Initial nod issued for real estate investment fund

Muscat: The Capital Market Authority (CMA) has issued an initial approval to establish the first real estate investment fund named “Aman REITs”, as part of the economic diversification initiatives of innovative finance and the financing lab supported by “Tanfeedh”. The initial public offering (IPO) of the fund is expected during the first quarter of this year.
Real estate investment trusts (REITs) are considered a qualitative addition to the gross domestic product (GDP) and would enhance investment opportunities in the real estate sector as new avenues of investment by encouraging small and institutional investors to enter the Omani real estate market, moving the financing wheel and encouraging real estate investment. This would have a considerable impact on foreign investments, as such funds provide incentives for foreign investments and attract investments from abroad, besides diversifying investment options and increasing market depth.
Mohammed Said Al Abri, Vice President, Capital Market Sector at the CMA, said: “We praise the first initiative to establish a real estate investment fund which we expect to have a noticeable impact in pushing the economic development process in Oman."
“Aman REITs” for real estate investment are undergoing the initial procedure and we hope to finalise the offering process before the end of the first quarter of this year," he added.
Al Abri pointed out that CMA’s initial approval has been issued for a fund worth OMR20 million. As much 50 per cent will be offered to the public.
He said: “We are viewing such funds as a regulated portal for foreign investors in order to activate the real estate market by holding investment units; the funds would remedy the concerns of local investors over foreign investors entering and controlling properties, including residential properties and the social and security impacts. The funds would provide numerous options for investors, including allowing companies and individuals to invest in real estate and own investment units without having direct control on the assets, besides providing opportunities for partnerships with citizens to avail of the promising real estate investment opportunities."
He added that listing the fund on the stock exchange would contribute to supplying the market with new security, which would allow easy exit through trading, besides the importance of listing in attaining high standards of transparency on the financial position of the fund, as well as smooth liquidity for the issuer.
Abdulsamad Al Maskari, Chief Executive Officer of Tharaa Global Business, said: “Such funds attained global acknowledgement for the positive indicators they achieved in a number of economies, besides contributing to creating employment opportunities and fixed income, in addition to attracting foreign investments that help in moving the wheel of the national economy. We found out after considering a number of experiences, especially in Asian countries, that REITs contributed to the GDP and furnished diversified investment opportunities, besides providing liquidity. They had an obvious impact on the GDP of Japan, which realised 0.3 per cent or about US$287 billion."
The idea of offering funds came from the laboratories of Tanfeedh to set out regulations for REITS which had a positive impact, according to the vision provided by leading real estate companies in Oman. They are expected to enhance the confidence of investors in the market and to stimulate the real estate business, which would reflect the actual role the sector plays in the capital market in particular and the national economy in general.
REITs will allow a foreign investor to own 100 per cent in the properties, which would increase capital flow to the local market, besides positively enhancing foreign investments.
The decision to establish REITs had a great role in increasing the efficiency of real estate products and projects, whether services, commercial or industrial and everything that attains lucrative returns without impacting the mechanism for expatriates owning properties, as the process will be similar to buying shares in stock markets.
The regulation obligates REITs to distribute not less than 90 per cent of the total profits to unit-holders and keep 10 per cent of the fund returns for operational expenses of the properties. REITs will also solve inheritance-related problems as the funds can be transferred into assets by establishing a real estate fund, which would facilitate the distribution of rights between heirs.