Real Estate Investment Trusts in The United Arab Emirates

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There are no federal laws in the United Arab Emirates governing foreign ownership of real estate property assets including Real Estate Investment Trusts in The United Arab Emirates. Each emirate makes its own policies.

In 2006, the Dubai International Financial Centre (which is a sort of free zone within Dubai) passed an Investment Trust Law and its Collective Investment Law No. 1, and an Investment Trust and REITs Rules Instrument. This got the ball rolling for Real Estate Investment Trusts in The United Arab Emirates (which includes Dubai).

One reason that establishing them has been slow is that there apparently are few taxes there, so the usual incentive of allowing a REIT to not pay taxes if they pay out at least ninety percent in dividends does not apply.

The United Arab Emirates requires that Real Estate Investment Trusts pay out at least eighty percent of net income to investors. Also REITs there can invest only in single ownership buildings, and in the UAE most residences are owned per unit. This means that office and retail properties will be the main opportunity for REITs.

The First Real Estate Investment Trust in The United Arab Emirates

On November 23, 2010 the Dubai Islamic Bank DISB.DU (DIB) announced the launching of the first Sharia-compliant Real Estate Investment Trust. It's a joint venture with Eiffel Management, part of Societe de la Tour Eiffel, a French Real Estate Investment Trust, and named Emirates REIT. It will look only at Sharia-compliant property such as office buildings, warehouses, schools and car parks. Investors will be able to obtain shares by trading them for their own income-producing real property assets.

The Dubai Islamic Bank started it off by contributing seven of their properties from around the UAE. The Emirates REIT will be open to all investors, but fifty-one percent must come from the Gulf Cooperation Council. It will be based in the Dubai International Financial Center.

During the real estate boom through 2007, Dubai was the biggest and fanciest property boom town. Since the economic recession of 2008-2009, property values have fallen 62%. Even now, although foreign investment in the UAE is expected to go up, that's true for all economic sectors except real estate.

To be complaint with Sharia law, a REIT must avoid interest, including investing in conventional banks and insurance companies. They must also avoid forbidden areas such as tobacco, alcohol, pork. gambling and adult entertainment. They're not too different from socially conscious investing as practiced in the United States.

However, they are also supposed to be more careful and selective in their choice of assets, and must have an Islamic Board attached to approve or disapprove all selections based on religion.

So there is a lot of extra red tape involved in getting things approved. However, there are a lot of Middle East investors who wish to make investments in high quality real estate in their region, without the hassles of direct involvement, and yet who want to make sure they're following Sharia law.

Real Estate Investment Trusts in The United Arab Emirates

The Emirates REIT -- first Sharia compliant REIT in Dubai.
Arabian REIT -- first REIT in the entire Gulf

There is great potential, both for conventional and Sharia-compliant, Real Estate Investment Trusts in The United Arab Emirates.

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