High-Yield REITs: Smart Investing in UAE's Booming Real Estate Market

For investors seeking to capitalize on the thriving real estate market without making a substantial upfront investment, Real Estate Investment Trusts (REITs) present an excellent opportunity. REITs are professionally managed portfolios that often consist of a variety of properties such as residential, commercial, or industrial real estate. They generate income primarily from rental payments and can also appreciate in value over time, offering potential capital gains.

How do investments in REITs work?

Real Estate Investment Trusts (REITs) are collective investment funds that pool money from private and institutional investors to invest in various real estate ventures. In return, investors are issued units or shares of the REIT. This structure enables investors to benefit from a diverse real estate portfolio while mitigating risks associated with direct property ownership.

Compared to individual property ownership, REITs provide an accessible and liquid way to invest in real estate without the burden of property management responsibilities. Additionally, publicly listed REITs offer the advantage of dividend-based passive income and the potential for liquidity through trading on stock exchanges.

As per UAE regulations, REITs are required to be closed-ended funds. This implies that after the initial public offering (IPO), shares are not directly traded with the sponsoring fund. Instead, they can be traded on the exchange, where market participants assume the roles of buyers and sellers for public funds.

Overall, REITs offer investors a simple and effective means to participate in the real estate market's growth and potentially earn high yields while diversifying their investment portfolios.Since REITs are required to distribute 80 percent of the income to their shareholders annually, dividends can be substantial. The relatively low correlation of listed REIT returns with the returns of equities and fixed-income investments makes it a good portfolio addition to reap diversification benefits.