REIT stands for Real Estate Investment Trusts. The REIT industry is a business that own, manage, and finance real estate that generates revenue for their shareholders. These businesses aim to combine the capital of numerous investors, enabling both private and institutional investors to profit from their real estate holdings. They also reduce the risk of the individual while purchasing, maintaining, or financing any property. Further, a REIT can be recognised as a business company that allows investors of any institution to invest in a comprehensive, professionally managed portfolio of liquid properties. Firms or companies that want to qualify as a REIT must meet certain criteria. Investors gain a number of advantages from REITs, including the diversification of their stock portfolio and dividend-based passive income. A majority of REITs trade on significant stock exchanges.
The REIT market is booming globally. The United States has the fastest growing REIT market, followed by the United Arab Emirates, the United Kingdom, and many others. While the US remains the largest in the real estate market, the UAE real estate market is also expanding at a rapid rate. Macroeconomically, the UAE is expected to grow its economy by more than 5% in 2022 and 2023, and its population is expected to increase, with more than 5.6 million people expected to live in Dubai and 12 million in the UAE by 2040. These elements favour the real estate sector’s long-term expansion as well as its immediate recovery.
The UAE REIT Market
REITs have been a persistent theme in the Middle East since 2014. The main purpose of REITs, which are essentially corporate vehicles, is to engage in income-producing real estate assets across several sectors. A REIT’s operations and the types of assets it can invest in are frequently subject to stringent rules and requirements. The REIT market recently gained attention with a few entrants into the market. There are currently 18 listed REITs across the GCC, including: Abu Dhabi, Saudi Arabia, Bahrain, and Oman. All have implemented regulatory frameworks to accommodate REITs since 2014. Dubai has two real estate investment trusts: Emirates REIT and ENBD REIT. In Saudi Arabia, there is Riyadh REIT, Al Jazira Mawten REIT, and Jadwa REIT Alharamain Fund, with a total of twelve REITS listed on Tadawul in 2018. Bahrain-Eskan Bank Realty Income Trust; and there are an additional three private REITs in Abu Dhabi-The Residential Reit, the Logistics Reit, and Etihad Reit.
In recent years, a number of REITs have been launched on stock exchanges throughout the GCC. As part of the National Transformation Program (NTP) and Saudi Vision 2030, the Saudi Capital Markets Authority (CMA) allowed the listing of REITs in 2016, which further accelerated its growth. With a new generation of investors looking for investment solutions to diversify their portfolios in local markets, the future for REITs in the GCC looks appealing. For conventional investors looking to invest in Sharia-compliant goods across several asset classes, including real estate, Islamic REITs may be a better choice.
Looking up at the current situation of the UAE REIT market, by 2022 and 2023, the UAE’s GDP is projected to rise by more than 5%, and by 2040, the country’s population is projected to reach 12 million, with more than 5.6 million of those living in Dubai. These factors support both the current and long-term growth of the real estate industry. In fact, as the real estate industry continues to grow this year, the market will witness higher occupancy rates in real estate assets across Dubai and the UAE. There are several factors that are constructing the UAE into an ideal real estate investment trust. Equitativa (Dubai) Limited is one such company.
Factors impacting the UAE REIT
Equitativa is a leading regional asset management firm that specialises in managing real estate investment trusts (REITs). The business owns and operates parking lots, offices, shops, and residences. Equitativa is widely operational across the United Arab Emirates. The holding company provides both institutional and retail investors with cutting-edge risk-adjusted financial solutions that generate revenue. Equitativa is currently regarded as the leading REIT manager in the Gulf Cooperation Council (GCC) countries and the largest REIT manager for Sharia Compliant REITs worldwide. Equitativa founded the first Sharia compliant REIT in the UAE, Emirates REIT, which was created in the DIFC (Dubai International Financial Centre). About USD 2 billion worth of assets are being managed by the group. It manages two real estate investment trusts: The Residential REIT, incorporated in Abu Dhabi Global Markets, and Emirates REIT, which is listed on NASDAQ Dubai. By introducing a hospitality REIT, a logistics REIT, and numerous other REITs in emerging regions, Equitativa is further diversifying its REIT portfolio. This is considered that Equitativa (Dubai) Limited is the powerhouse behind the REIT of the UAE. The firm is performing so well in its field that International Business Magazine has announced it as one of the winners in its annual awards ceremony+. The magazine has awarded “Best REIT Manager UAE 2022” to the firm for its outstanding performance in serving the best real estate services in the UAE.
Recently, Dubai-based real estate investment company, Emirates REIT, has revealed that its first-half 2022 profits increased by 20.9% year over year to USD 61.5 million.
Investing in Trustworthy Real Estate
REITs in the UAE require greater access to more international institutional investors in order to become significant real estate asset owners and support economic growth that protects against future economic downturns. This can be pension funds and insurance companies that typically value real estate’s ability to hedge against inflation or global asset managers who will have both, dedicated real estate strategies and exchange traded funds that will replicate indexes, or investment companies. The recent addition of Tadawul to the MSCI Emerging Markets index has helped Saudi Arabia’s REIT sector grow and draw more foreign investment. Keeping operational control over the assets is still a big draw, as it is a chance for firms and investors to make lucrative profits in the long term.
Blog By Tasleem Majumder
