04 June 2015
MUSCAT: The growth of Oman's property sector continues to be stymied by the absence of suitable equity tools, such as Real Estate Investment Trusts (REITs) and real estate funds, say property developers, who want the government to put in place the regulatory framework necessary to support such initiatives.
The issue surrounding REITs and other investment instruments was the subject of vigorous debate at a major real estate conference held in the city recently. Speakers and panellists representing the Sultanate's influential developer community made a strong plea for government legislation that would eventually make possible the rollout of REITs in Oman.
Galvanised by the clamour for state action on this issue, the Oman Real Estate Association (ORA) -- the organisers of the conference -- have also added REITs to its 10-point list of priority recommendations for the government to act on.
A Real Estate Investment Trust is defined as a security that sells like a stock on exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate. Equity REITs invest in and own properties (thus responsible for the equity or value of their real estate assets).
Their revenues come principally from their properties' rents.
Among the strongest advocates of REITs is Abdulrahman Awadh Barham, CEO -- Al Madina Real Estate Company, a leading developer behind a number of landmark retail, hospitality and residential developments, most notably the Tilal Complex in Al Khuwair, Muscat.
Speaking to the Observer on the benefits of REITs, Abdulrahman said: "REITs, real estate funds, and so on, are key to creating a property market in its proper sense in Oman. We need to bring in equity tools like REITs. Other countries have successfully done so! Take Singapore, for example, which has a well regulated market. It has been successful in developing the (island-state) through public and foreign participation in the form of REITs and other equity instruments. So we don't have to reinvent the wheel here -- all we need to do is adopt best practice and follow suit."
Real Estate Investment Trusts, according to the veteran developer, have the potential to promote liquidity in the real estate market, as well as attract all manner of investors -- small, medium and large. "Real estate funds and other such investment instruments will not only encourage savings, but will also see the involvement of a greater number of small investors. Ultimately, we will see a dynamic sector," he stressed.
REITs, developers argue, can be listed on the market and traded in much the same way shares are bought and sold on the stock market. Equally imperative, they add, is legislation regulating real estate funds that must be tax exempt. Current equity funds, for example, are not permitted to invest in real estate, they point out. However, a major impediment to the vision of a dynamic property market taking root in Oman is the absence of a market regulator as well as a legal framework that is conducive to the introduction of REITs and other such investment tools, laments Abdulrahman.
"Just as the stock market has the Capital Market Authority as its regulator, we need an independent regulator to oversee the real estate market," said Abdulrahman.
"The Ministry of Housing is an executive institution and not a regulatory body, per se. With an effective market regulator, we can see sustained growth of the real estate industry, with significant revenue also accruing to the government in the form of taxes -- something the government misses out at the moment," he noted.
The absence of an independent market regulator is also holding back the growth of a sector that makes a significant contribution to Oman's Gross Domestic Product, according to Mohammed al Ghassani, CEO -- Global Omani Development & Investment Company (GLOREI), a prominent Omani real estate firm.
"In 2014, the contribution of real estate -- based on its limited definition -- was almost 4 per cent to the national GDP. But if you add tourism, logistics activities, construction, and so on, we see the contribution rising to 11-12 per cent. This is a big percentage of the GDP. Consequently, the real estate sector should receive more attention," he remarked.
MUSCAT: The growth of Oman's property sector continues to be stymied by the absence of suitable equity tools, such as Real Estate Investment Trusts (REITs) and real estate funds, say property developers, who want the government to put in place the regulatory framework necessary to support such initiatives.
The issue surrounding REITs and other investment instruments was the subject of vigorous debate at a major real estate conference held in the city recently. Speakers and panellists representing the Sultanate's influential developer community made a strong plea for government legislation that would eventually make possible the rollout of REITs in Oman.
Galvanised by the clamour for state action on this issue, the Oman Real Estate Association (ORA) -- the organisers of the conference -- have also added REITs to its 10-point list of priority recommendations for the government to act on.
A Real Estate Investment Trust is defined as a security that sells like a stock on exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate. Equity REITs invest in and own properties (thus responsible for the equity or value of their real estate assets).
Their revenues come principally from their properties' rents.
Among the strongest advocates of REITs is Abdulrahman Awadh Barham, CEO -- Al Madina Real Estate Company, a leading developer behind a number of landmark retail, hospitality and residential developments, most notably the Tilal Complex in Al Khuwair, Muscat.
Speaking to the Observer on the benefits of REITs, Abdulrahman said: "REITs, real estate funds, and so on, are key to creating a property market in its proper sense in Oman. We need to bring in equity tools like REITs. Other countries have successfully done so! Take Singapore, for example, which has a well regulated market. It has been successful in developing the (island-state) through public and foreign participation in the form of REITs and other equity instruments. So we don't have to reinvent the wheel here -- all we need to do is adopt best practice and follow suit."
Real Estate Investment Trusts, according to the veteran developer, have the potential to promote liquidity in the real estate market, as well as attract all manner of investors -- small, medium and large. "Real estate funds and other such investment instruments will not only encourage savings, but will also see the involvement of a greater number of small investors. Ultimately, we will see a dynamic sector," he stressed.
REITs, developers argue, can be listed on the market and traded in much the same way shares are bought and sold on the stock market. Equally imperative, they add, is legislation regulating real estate funds that must be tax exempt. Current equity funds, for example, are not permitted to invest in real estate, they point out. However, a major impediment to the vision of a dynamic property market taking root in Oman is the absence of a market regulator as well as a legal framework that is conducive to the introduction of REITs and other such investment tools, laments Abdulrahman.
"Just as the stock market has the Capital Market Authority as its regulator, we need an independent regulator to oversee the real estate market," said Abdulrahman.
"The Ministry of Housing is an executive institution and not a regulatory body, per se. With an effective market regulator, we can see sustained growth of the real estate industry, with significant revenue also accruing to the government in the form of taxes -- something the government misses out at the moment," he noted.
The absence of an independent market regulator is also holding back the growth of a sector that makes a significant contribution to Oman's Gross Domestic Product, according to Mohammed al Ghassani, CEO -- Global Omani Development & Investment Company (GLOREI), a prominent Omani real estate firm.
"In 2014, the contribution of real estate -- based on its limited definition -- was almost 4 per cent to the national GDP. But if you add tourism, logistics activities, construction, and so on, we see the contribution rising to 11-12 per cent. This is a big percentage of the GDP. Consequently, the real estate sector should receive more attention," he remarked.
© Oman Daily Observer 2015
