The number of listed real estate investment trusts (REITs) globally amounted to 865 at the end of 2021 with a combined market cap of approximately $2.5 trillion. By comparison, only two REITs are listed on Nasdaq Dubai: Emirates REIT and ENBD REIT.
REITs outperformed international stock and bonds over a decade. It is highly likely that a number of real estate funds will be turning their attention to Dubai, and such funds often bring with them income generation, development of previously undeveloped areas, and open up a new market for retail investors, especially with the possibility to invest in the areas of Dubai previously designated as non-freehold.
Dubai’s new decree law on real estate funds is well warranted. The decree is aimed at enhancing Dubai as a destination for real estate investment from all across the world. It covers all licensed real estate investment funds in Dubai (mainland and free zones inclusive, including those funds registered in the DIFC), and all properties in Dubai (mainland and free zones, except properties located in DIFC).
The President of the DIFC is granted the power to grant further privileges to funds registered and operating in the DIFC. A register for real estate investment funds will be set up with and regularly audited by the Dubai Land Department for registration of eligible funds, and funds that are registered may avail themselves of the benefits/incentives under the decree.
The fund must be licensed with a competent authority (including the Securities and commodities Authority, and the Dubai Financial Services Authority at the Dubai International Financial Centre), The value of real estates assets held should be no less than Dh180 million, and Its shares should not be suspended from trading on Dubai’s financial markets.
The registration fee is relatively low, at Dh10,000. Audited reports will also be required to confirm ongoing satisfaction of eligibility criteria by the funds.
Transfers of shares/units in the fund by investors will not attract any fees relating to property transfer. Founders of the fund are allowed to contribute to the fund in kind, and contributions in the form property will attract a fee of Dh50,000 rather than the standard 4 per cent fee.
Arguably the most crucial development brought about by the decree is the ability for the funds to acquire rights in property located in areas previously restricted to local ownership (as approved by the Committee of Property Investment Funds). This greatly broadens the market for property investment in Dubai.
Funds considering entry into the market should seek legal advice as this is regime is in the early stages of its development, and applicants will likely require establishing a dialogue with the competent authorities to ensure a smooth and successful application process.
