The UAE property market is growing at a rapid pace, both in size and value. With multiplying returns on investment (ROIs), the lucrative scope of the Emirates’ real estate lures investors. The larger the property portfolio one has, the bigger would be the profit margin. Investors can either expand their real estate portfolio by acquiring new properties or by investing in a real estate investment trust (REIT).
Let’s explore more about a real estate investment trust and how it works for UAE investors.
What is a Real Estate Investment Trust (REIT)?
A REIT is a financial vehicle that allows individuals to invest in real estate assets without directly owning the properties. REITs pool funds from multiple investors to purchase and manage income-generating real estate properties.
They offer a way to access real estate markets with potential dividends and capital appreciation. A feasible way to explore a liquid and diversified avenue for real estate investment in the UAE.
History of REITs in the UAE
The history of UAE REITs can be traced back to 2005 when Emirates NBD established the first REIT in the UAE. In 2010, Emirates REIT was formed and began attracting investors’ interest.
With the increasing trend of REITs in the region, the UAE introduced a regulatory framework for all related financial activities in 2014. During this time, Emirates REIT became the first and largest Shariah-compliant REIT listed on NASDAQ Dubai.
Useful Tips on How to Invest in a REIT in the UAE
As a REIT investor, it is important to understand the scope, market position and historical trends. Moreover, there are multiple avenues for investing in UAE REITs. For starters, here are a few handy tips on how to invest in a REIT in the UAE.
Learning About the Different Types of REITs
REIT investors in the UAE can mainly choose between private and publicly listed REITs. Publicly listed REITs are the ones listed on a stock exchange, such as NASDAQ Dubai. These types of REITs allow investors to invest in shares and enjoy returns in the form of dividend income.
Similarly, private REITs are not traded on exchanges, instead, they are owned by individuals or investor groups. Though private REITs are less liquid than publicly listed ones they offer higher dividend returns. That said, investors in private REITs might have to commit for extended periods for these benefits.
There is another unique type of REIT in the UAE known as Masdar Green REIT. It allows individuals and companies to pour in investments in sustainable development. Based in Abu Dhabi, it is one of the region’s first sustainability-oriented REITs.
Analysing Your Goals for REIT Investment
Be it income generation or profit margins, different REITs work differently. When investing in REIT, make sure to weigh all the available options. Find out whether the REIT has invested in off-plan projects or ready properties. Whether you are investing in a private financial institution or going for a publicly listed company, due diligence is important.
Whichever REIT you select, carefully walk through its investment programme to learn about the goals and risk tolerance. Some REITs may be more focused on income-generating properties while others on long-term growth and capital appreciation.
Be Aware of the Associated Fees
The REIT investment might entail several fees. There can be an investment management fee or a transaction fee. To learn about the fee structure, investors must carefully go through the terms and conditions of their chosen REIT and investment fund.
Assess the Properties in the Portfolio
According to their business models, REITs invest in different types of properties in the UAE. Therefore, a REIT investor should meticulously assess the intended real estate investment portfolio and its prospective market scope.
For instance, if your chosen REIT invests in commercial properties, there can either be bigger profits or vice versa. Considering the risks involved, carefully factor in all the opportunities and challenges for commercial investors to make the right decision for your portfolio.
FAQs
How do real estate investment trusts (REITs) work?
UAE REITs function by pooling funds from multiple investors to invest in a portfolio of income-generating real estate properties.
Are all REITs publicly traded?
No, not all REITs in the UAE are publicly traded. As discussed, there are private REITs functioning in the country as well. Investors should know about the different types of REITs and weigh the options accordingly before proceeding with their investments.
Does the newly introduced real estate corporate tax apply to REIT investments?
Currently, the UAE corporate tax rate on real estate is 9% of the income generated from a property. That said, investments in qualifying investment funds, such as REITs in the UAE are exempted from the corporate tax.
How to Choose REIT?
When working on your REIT investing goals, it is important to consider its size and property portfolio. Make sure to do thorough research, compare the available options and choose a REIT with a scope of business that is best suited to your investment goals.
This was everything to know about investing in REITs in the UAE. The aforementioned information is intended to help you make an informed investment decision. Meanwhile, those who are new to real estate investment should check out these tips for investing in UAE real estate.
Aspiring investors can start by exploring these properties for sale in the UAE to assess the real estate market. Besides, if you already own multiple real estate assets, consider these benefits of hiring a property management company.
For more updates on the scope and benefits of REITs, keep following dubizzle’s property blog.
