MUSCAT, JAN 7 - The Oman Real Estate Association (ORA), which has long campaigned for the legalisation of Real Estate Investment Trusts (REITs) in the Sultanate, has warmly welcomed yesterday’s announcement by the Capital Market Authority (CMA) formally issuing the regulatory framework for the introduction and trading of this new asset class on the Muscat Securities Market (MSM).
The keenly anticipated announcement came in a tweet by CMA Executive President Shaikh Abdullah bin Salem al Salmi affirming that property owners and developers can now set up REITs based on existing, commercial, income-generating assets. The significance and potential of REITS as a vehicle for driving investment and liquidity in the real estate industry was also underlined by Tanfeedh — The National Programme for Enhancing Economic Diversification — as one of nearly 100 economic initiatives for implementation over the short term.
“We welcome the issuance of the regulatory framework for REITS,” said Hassan Juma al Lawati (pictured), Vice-Chairman of ORA, which groups some of the nation’s biggest and most prominent property developers and investors. “The framework is very comprehensive, encompassing both the legal and operational aspects of REITS, which will have beneficial implications for the growth of the real estate sector in Oman.”
In comments to the Observer, Al Lawati, who is also Managing-Director of Al Osool Properties, said the new regulations will have a positive impact on the property market. “For one, it will create liquidity for investors and developers who have sound, income-generating assets in their portfolio, and would want to liquidate them. Through REITS, they can liquidate their holdings and consider reinvesting in other types of real estate products, thereby driving the growth of quality products and service standards in the industry.
Additionally, REITs will inject new levels of professionalism in the way how properties are managed. “We will also see improvements in the professional management of assets, the growth of professional investment managers, committees being set up to review the performance of assets, and so on. After all, 90 per cent of revenues generated by REITs will have to be distributed to investors.”
The well-known developer, however, lamented the minimum limit of the size of a REIT set at RO 10 million under the new regulations, as being a “bit too high for the Omani market”. He explained: “It would have been ideal if the paid up capital for a REIT was lower, say, at RO 5–7 million. This would have many more REITs to come on to market, thereby providing more investment options and driving competition as a result.”
REITs, said Al Lawati, will also open up new opportunities for investors to consider stakes in an array of different real estate products. “For example, if I want to invest in a shopping mall, costing RO 40 million, I will not be able to.
But with REITs, I can buy units in various asset classes such as shopping malls, hotels, industrial estates, and so on.”
Conrad Prabhu
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