Dubai: After what seems like a long gestation period, ‘real estate investment trusts’ (Reits) could finally be coming of age in the UAE and other Gulf markets.

Dammam headquartered International Investment Real Estate (IIRE) has confirmed plans to launch a Dubai-specific Reit offering in 2014. “We plan to launch two more funds in 2014 which will be more broadbased geographically to seize opportunities in both Saudi Arabia and the UAE,” said Raed Al Khars, founder and CEO of IIRE.

“We believe that REITs have a very bright future in the coming years in the Gulf. Today, investors have too many options and making the right decision is getting more complex. Investors don’t have time to conduct thorough research because the available data lacks both breadth and depth.

“Conducting research consumes a lot of time wherein investors end up losing the opportunity by the time they make their decision. Having said this, investors now rely on professional real estate investment firms and prefer participating in a real estate investment fund which guarantees a minimum return and stay totally hassle-free over the tenure of the investment. We believe that over the time this industry will grow exponentially.”

Spreading risks

Think of Reits as a mutual fund for investors seeking property assets. For investors these investment vehicles offer an opportunity to take up exposures in income-generating properties that they may not be able to fund on their own. Also, having other investors on board, investors can spread the risks associated with an investment.

Just before the downturn in 2008, there were a few sporadic attempts at developing Reits in the UAE. Australia’s Macquarie had tied with a local bank to pursue such a course, but was then scrapped, according to market sources.

Recently, Reits have found the going to the liking. A dedicated entity, Emirate Reit, was holding assets of Dh768 million plus as of June 2013, according to its portal. Others are said to be considering the virtues of going Reit.

Public interest

“Reits were created in the US to develop a structure similar to mutual funds so that it can provide liquidity (similar to stocks) and to allow for participation of retail investors in the real estate sector,” said Gaurav Shivpuri, head of capital markets at Jones Lang LaSalle, the property consultancy. “Additional benefits — by removal of corporate tax — were included to create interest amongst the public.

“In the GCC the lack of these vehicles is largely due to a number of factors including a lack of legislation until recently, the small population (and hence lower demand), the size of stock markets and misplaced demand-supply (product is mostly GCC freehold but the population is mostly non-GCC).

“As each of the above factors gets tackled and the market matures, we should see the development of more Reits in time to come.”