International investors can own up to 100 per cent of units offered by Real Estate Investment Trusts (REITs) under new regulations governing the establishment of these funds that came into force earlier this year, a high-level executive of the Capital Market Authority (CMA), has said.
Kemal Rizadi Arbi (pictured), Adviser at the Authority, said the provision was among an array of novel features included in the new regulatory framework for setting up REITs in the Sultanate – part of a broader effort to drive economic diversification by stimulating investment inflows – local and foreign – into the real estate sector.
“As part of our role as a facilitator in developing the REITs market, the CMA has taken on board a lot of initiatives to ensure that market players will be able to establish REITs and be more innovative in structuring those funds,” said Arbi.
The official made the comments during a panel discussion on Tuesday, held as part of the IFN Oman Forum 2018, organised by REDMoney Events in collaboration with the CMA.
In one such measure embedded in the new regulations, foreign investors can own up to 100 per cent of units offered by a REIT set up in the Sultanate, said Arbi. This is in contrast to regulations in certain other jurisdictions, including in the local region, that limit ownership by foreigners to a maximum of 49 per cent of the units. “REITs have been fully open to foreign investments in order to attract foreign investment into Oman,” he stated.
Additionally, the regulations allow a great deal of flexibility in how REITs can be structured by the issuers. For instance, a fund can be modelled on a company structure, which allows for the issuance of shares in the REIT as opposed to units, Arbi said. He cited in this regard the example of Dubai-based Emirates REIT which operates on a company structure and thus sells shares in its investments instead of units.
Likewise, the regulations permit property developers to apply for a license to become investment managers, given their role as prime-movers in the introduction of REITs in the Sultanate. As investment managers, the property developers can transfer some of their assets into the funds they create, Arbi said.
Significantly, since the gazetting of the regulations in January, the CMA has been receiving a steady stream of prospective players — local and overseas-based — eager to consult with the Authority on the opportunities to set up REITs, structuring of the funds, and the scope and parameters of the trusts allowed under the new guidelines.
“We do welcome these consultations, based on which we can give preliminary approval so that the interested issuer can go ahead and work on the offer documents, while preparing their applications as well,” said Arbi.
In his comments, the Advisor also emphasised the CMA’s broader role beyond its principal remit as the regulator of capital markets. “The Authority’s role is not limited to that of a regulator, it is also a facilitator and developer of capital markets (and insurance as well).
At the CMA, we are not only formulating the requisite regulatory and legal frameworks, but also building the infrastructure for the market players and the products coming onto the market. We also look to connect the different elements of the wider eco-system.”
These efforts, he said, are evident in the development of the Islamic capital market underpinned by an MSM Sharia Index based on a pool of sharia stocks that are already in place, said Arbi. Furthermore, the Authority has rolled out sukuk regulations to build on the fixed income market.
Impetus to the launch of REITs in Oman also came from the National Programme for Enhancing Economic Diversification (Tanfeedh), which mooted the need for, among other initiatives, alternative financing platforms to stimulate economic growth and attract foreign investment into the country, he added.