REIT funds attractive mechanism to boost real estate market in UAE
- 21 Jan 2023
Picture used for illustration purpose. File
Inayat-ur-Rahman, Business Editor
This was stated by Saleh Tabakh, an expert in investment portfolio management, CEO of Al-Andalus Courtyard Real Estate Developer, during an exclusive interview with Gulf Today .
Tabakh also highlighted that he welcomes the recent declaration of the Securities & Commodities Authority “SCA” regarding the simplification and facilitation of the local REIT funds’ rules within the frame of offering attractive & diversified investment mechanisms.
“These funds can make a qualitative leap in the available financing means within the real estate market”, Tabakh added.
He stated that the UAE has one of the best real estate markets regionally & globally, amidst huge abilities, attractive opportunities, and unprecedented facilities offered by the real estate sector in the country, as well as the modern investment tools that became common within the UAE during the recent years, such as investment in REIT funds, as these tools meet the aspirations of real estate investors.
Tabakh noted that Dubai currently witnesses unrivalled turnout from the part of local & foreign investors, simultaneously with the listing of some Dubai’s public governmental institutions in stock exchanges, as they launched initial public offering “IPO”.
He underscored the fact that real estate is deemed among the significant investments which benefit from the unprecedented investment vigor, let alone that it is the most secure investment, as it yields fixed returns & also due to the rise of assets’ values. Accordingly, the role of REIT funds emerged as an investment platform which provides the investors with alternative options for investment in stocks, not to mention that it offers also financing opportunities to participate in the development of megaprojects, increase the turnover of developers, and provide the real estate liquidity.
“REIT funds are financial vessels which collect money from their investors and shareholders, with the aim of investing this money in the real estate sector, against the issuance of investment units of equal values & rights for these investors”, Tabakh explained.
“The percentage of ownership for any investor or shareholder in the REIT fund is calculated according to the number of units that he owns, as compared to the total number of units in the fund. These funds enable individuals & institutions of accessing a diversified portfolio of real estate assets, such as residential towers, with the main goal of bringing profits, besides saving huge profit when the price or value of real estate increases, in a manner which assures a staple income that adds diversified capital earnings”, he added. Tabakh stressed that the first REIT fund in the Middle East was launched since 13 years only, and was in the UAE.
As for the working mechanism of REIT funds, Tabakh advised that these funds are established by a listed company, bank, or financial investment company. “The entity which establishes the REIT fund determines the investment opportunities in the same, after studying the projects, setting their goals, capitals, the plans of their implementation, and the targeted entities for real estate contribution”, he noted.
“The real estate units are offered in public contribution according to the terms prescribed by the entity which established the REIT fund, and the terms differ from a fund to another. So, it is necessary for the potential investors in REIT funds to check the terms of each fund and identifying the best ones, before taking the final decision”, Tabakh added.
He stated that investment in REIT funds brings many benefits, e.g. providing the investors with the opportunity to invest within a portfolio that includes various real estate assets, which in turn bring high income, as this portfolio is supported by rent contracts of long rental terms and high amounts, as well as the participation in the real estate market inside and outside the UAE, a matter which helps increase the added value, trough bringing a capital return on the long run.
Tabakh indicated that REIT funds enable the investors of acquiring the properties of single rents within sectors of rabid growth, e.g. educational & health properties. Moreover, REIT funds enjoy professional administrations, which can assess the risks & identify the best investment ways & tools, he continued.
He added that SCA one month ago disclosed its intention to launch soon the new scheme of investment funds, which aims to strengthen this industry locally, as it is deemed one of the investment tools that matches the investors in the securities sector.
