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Survey: 43% believe GCC lacks maturity for REITs

CFA Society Emirates's survey found that investor sentiment and lack of understanding would be a key challenge hindering REIT growth in the Middle East

Up to 43% of a recent survey's respondents feel the GCC lacks the maturity required for REITs to grow [representational image].
Up to 43% of a recent survey's respondents feel the GCC lacks the maturity required for REITs to grow [representational image].

Up to 43% of a recently released survey's respondents reportedly claim the GCC has not reached the maturity level required to drive the uptake of real estate investment trusts (REITs). 

This, despite 45% of the survey's respondents stating they believe the GCC's real estate sector is ripe for REITs to grow. 

Weak regulations and lack of awareness may hinder the uptake of REITs in the Middle East, the survey found. 

CFA Society Emirates, through a survey of its members and charterholders, and found that investor sentiment, coupled with lack of understanding, would pose a key challenge for REIT growth in the Middle East.

READ: UAE's Five Holdings unveils $570m hospitality-focused REIT

A majority of the society's members ranked expected returns from a REIT portfolio higher than cash equivalents (83%) and bonds (73%).

However, respondents said they believe that REIT returns would be lower than those from stocks (62%) and private equity (82%).

Additionally, 46% of the respondents said real estate would deliver higher returns than REITs. 

Meanwhile, 75% of the survey's respondents said they see institutional investors opting for REITs, while 23% said they feel retail investors would opt for the asset class. 

Regardless, 62% of the surveyed members said they intend to invest in REITs. 

Amer Abdul Aziz Khansaheb, president of CFA Society Emirates, said that the GCC has "seen a surge of activity in [its] relatively youthful REIT market". 

He continued: "Recent developments, such as the over-subscription of ENBD [Emirates NBD] REIT and Johor Corp’s Al-Salam REIT, suggest that there is a rising demand among investors for this particular asset class.

READ: Emirates NBD REIT to boost Dubai real estate market

"With the UAE’s real estate market having the highest demand in the GCC among regional and international investors, a less volatile asset class – such as REITs – is expected to become more attractive, as investors seek to reduce portfolio risk given the current macroeconomic environment," Khansaheb added, according to WAM.

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