Investor awareness & improved regulatory environment necessary for GCC REITs to flourish
Source: FTI Consulting , Author: Posted by BI-ME staff
Posted: Wed June 21, 2017 12:25 pm

UAE.  Investor sentiment and lack of understanding, along with a weak regulatory environment, are the biggest challenges for the growth of REITs in the Middle East, according to the latest survey by CFA Society Emirates, which gauged the opinions of the society’s members and charterholders in the UAE.

The survey revealed that the majority of CFA Society Emirates’ members ranked expected returns from a REIT portfolio higher than cash equivalents and bonds, and said that they intend to invest in REITs. However, they believe that the returns from REITs would be lower than stocks, private equity and real estate. Most investment professionals surveyed expect that the UAE’s residential and commercial real estate market will either stay flat or deteriorate over the next 12 months.

Amer Abdul Aziz Khansaheb, CFA, President of CFA Society Emirates, commented on the findings, saying: “Over the past decade, the GCC has seen a surge of activity in the region’s relatively youthful REIT market. Recent developments, such as the oversubscription of ENBD REIT and Johor Corp’s Al-Salām REIT, suggest that there is a rising demand amongst investors for this particular asset class. 

Investment professionals recognise that REITS are attractive to investors because they offer a more diversified portfolio compared to buying shares in a listed property company. Additionally, with declining oil revenues and the growing likelihood of fiscal restructuring measures, REITs would provide investors with a hedge against any inflationary trends.” 

He added: “With the UAE’s real estate market having the highest demand in the GCC amongst 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. However, our survey shows that it is important for investment professionals to increase investor understanding about REITs and gain their trust through prudent and ethical investment strategies which put investor interests first. This, along with creating a more robust regulatory environment to gain investor confidence, is significantly important for the growth of REITs in the region.”

8 key survey findings:

- Investor understanding of REITs was seen as the biggest challenge for its growth and development in the region.
- 62% are convinced returns from a REIT portfolio will be lower than stocks, 82% feel that REITs will deliver lower returns than private equity and 46% are of the opinion that real estate would deliver higher returns than REITs.
- A large majority of respondents said that the expected returns from a REIT portfolio would be higher compared to cash equivalents (83%) and bonds (73%).
- 76% of members see institutional investors investing in REITS, compared to 23% who felt that it would be retail investors.
- 62% of respondents said that they intend to invest in REITS.
- 74% of members expect the outlook for the UAE’s residential real estate market to either stay flat or deteriorate.
- In terms of the commercial real estate outlook for the UAE, 70% feel that the market will either stay flat or deteriorate. 
- 45% of members believe that GCC’s real estate market is mature enough for REITS to flourish, while 43% believe that it is not.

Methodology
An online survey was conducted from 1st May till 1st June 2017. Participants included 137 CFA Emirates members from the UAE.
Media contacts

Released for and on behalf of CFA Institute in the GCC and Middle East by FTI Consulting.

Photo Caption:  Amer Abdul Aziz Khansaheb, CFA, President of CFA Society Emirates (File photo). 

About CFA Institute
CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion for ethical behavior in investment markets and a respected source of knowledge in the global financial community. The end goal: to create an environment where investors’ interests come first, markets function at their best, and economies grow. CFA Institute has more than 148,000 members in 163 countries and territories, including 142,000 charterholders, and 148 member societies.

For more information, visit www.cfainstitute.org

About CFA Society Emirates
The CFA Society Emirates Society is an association of local investment professionals consisting of portfolio managers, investment advisors, educators and other financial professionals.  With 600 members, CFA Society Emirates is the largest member society in the GCC region comprising over half of the total number of CFA charterholders in the Gulf. The society also represents a majority of the 4,773 candidates from the region who took the CFA exams in 2009.  With CFA membership in the GCC anticipated to double over the next decade, a significant share of this growth is expected to be in the UAE.

 

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