The Introduction Of Real Estate Investment Trusts In Oman

Real Estate Investment Trusts (REITs) are vehicles that permit investment in income-generating real estate through the purchase of publicly traded securities. REITs typically own, operate and trade in several types of commercial real estate assets ranging from office buildings, apartment complexes, hospitals, warehouses, hotels and shopping malls. They allow for individual investors to acquire ownership of these types of property portfolios by purchasing shares or units in the REIT. The investors receive revenue from the real estate property rent. A REIT will operate by leasing space and passing on collected rent payments to its investors through dividends.

REITs offer a number of advantages for individuals or corporates looking to invest in property. For example, individual investors are not required to invest large sums directly in real estate, but instead can invest small amounts into a REIT. This presents a lower risk option particularly given that the management of properties is conducted by the REIT. Additionally, REITs also offer an easy exit for investors who can simply trade their equity stakes on an exchange.

In recent years, REITs have become more popular in the Middle East with various GCC jurisdictions, including Saudi Arabia and the UAE enacting legislation for the existence of REITs. Oman has now followed suit.

On 4 January 2018, the Capital Market Authority issued Decision No. 2 of 2018 - the issuing regulations for Real Estate Investment Trusts (the REIT Regulations). The introduction of the REIT Regulations means that it is now possible for investors to establish and invest in REITs in Oman. The REIT Regulations follow Ministerial Decision 95 of 2017 issued by the Ministry of Housing on 15 November 2017 which also specifically focuses on REITs. Together, these laws demonstrate the government's intention to provide a clear regulatory framework for the operation of REITs in the Sultanate.

In this article we set out the key aspects of the new REIT Regulations which, amongst other things, set out the rules necessary to establish, manage and invest in REITs in Oman.

Establishing a REIT in Oman

Prior to the issuance of the REIT Regulations, the only way that investors in Oman could invest in a fund with a portfolio of real estate assets was through a fund established pursuant to the Executive Regulations of the Capital Market Law (Decision 1/2009) (CML Regulations) which only permitted up to 30 per cent of the fund's equity to...

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