REITs are regulated investment vehicles that own, manage and operate a diverse range of real estate assets with the intention of earning profits. Through these investment vehicles investors earn income without having to buy, manage, or finance properties themselves.

Types of REITs

They include:

1. Development Real Estate Investment Trusts (D-REITs): Investors pool their capital together to acquire land with a view to undertake development and construction projects and associated activities before selling it at a profit.

• Income Real Estate Investment Trust (I-REITs): Investors pool their capital for purposes of acquiring long term income generating real estate including housing, commercial and other real estate. I-REITs are available for purchase to the general public.

• Islamic Real Estate Investment Trusts: This is a unique type of REITs which only undertakes Shari’ah compliant activities. A fund manager is required to do a compliance test before making an investment in this type of REIT to ensure it is Shari’ah compliant.

Parties involved in REITs

• Promoter– Sets up the real estate investment trust scheme.
• REIT Manager: This is a company licensed by the Capital Markets Authority to provide real estate management and fund management services for a REIT scheme on behalf of investors.

• Trustee: The Trustee’s main role is to act on behalf of the investors in the REIT, by assessing the feasibility of the investment proposal put forward by the REIT Manager and ensuring that the assets of the scheme are invested in accordance with the Trust Deed and the offering memorandum.

• Project/Property Manager: The role of the project manager is to oversee the planning and delivery of the construction projects in the REITs.

Legal framework governing REITs

REITs operate under the Capital Markets (Real Estate Investment Trusts) (Collective Investment Schemes) Regulations, 2013. The Regulations require REITs to distribute most of their net income to the unitholders.

Tax implications of REITs

REITs are exempt from income tax except for payment of withholding tax on interest income and dividends. Equally, REITs are exempt from stamp duty, value added tax as well as capital gain tax in some instances.

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