Three Omani firms plan to set up REIT fund

30/01/2018 06:03 AST

Three Omani companies are planning to establish real estate investment trust (REIT) fund, following the market regulator’s announcement of a new regulation for real estate focused funds.

These companies are expected to float funds to raise capital from the investing public this year, according to highly placed sources at the Capital Market Authority (CMA).

REIT funds are securities that sell like a stock on the bourse and invest in real estate directly, either through properties or mortgages.

Some of the real estate developers are also expected to create REIT funds to transfer part of their assets under the scheme.

The new regulation, which was announced by the CMA earlier this month, permits funds to own residential complexes provided the area is not less than 10,000 square metres. However, the funds are not allowed to own vacant or agricultural land.

Real estate investment funds can mobilise money directly through the issuance of bonds or sukuk up to 60 per cent of the total assets. Foreign investment is allowed up to 100 per cent, and the fund has to offer a minimum of 40 per cent of its capital to the public. REIT funds are allowed to establish special purpose vehicles to obtain tax exemption.

The minimum capital for establishing a REIT fund is fixed at OMR10 million. The funds will be available for public subscription, and the special purpose vehicle has to distribute not less than 90 per cent of the annual profits to the holders of its units.

“The new regulation enables property developers to unlock their assets and allows small investors to invest in real estate projects,” said Sheikh Abdullah Salim Al Salmi, executive president of the CMA.

As per the new regulation, the funds can invest only in real estate projects that are 90 per cent complete.

Sheikh Al Salmi added the new funds will not only allow real estate developers to unlock the value of existing properties and reinvest in other projects but also provide investors an opportunity to participate in real estate projects with small fund sizes that offer regular income and capital appreciation.

He indicated that REIT funds will also attract foreign investment and create liquidity in the local bourses.

REIT funds will be listed on the Muscat Securities Market (MSM), which will help investors to call back their money, if desired. Also, once the maturity period of the funds ends, investors can recoup their money.

Among GCC countries, Saudi Arabia, Bahrain, and the United Arab Emirates have allowed the listing of REIT funds.

The CMA will soon begin a marketing campaign to attract companies from within the country and outside, to float REIT funds.

Privatisation of MSM

Referring to a long-term plan to privatise the Muscat bourse, Sheikh Al Salmi noted that the idea is to create a separate company to own the MSM, which will be under the State General Reserve Fund. “We are in the process. It is just a matter of evaluation (of the MSM),” added Sheikh Al Salmi.

Times of Oman