Nasdaq Dubai is home to the world’s largest publicly listed Sharia’a-Compliant REIT both by total assets and by market capitalisation.
REITs are funds that invest in real estate. They enable issuers to raise capital from their property without selling it, through its income stream.
Investors benefit by receiving dividends based on the rental income. REITs enable them to gain exposure to property without buying it or spending large amounts of capital.
Investors can buy shares in REITs just like shares in other companies.
Two REITs are currently listed on Nasdaq Dubai: Emirates REIT, whose IPO in April 2014 was the first REIT listing in the GCC, and ENBD REIT, which listed in March 2017. Both REITs are Sharia’a-compliant.
Benefits of REITs
REITs allow companies to raise capital without selling a stake in the holding company itself.
Companies can leverage on their real estate assets by creating a REIT and raising capital through the partial sale of the REIT.
REITs will allow the company to keep up to 75% of equity, so you don't need to sell a whole property just to raise capital.
Establishing a REIT will allow companies to raise further capital to purchase more real estate assets.
Reduce Cost of Capital
REITs can increase a company’s ability to acquire an investment grade rating for unsecured debt, thereby reducing the cost of capital.
Strong corporate governance and disclosure standards provide the ability to expand the investor base due to the added comfort.
Income & Long-Term Growth
REITs provide competitive long-term rates of return that complement the returns from other stocks and from bonds.
High Dividend Yield
Significantly higher on average than other equities, REITs have produced a steady stream of income through a variety of market conditions.
Shares of publicly traded REITs are readily converted into cash because they are traded on the major stock exchanges.
Real estate has historically had a low correlation to other asset classes, giving investors the opportunity to diversify their investments.
Real estate rents and values tend to increase when prices do. This supports REIT dividend growth and provides a reliable stream of income even during inflationary periods.
With ongoing disclosures, investors are kept up to date with the REITs activities.
Key Characteristics of REITs
REITs are a sub-set of Property Funds, which are designed for income generation. In the DIFC, a REIT in addition to being closed-ended, must meet the following requirements:
- Be a Public Fund that is listed and traded on a recognised exchange
- Invest no more than 30% of total assets in property under development
- Distribute at least 80% of annual net income
- Borrowing must not exceed 70% of the net asset value of the Fund