Investment interest in the Real Estate Investment Trusts (REITs) has grown significantly in recent times on improved confidence in the economy, giving the asset class a pride of place in the real estate investment market.
A major interest in the market comes from pension funds whose investment jumped from N15.028 billion in the first half (H1) of 2024 to N77.8 billion in the H1 of 2025, representing a five-fold jump over the period.
A report on the pension funds industry portfolio released by the National Pension Commission (PenCom), which revealed this rise in investment interest, also shows that direct investment of pension funds by Pension Funds Administrators (PFAs) in real estate declined by 7.4 percent to N255.9 billion in H1 2025 from N276.4 billion in H1 of 2024.
BusinessDay gathered that the increasing apathy to direct real estate investment by PFAs stems mainly from fear of arbitrary revocation of Certificate of Occupancy (C-of-O) by state governments, which makes such investments insecure and risky.
Conversely, investment in REITs has some advantages, more so as it is a formalised business. REITs are pooled funds of investors to purchase and manage income property. They are owned by companies like UPDC and are traded on the stock exchange like stocks.
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Investment in REITs allows investors to earn income from real estate without having to buy, manage, or finance properties themselves. Such investors benefit from the rental income generated by the properties without being directly involved in managing them.
For this reason, REITs have become attractive and a major source of real estate investment channel for PFAs, leading to a significant increase in their investment in the trusts in the first half of this year.
New tax law
Furthermore, the new tax law is a major factor driving investment interest in REITs. Before now, double taxation was a disincentive to investing in REITs. But today, according to Yomi Olugbenro, partner & West Africa Tax leader, Deloitte, REITs have become a credible vehicle for minimising double taxation.
“Rental income and dividends, which are authorised collective investment schemes, are exempted from taxation. Exemption is subject to distribution of 75 percent of dividend and rental income within 12 months after year-end,” Olugbenro, who was a member, Presidential Fiscal Policy & Tax Reforms Committee, explained at a real estate forum in Lagos.
Adeniyi Akinlusi, former CEO, Trustbond Mortgage Bank, told BusinessDay that the growth in the Nigerian REITs market is understandable, explaining that other alternative investment asset classes are not as viable.
Dolapo Omidire, an investment analyst and CEO, Estate Intel, agrees, pointing out that “the inherent potential in the Nigerian REIT industry is the main attracting factor for the growing investment interest.”
There’s an attractive opportunity in capital-raising for the REITs operators, as well as a tax advantage, and, according to Omidire, the tax benefit stems from REITs’ capacity to shun taxes, as long as they pay 90 percent of their income to the shareholders.
Created by a 1960 law in the US, REITs were designed to make real estate investing more accessible so that smaller investors could invest in a portfolio of skyscrapers, shopping malls, or apartment complexes with the same ease as buying stocks.
Read also: REITS can offer you better returns than stocks, bonds
By pooling capital from many investors, REITs have changed and funded much of American real estate, often in ways few in the public understand.
In Nigeria, the REITs market has seen growth in investor interest and patronage. So far, there are two major REITs in the country, including the UPDC’s hybrid REIT, which accounts for about 50 percent of the entire REIT market. The HMK REIT is the second largest REIT, accounting for 25 percent of the market.
Before them were the Skye Shelter Fund and Union Homes REITs, both of which had dismal outing, accounting for four percent and 21 percent of the market, respectively.
PFAs rebalancing
Fixed income remains the preferred asset class for PFAs, as 67 percent of them expect to increase their allocation, particularly to government bonds, according to Oguche Agudah, chief executive officer of the Pension Fund Operators Association of Nigeria (PenOp).
He noted that this is driven by the Central Bank of Nigeria (CBN)’s hawkish policy stance and continued focus on inflation control.
“Interest in infrastructure is growing rapidly, with 82 percent of managers planning to increase investments in the sector. This shift is supported by a growing pipeline of bankable deals and strong government backing for infrastructure projects,” he noted.
“However, many highlight the need for more specialist funds to support this transition,” he said.
However, 25 percent plan to reduce their equity holdings, reflecting caution.
“This evolving approach reflects a broader focus on capital preservation, inflation protection, and long-term growth opportunities amid an uncertain macroeconomic landscape,” Chika Onwunali, managing partner, Premium Debate, said.
Read also: PFAs pump N5.5trn into real sector for high yields
Analysts at FBNQuest said they anticipate an uptick in PFAs’ allocation to equities, driven by the continued strong performance of the equity market.
Analysts at FBNQuest Merchant Bank Research, reviewing the performance of PFAs as contained in the National Pension Commission’s (PenCom’s) report, noted that total assets under management (AUM) in the regulated industry sustained its growth momentum in June 2025.
“In June, total pension industry AUM grew by approximately 20 percent y/y to N24.6 trillion, from N24.11 trillion.
“On a month-on-month (m/m) basis, the growth was more modest at 2 percent m/m, reflecting a steady but slower pace of monthly accumulation in pension contributions.
Returning to the data, FGN securities were the primary driver of the y/y growth, increasing by 17 percent y/y (N2.2 trillion) to N15.2 trillion.
