Tokenising property: New dawn for real estate and capital markets

While traditional Real Estate Investment Trusts (REITs) promised to open up the sector to retail investors, the results have fallen short.

Now, tokenisation, the digital representation of property rights using blockchain technology, is presenting a bold alternative. If implemented strategically, it could do for real estate what M-Pesa did for financial inclusion.

REITs were introduced in Kenya through the Capital Markets (REITs) Regulations of 2013, with the intention of allowing investors to pool their capital into income-generating real estate assets. Structured as unit trusts, these vehicles were meant to make real estate ownership liquid and accessible.

However, the uptake has been sluggish at best. What went wrong?

High entry thresholds: The regulatory framework requires REIT trustees to hold at least Sh100 million in capital, while investors must commit a minimum of Sh5 million.

Complex structuring: The layers of legal and financial intermediaries involved discourage smaller investors.

Limited public awareness: Few Kenyans understand how REITs work, and fewer trust them as a reliable investment vehicle. This has resulted in an investment tool that excludes most of the Kenyan investors while other jurisdictions forge ahead.

To successfully transition from REITs to tokenisation, Kenya needs a structured roadmap and to focus on key areas. After sandbox validation, platforms like OwnMali should be granted full operating licences with safeguards such as insurance, audits, and investor education requirements. Regulatory bottlenecks should be minimized to maintain momentum.

The law must clearly define investment tokens representing income or equity claims, Utility tokens for access and asset-referenced tokens backed by property or income streams. Without clear legal definitions, tokenised investments may be misclassified or subjected to conflicting laws.

Initially, tokenisation can operate through Special Purpose Vehicles (SPVs) that own property and issue tokens. Over time, legal reforms should enable direct title-deed tokenisation, similar to Dubai’s system.

Tokenisation enables fractional ownership, reducing the cost of entry for young professionals, sacco members, and diaspora communities. Regulators should encourage platforms to allow micro-investments, possibly starting at Sh100 or thereabout.

In early 2025, Dubai made history by launching a pilot program to tokenize property title deeds. The initiative, driven by the Dubai Land Department (DLD) in collaboration with regulators like VARA (Virtual Assets Regulatory Authority), DFSA (Dubai Financial Services Authority), and FSRA (Financial Services Regulatory Authority), created a well-coordinated framework for digitized, secure, and legally enforceable real estate ownership.

This approach combines the security and transparency of blockchain with established legal frameworks to enable both fractional and whole ownership through digital tokens. The benefits are significant.

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These come in the form of lower investment thresholds that allow ordinary people to invest and smart contracts that facilitate instant and secure transactions in addition to secondary trading platforms that enable real-time liquidity.

Kenya has begun taking steps in the right direction. The Capital Markets Authority (CMA) recently admitted OwnMali, a blockchain-based real estate tokenisation platform, into its regulatory sandbox. The platform allows Kenyans to invest in real estate starting with as little as Sh2000 ($15).

While still in its pilot phase, OwnMali represents a paradigm shift. It offers the potential for increased access for the youth and low-income earners, greater diaspora participation in the property market and digital integration with payment systems and mobile wallets.

The sandbox environment will provide key regulatory, technical, and behavioral insights to shape Kenya’s long-term strategy.

The forthcoming Virtual Asset Service Providers (VASP) Bill 2025 is expected to lay the groundwork for this new asset class. The draft law will define the licensing and operations of platforms that issue, trade, or manage digital tokens, including token issuance platforms, virtual asset exchanges, digital wallets and custodians and smart contract verifiers and validators.

The law will assign roles to Capital Markets Authority (CMA), Central Bank of Kenya (CBK) and Communications Authority (CA) within their respective mandates but in the context of the VASP Bill 2025. This tripartite framework, if well co-ordinated, can provide a robust foundation for a safe and dynamic tokenized property market.

To successfully transition from REITs to tokenization, Kenya needs a structured roadmap and to focus on key areas.

After sandbox validation, platforms like OwnMali should be granted full operating licences with safeguards such as insurance, audits, and investor education requirements. Regulatory bottlenecks should be minimized to maintain momentum.

The law must clearly define Investment tokens representing income or equity claims, Utility tokens for access and asset-referenced tokens backed by property or income streams. Without clear legal definitions, tokenized investments may be misclassified or subjected to conflicting laws.

Initially, tokenisation can operate through Special Purpose Vehicles (SPVs) that own property and issue tokens. Over time, legal reforms should enable direct title-deed tokenization, similar to Dubai’s system.

Tokenisation enables fractional ownership, reducing the cost of entry for young professionals, sacco members, and diaspora communities. Regulators should encourage platforms to allow micro-investments, possibly starting at Sh100 or thereabout.

Kenya must invest in the backend technology to support, Smart contract enforcement, Digital KYC/AML compliance, Secure token wallets and custodians and Real-time trading on digital exchanges. Partnerships with global organizations in this space and private technology players could accelerate rollout.

The success of tokenisation depends on coordinated governance among all relevant arms of the government.

If implemented well, property tokenisation can achieve several objectives. Capital formation from the grassroots through sacco, chamas, and youth groups owning commercial property with a few clicks.

Liquidity in traditionally illiquid markets can be restored through offering exit options without needing to sell entire properties since tokens can be traded on secondary platforms. Real estate will now become a programmable asset class with better transparency, auditability, and investor protection.

In essence, Kenya could become Africa’s most innovative real estate investment destination.

Kenya has already shown the world how to lead in fintech through mobile money. Now, with the right vision and coordinated action, it can do the same for real estate finance.

This is not merely about digitising land; it is about revolutionizing ownership, access, and prosperity. It is about ensuring that every Kenyan, not just the privileged few, can own a stake in their country’s physical and economic future.

Let us move beyond land being an elite asset by tokenizing the dream of property ownership and making it real, accessible, and secure for all.

The writer is the CEO of Miradi Capital, an advisory firm focused on Corporate Finance and Risk Management. He can be reached at [email protected].