- INTRODUCTION
Many Nigerian investors today face a vast and diverse financial market, filled with numerous options such as stocks, bonds, mutual funds, and derivatives. With so many choices available, determining the most suitable investment can be challenging. Each product carries its own set of risks, potential returns, and detailed terms that require careful consideration.
Historically, real estate has been considered a reliable way to build wealth. Its tangible nature and its track record as a strong hedge against inflation have made it a popular choice. However, directly investing in property is not practical for everyone. It often demands substantial capital, active management, and can involve complex legal and administrative processes.
This is where Real Estate Investment Schemes (REIS) offer an alternative. Instead of purchasing physical properties yourself, REIS, similar to a collective investment scheme, allow investors to pool their funds to acquire and manage income-producing properties such as office buildings, shopping centre, or residential developments. Investors receive a portion of the income generated, typically through periodic distributions, and can participate with a smaller investment than would be needed for direct ownership. Despite these benefits, many Nigerian investors remain unfamiliar with REIS. There is often uncertainty about how these instruments operate, the risks involved, and how to start investing in them.
This article aims to clarify these points. It will explain the fundamentals of Real Estate Investment Schemes, outline their legal framework under Nigerian law, and highlight why they could be a valuable addition to your investment portfolio. Whether you are an experienced investor or new to the market, gaining a clear understanding of REIS can open doors to real estate investing in a more straightforward, efficient, and accessible manner.
2. What Are Real Estate Investment Schemes — And Why Should You Care?
A Real Estate Investment Scheme (REIS) is a specialised collective investment vehicle, that pools funds for investment in real estate assets. It may be structured either as a corporate entity or as a unit trust, and must be fully approved and regulated by the Securities and Exchange Commission (SEC). The primary objective of a REIS is to invest in income-generating real estate assets, including land, buildings, and real estate-related financial instruments such as asset-backed securities and mortgage-backed securities (MBS). REIS may also invest in companies that manage or provide such assets.
Similar to a mutual fund, it collects money from multiple investors to create a pooled fund. This allows investors to participate in large-scale investments they might not be able to access individually. Under REIS, investors acquire securities whether shares or units that confers on the beneficiary a proportional entitlement to the income generated by the underlying real estate assets, such as rental income, interest income, or capital gains from asset sales. Depending on the structure of the scheme, investors may also receive voting rights or participation in scheme management.
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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.
