REIT is a private or public investment fund which is established to invest a certain percentage of its assets in real estate. Beside UAE onshore under the Emirates Securities and Dubai International Financial Center, such funds are permitted in the free zone of Abu Dhabi Global Market.
REIT is a perfect option for those who would like to get investment returns from property without the responsibilities of a landlord. It works in the following way – a company acquires or constructs a set of buildings (mostly apartments), which investors can purchase through the company, therefore joining the group. An investor has a right to own one or more property units. At the same time, management, maintenance, advertising, tenant search are under the operation of the investment group itself. For these services a specific amount from monthly rent is taken by the group.
The types of REITs in Abu Dhabi are the following:
1) Private UAE REIT – at least 75 percent of its total assets must be invested in real estate, whether in the form of construction, development or re-fitting, providing it is in preparation for sale, management, lease or disposal;
2) Public UAE REIT is required to:
- invest minimum 75 percent of its total assets in income generating real estate assets;
- receive minimum 90 percent of its total revenue from real estate, interest, dividends and capital earnings relating to such income generating real estate;
- distribute minimum 80 percent of its net profits to unitholders each year.
3) If the UAE REIT owns one or more real estate service companies, the UAE REIT Regulations now stipulate that investments in such service company(ies) cannot exceed 20 percent of the UAE REIT's total assets;
4) Borrowing must be restricted to amounts of not more than 50 percent of the UAE REIT's total asset value.
According to Haider Tuaima, the head of real estate research of ValuStrat, REITs provide an opportunity for any investors to enter a real estate market they could not afford otherwise. For instance, commercial real estate assets become available. This is a simple strategy to obtain significant and regular profit from property without purchasing an actual property itself. Moreover, due to shares in the REITs being traded on the stock market, the investor can exit or shorten their position at any time and as they choose.