What are REITs?

According to weetas.com Because it is one of the world's largest and most developed market sectors, the real estate market has been developing its machinery and tools continuously over a long period of time. One of the main reasons for this continuous development is to try to find new ways to facilitate investment in real estate for all categories, even financially unable to grow the sector faster, and perhaps the funds are one of the most famous of these methods.

The idea of ​​REITs, was mainly inspired by the idea of ​​mutual funds. Real Estate Investment Fund (ETF) is an institution that owns or finances properties that are already developed and equipped to earn profits from leasing. The main objective of these funds is to help those who can not own real estate to invest in real estate and secure a stable source of income for themselves without having to buy real estate on their own.

Investment in real estate assets.

This is the most widely used type of REIT. In this type, investment funds purchase, manage and develop real estate directly, and the main source of profit for these funds is the rent paid for these properties. These funds invest in limited types of real estate, including residential, administrative, retail, hotel, resort and health care.

Investment in debt securities.

In this less popular type, REITs follow a different and indirect path that is more like banks. Funds in this case lend real estate developers and investors the money they need in the form of real estate loans. The main source of profit here is the interest paid to the funds on these loans.

Miscellaneous Investment.

In this type, ETFs do not identify their transactions in one of the two types mentioned above, as they allocate part of their capital to own the properties that are directly developed and the other part is to lend to developers. Because of this, they reap the benefits of both rents that are paid on their own property and the benefits of loans they lend.

Gulf States with REITs:

Because the real estate market in the Arabian Gulf is one of the largest real estate markets in the world, 3 Arabian Peninsula countries have adopted the concept of REITs in their real estate markets to help revive these markets, which suffered due to the significant drop in oil prices Which had a significant impact on the economy of the Arabian Gulf, of which oil was the backbone.

To date, three Arab countries are implementing the REIT concept - the Kingdom of Bahrain, the United Arab Emirates and Saudi Arabia.

REIT FUNDS IN SAUDI ARABIA:


Saudi Arabia is one of the largest and most influential real estate markets in the Arabian Gulf region, being the largest Arabian Peninsula monarch, one of the three countries to allow the creation of real estate investment funds. Here we present the conditions required by the Kingdom to recognize any institution as a fund of REITs:
  • Number of investors: The number of investors in Saudi Riyal funds should not be less than 50 investors.
  • Capital: The Fund's capital must be at least SR100 million.
  • Investment properties: Investment properties for rent must constitute at least 75% of the value of the REIT assets.
  • White lands: Red funds are not allowed to invest in white land.
  • International Investments: The Fund's management is permitted to invest in real estate outside of Saudi Arabia provided that their investments do not exceed 25% of the value of the Fund's assets.

The REITs are expected to play a major role in the coming years in reviving and revitalizing the real estate market in the Gulf region in general and in Saudi Arabia in particular, as this will help to overcome the crisis from which the GCC real estate market is recovering.

This is because the fall in oil prices has negatively affected the purchasing power of citizens in the Gulf countries and therefore their desire to invest in real estate, but because of the nature of REIT funds that allow investment in small amounts, this will certainly support the Saudi and Gulf real estate market. Therefore, the rest of the GCC is expected to allow the establishment of REITs in the near future.

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