members of the public and potential investors.¹⁰

b. DIFFICULTY IN TITLE PROCESSING: Lengthy land title bureaucracy stifles growth. Streamlining procedures through digitization and specialized agencies could unlock capacity. This is another major challenge facing the sector in Nigeria. The processing of land title documents usually faces a lot of bureaucracy and can take up to six months or more to perfect. The process is usually cumbersome and affects the smooth acquisition of properties. Regulatory Agencies like the Abuja Geographical Information System (AGIS), Land Registries, and other regulatory bodies have to be more responsive. It is also advisable that an Agency or Department be created to expedite the process of processing and procuring land title documents. An example of such an Agency is the One-Stop Investment Centre (OSIC), which is under the Nigerian Investment Promotion Commission (NIPC).

c. LACK OF TAILOR SUITED REGULATORY FRAMEWORK: Currently, the main regulations applicable to REITs are the Investment and Securities Act (ISA) 2025, Securities and Exchange Commission Consolidated Rules and Regulations (2013), Companies and Allied Matters Act 2020, and the Nigeria Land Use Act 1978. It is suggested that legislation that will be exclusive to the real estate sector and REITS should be put in place to robustly regulate the sector.

THE ROLE OF LAWYERS AND LAW FIRMS IN RESOLVING THE CHALLENGES OF REAL ESTATE INVESTMENT TRUSTS IN NIGERIA

In order to address the legal issues that Nigerian Real Estate Investment Trusts (REITs) face, lawyers and law firms are essential. Their knowledge can lower risks, expedite deals, and boost investor trust in the real estate market. Some of their roles include the following:

a. DUE DILIGENCE: To guarantee that REITs purchase properties with legitimate and unambiguous titles, lawyers can offer due diligence and title verification services. They assist in avoiding expensive legal issues by closely reviewing land paperwork, locating encumbrances, and settling disagreements prior to deals being finalised.¹¹

b. LEGAL ADVISORY: Under the Land Use Act and other property regulations, legal firms can help clients navigate the complex regulatory and consent processes. Their familiarity with the documents, consent procedure, and dealings with government officials guarantees legal compliance and cuts down on delays. When it comes to REIT establishment and operation, lawyers provide structuring and advice services. Their assistance in structuring transactions in accordance with SEC standards and guaranteeing adherence to tax and investment laws makes REITs more transparent and appealing to investors.¹²

c. POLICY REFORMS: Lawyers can promote legislative and regulatory changes to streamline property transfer procedures and modernise land administration. Law firms can advocate for changes to out-of-date regulations and assist in the creation of frameworks that are REIT-friendly by working with legislators and professional groups.

In Nigeria, REITs are still a relatively unexplored investment vehicle while having a great deal of potential to raise money for real estate development and provide investors with steady returns. For fund managers, promoters, and investors looking to get involved in the industry, a better grasp of the tax ramifications and legal framework is essential.

The Nigerian REIT market is constrained by significant legal issues, ranging from cumbersome property transfer processes and unclear tax regimes to weak investor protection and governance challenges. Addressing these issues through regulatory reform, tax incentives, and institutional strengthening will not only improve the viability of REITs but also position them as a critical driver for bridging Nigeria's housing and infrastructure deficit. With the right reforms, REITs could become a cornerstone of real estate financing and capital market development in Nigeria.

Footnotes

1 https://www.lexworthlegal.com/real-estate-investment-trusts-the-future-of-real-estate-developments/ accessed September 2, 2025

2 https://chamanlawfirm.com/real-estate-investment-trusts-reits-nigerian/ accessed September 3, 2025

3 Land Use Act 1978, Cap L5, Laws of the Federation of Nigeria (LFN) 2004, s 22

4 Kola F Famurewa, 'Legal Issues in Real Estate Investment Trusts (REITs) in Nigeria' (2020) Nigerian Journal of Property Law 12(2) 44.

5 Companies Income Tax Act, Cap C21 LFN 2004 (as amended by the Finance Act 2020), s 23(1)(s)

6 Oladele A Akintoye, 'Tax Challenges of Real Estate Investment Trusts in Nigeria' (2019) Nigerian Tax Law Review 5(1) 73.

7 Securities and Exchange Commission, Rules and Regulations (Consolidated 2013, as amended 2019), Rules 565–593 (Real Estate Investment Schemes).

8 Companies and Allied Matters Act 2020, ss 283–290.

9 Chidi I Ani, 'Corporate Governance and Investor Protection in Nigerian Real Estate Investment Trusts' (2021) Journal of Corporate Law and Practice 9(3) 115.

10 https://www.nigeriapropertyforum.com/t/real-estate-investment-trusts-reits-in-nigeria-a-legal-guide/1658 accessed September 2, 2025

11 https://legalafrica.org/opportunities-role-ethical-responsibilities-of-solicitors-in-real-estate-investment-in-nigeria/ accessed November 2, 2025

12 https://legalafrica.org/opportunities-role-ethical-responsibilities-of-solicitors-in-real-estate-investment-in-nigeria/ accessed November 2, 2025

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.