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Abu Dhabi, UAESaturday 23 June 2018

Central Bank of Bahrain moves to lift restriction on trading in real estate investment trusts 

Bahrain-domiciled Reits now open to retail, high net worth individuals and institutions without restrictions  

Bahrain is keen to make local Reits more liquid. Getty Images
Bahrain is keen to make local Reits more liquid. Getty Images

The Central Bank of Bahrain amended regulations that pave the way for retail investors to invest in Bahrain-domiciled real estate investment trusts (Reit) as part of the kingdom's commitment to boost the Reit industry by making the investment vehicle more liquid.

The removal of restrictions on who can invest in real estate investment trusts will now permit all types of investors including high net worth individuals, institutional and retail investors. Reits are traded on exchanges like stocks but the underlying assets are only real estate from which a rental dividend is distributed to shareholders.

"Overall, Reits have become an important addition to the real estate investment landscape in the last few years for both retail investors and the large institutional investors; reflecting the increased growth, maturity, transparency and sophistication of the local, regional and global real estate markets," said Abdul Rahman Al Baker, executive director of financial institutions supervision at the kingdom's regulator.

Reits, which typically invest in commercial real estate, have popped up across the region in recent years to allow investors to tap the real estate market without having to buy real estate directly.

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Although listed reits have only existed in the UAE since the launch of Emirates Reit on Nasdaq Dubai in 2014, institutions have been setting up unlisted collective investment vehicles since the mid-2000s.

These include the US$200 million Arabian Real Estate Investment Trust, set up in 2006 by HSBC and Daman, the original Emirates Reit vehicle which was established in 2010 by Dubai Islamic Bank and Dubai Properties and the original ENBD Reit, which was set up as a Jersey- based open-ended real estate fund in 2005.

The news comes as more and more reits are expected to start trading in the UAE and across the Arabian Gulf. Saudi Arabia approved reit listing rules last year to bolster its housing market and currently has two listed. In Bahrain, the country’s first Sharia-compliant retail reit was listed in January on the local bourse.

In April, the fund manager behind ENBD Reit’s main rival, Emirates Reit, announced it had teamed up with Al Hamra Real Estate Development and National Bonds to create the UAE’s first residential real estate trust. The fund manager is also looking to set up reits based around hotels, logistics and sporting assets.