Gone are the days when Emiratis had to own a property to generate related income, thanks to real estate investment trusts in the UAE. Unfortunately, some people are still in the dark regarding this excellent investment. If you are one of these individuals, this article is a must-read. It leaves no stone unturned regarding REITs in the UAE to help you decide if they are an excellent investment. Check it out!
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About Real Estate Investment Trusts (REITs) in the UAE
REITs funds revolve around long-term real estate investments. The investors own, lease or buy mortgages and loans financing real estate. The share price usually appreciates, and the investors get regular dividends. It is a passive investment where investors earn money generated by the real estate market despite not owning any property. Besides, the investors aren’t responsible for the operation of the REITs.
Types of REITS in the UAE
There are three types of real estate investment trusts in the UAE. Check them out!
- Mortgage REITs: These real estate investment trusts offer real estate managers and owners loans. The earnings are the interest these individuals pay for the loans.
- Equity REITs: It is worth mentioning that this is the most common type of Real Estate Investment Trust (REIT) in the UAE. Such companies manage and own real estate that generates revenue through rent.
- Hybrid REITS: These real estate investment trusts in the UAE combine the two REITs approaches.
Benefits of Real Estate Investment Trusts in the UAE
There are several benefits of Real Estate Investment Trusts (REITs) in the UAE, depending on the category under which you fall. Check them out!
Benefits of real estate investment trusts as an institutional investor
Institutional investors benefit from REITs in the UAE in the following ways;
- Reducing risk by introducing other investors into owning part of their real estate assets
- Raising capital to buy other real estate assets to investors, including public and private REITs
- It brings transparency through disclosure requirements and corporate governance standards in alignment with financial reports, audits and shareholder interests.
- Partially selling an existing REIT or creating a new one is suitable for leveraging real estate assets.
- It is also ideal for raising capital to expand in the future without selling the holding company’s stake.
Benefits of real estate investment trusts as a personal investor
On the other hand, personal investors in REITs in the UAE are as follows;
- Hedging when inflation occurs since property valuation and rental prices often increase under such circumstances. Consequently, these investors will have reliable income following the substantial dividend growth during these challenging times.
- https://livinginuae.ae/cryptocurrency-investment-regulations-in-the-uae/Relatively high returns and a diverse portfolio that spread the risks, hence a perfect alternative to investing in the usual tangible assets
- Expect a relatively low revenue volatility thanks to the steady dividends from the rentals’ regular income. Since their share price has appreciated over time, real estate investment trusts in the UAE are stable, competitive, long-term investments with high reward potential.
- Its liquidity is impressive since one can purchase or sell shares conveniently, depending on their situation.
Pros and Cons of REITS in the UAE
Real Estate Investment Trusts in the UAE have merits and demerits. Let’s look at the pros and cons of REITs.
Pros of REITS
Pros of investing in Real Estate Investments Trusts as a UAE resident include;
- One of the advantages of REITs is their passive nature, which allows investors to benefit from the real estate market without owning or managing properties.
- Investors aren’t responsible for the property management, acquisition or leasing. In contrast, it’s the responsibility of the professional management team to increase the chances of the investment succeeding.
- It is a reliable source of income due to its compliance with the requirement of distributing dividends to investors.
- There are flexibility and liquidity benefits of real estate investment trusts since they are publicly traded on various stock exchanges. Consequently, investors can purchase or sell their shares conveniently anytime.
- The investors spread their risk thanks to its diversification, diversifying one’s investment portfolio.
- The combination of regular dividend income and long-term capital growth increases the potential for high returns if you invest in real estate investment trusts in the UAE or the rest of the world.
Cons of REITs
Cons of investing in Real Estate Investments Trusts as a UAE resident include;
- The REIT management team make investment decisions, thus leaving you little control over the property.
- Its fluctuating interest rates affect its profitability, thus making returns uncertain.
- Since REITS in the UAE are a type of investment, they attract tax rates, which reduce one’s investment returns.
- It is not a suitable short-term investment since the great benefits of real estate investment trusts are realized after a long time.
- These investments also incur additional costs, such as transaction fees and management charges.
- Real estate industry trends and market conditions can affect REITs’ performance, determining their investment returns.
Final Words on REITs in the UAE
Real Estate Investment Trusts in the UAE have greatly relieved passive investors. The same applies to companies and individuals interested in the real estate industry but don’t own properties. Their benefits are indisputable and worth considering when selecting an investment. However, weigh its pros and cons before investing in them.
