Understanding REITs: A guide to real estate investment in the UAE

As the first REIT to list under the UAE’s new regulatory framework announced in April 2024, this launch provides an opportunity to explore what REITs are, how they work, and what investors can expect.

What is a REIT?

A Real Estate Investment Trust (REIT) is a company or fund that owns and manages an income-generating real estate portfolio. The fundamental structure is simple. REITs offer investors access to a professionally managed and operated real estate portfolio. The majority of the income generated from these assets is then distributed to investors through dividend payments.

REITs offer investors two primary benefits designed to provide the economic benefits of real estate ownership while eliminating the time, cost, and administrative burden of managing physical properties.

The primary value of REITs lies in their ability to generate consistent income through dividend payments derived from rental income. These payments create reliable cash flow that forms the cornerstone of REIT returns, with historical data from established markets showing that dividends typically make up the majority of total REIT returns over long periods.

Beyond regular income, REITs provide potential for long-term value appreciation as underlying property values increase. This secondary benefit complements the income stream to create total returns for investors.

Dubai Residential REIT: Comprehensive details

IPO timeline and trading information

• Subscription Period: May 13-20, 2025
• Expected Trading Commencement: Around May 28, 2025
• Ticker Symbol: DUBAIRESI
• Trading Exchange: Dubai Financial Market (DFM)
• Offering Size: 1,625,000,000 units (12.5 per cent of total)
• Minimum Allocation: 2,000 units for successful retail subscribers
• Trading Hours: Regular DFM trading hours (Monday to Friday)

Portfolio composition and performance

Dubai Residential REIT manages 35,700 residential units across 21 communities, with a gross asset value (GAV) of AED 21.6 billion — making it, upon listing, the largest REIT in the GCC, with nearly double the combined GAV of the region’s five largest REITs.

• Occupancy Rate: 97 per cent (as of December 2024), up from 93 per cent in 2022
• Tenant Retention: 87 per cent (2024)
• Average Revenue per Unit: AED 50,315 (2024), increased from AED 42,620 in 2022
• Tenant Mix: 57 per cent individual tenants (primarily families) and 43 per cent corporate tenants

Property segments in detail

Premium Properties (746 units): High-end developments in prime locations including Bluewaters Residences, City Walk Residences, and Nad Al Sheba Villas, targeting affluent residents seeking superior amenities.

Community Properties (13,649 units): Family-friendly gated communities including Garden View Villas, The Gardens, Remraam, and Meydan Residence, offering specialised retail centers and leisure facilities.

Affordable Housing (16,256 units): Cost-effective housing in Al Khail Gate and International City, providing value and accessibility for budget-conscious residents.

Corporate Housing (5,049 units): Purpose-built properties in Nuzul and Al Quoz, specifically designed for corporate and industrial staff accommodation.

UAE REIT regulatory framework

Governing regulations

UAE REITs operate under regulations issued by the Ministry of Finance, with new rules announced in April. In addition, the Federal Tax Authority also issued guidelines clarifying these rules earlier this month. The rules pertain to the taxation of the REIT and the individual investors.

• Mandatory distribution requirements of at least 80 per cent of annual net profits
• Corporate income tax exemption for REITs
• Tax-free treatment of dividends and capital gains for UAE-based individual investors
• Professional management standards

Regulatory oversight

The SCA provides regulatory oversight, ensuring investor protection through:

• Regular financial reporting requirements
• Independent property valuations (semi-annual for Dubai Residential REIT)
• Management fee transparency
• Corporate governance standards

Dividend Policy Framework

Dubai Residential REIT’s policy includes:

• Semi-annual distributions (April and September)
• First payment expected September 2025
• Expected total of first two payments: The higher of AED 1,100 million or 80 per cent of 2025 profits
• Ongoing commitment to distribute at least 80 per cent of profit before fair value changes

Investment Process: Step-by-Step Guide

For UAE retail investors (first tranche)

1. Eligibility check: Must hold a National Investor Number (NIN) with DFM
2. Account setup: Ensure you have a trading account with an authorised broker
3. Subscription process: Submit application during subscription period (May 13-20, 2025)
4. Minimum investment: Consider guaranteed minimum allocation of 2,000 units
5. Payment: Follow broker’s payment procedures
6. Allocation: Receive confirmation of unit allocation
7. Trading: Begin trading once units are admitted to DFM

Brokerage requirements

Investors must work through authorised brokers including:

• Local UAE brokerage firms licensed by SCA
• International firms with UAE operations
• Banks offering brokerage services in the UAE

Tax treatment for different investor types

UAE residents

• Individuals: No income tax on dividends or capital gains
• Corporate Investors: Subject to UAE Corporate Income Tax Act where applicable
• REITs: Exempt from corporate income tax

Non-UAE residents

• Tax treatment depends on home country regulations
• May be subject to withholding taxes
• Should consider double taxation treaties between UAE and home country
• Professional tax advice recommended

Detailed comparisons with direct property investment

Capital requirements

• Direct Property: Typically AED 500,000+ for entry-level properties in Dubai
• REITs: Minimum investment based on unit price (typically much lower)
• Leverage: REITs provide embedded leverage through property financing

Liquidity comparison

• Direct Property: 30-90 days average selling time
• REITs: Immediate trading during market hours
• Transaction Costs: Generally lower for REITs than property transfers

Management responsibilities

• Direct Property: Owner responsible for all management aspects
• REITs: Professional management responsible for entire portfolio
• Time Commitment: Minimal for REIT investors

Returns and yields

The gross dividend yield is expected to be 7.7 per cent on the upper end of the price range and 7.9 per cent on the lower end of the price range. REITs typically offer:

• Regular income through dividends
• Potential capital appreciation
• Professional portfolio optimisation
• Economies of scale in operations

Dubai Residential REIT management and governance framework

The Dubai Residential REIT is structured as follows:

• REIT management: Dubai Residential REIT will be externally managed by DHAM REIT Management LLC, a wholly owned subsidiary of Dubai Holding Asset Management.
• Governance framework: A robust governance structure ensures transparency, with a board of directors comprising at least one-third independent non-executive members to oversee and ensure compliance by the Fund Manager with Dubai Residential REIT’s Investment Policy.
• Compliance: The Dubai Residential REIT adheres to UAE onshore REIT regulations, including minimum distribution requirements (80 per cent of annual net profits), restrictions on borrowing (capped at 50 per cent of total assets), and limitations on development exposure.

Market analysis and context

Dubai’s real estate market has been on a strong upward trajectory in recent years, buoyed by robust demographic and economic fundamentals. Between 2018 and 2023, the emirate’s population grew at an average annual rate of 2.7 per cent , adding steady demand for housing and rental units. Government-led initiatives such as the Dubai 2040 Urban Master Plan and the ambitious D33 Economic Agenda — which aims to double the size of the emirate’s economy by 2033 — have further reinforced investor confidence. The introduction of long-term Golden Visas has also played a pivotal role in attracting international residents, adding both stability and depth to the real estate sector.

Against this backdrop, the Dubai Residential REIT is poised to make a significant impact on the region’s investment landscape. Upon launch, it is expected to be the largest listed REIT in the Gulf Cooperation Council (GCC), with a gross asset value (GAV) of AED 21.63 billion—almost double the combined GAV of the five largest REITs currently operating in the region. It will also be the GCC’s first pure-play residential leasing REIT, offering investors focused exposure to a key segment of Dubai’s property market.

Looking ahead, the broader UAE REIT market is expected to see further growth and diversification. Several new REIT listings are reportedly in the pipeline, pointing to increased institutional interest and maturing investor appetite. Retail investors are also becoming more aware of REITs as accessible vehicles for real estate exposure. As the market evolves, there is potential for the emergence of more sector-specific REITs, spanning commercial, industrial, and possibly hospitality assets, which could further deepen and professionalise the market.

Shariah compliance details

Dubai Residential REIT maintains Shariah compliance through:

• Fatwa confirmation from the REIT’s Shariah Supervision Committee
• Additional fatwa from Emirates NBD’s Internal Shariah Supervision Committee
• Compliance with Islamic investment principles
• Regular Shariah auditing and oversight

Professional advice and resources

Getting professional help

Investors should consider consulting licensed financial advisors in the UAE, certified Islamic finance specialists (for Shariah compliance), tax advisors familiar with the UAE and international tax implications, or real estate investment experts.

Additional resources include:

• Official Prospectus: https://ipo.dubairesidential.ae/
• SCA Website: For regulatory information and investor protection
• Dubai Financial Market: For trading information and market data
• Dubai Holding: For company information and updates

Investment strategy considerations

Portfolio Allocation

Consider REITs as part of a diversified portfolio:

• Real estate allocation typically 5-15 per cent of total portfolio
• Balance with other asset classes (equities, bonds, cash)
• Consider correlation with existing holdings

Income vs. growth focus

REITs suit investors seeking:

• Regular income generation
• Inflation protection (historically)
• Real estate exposure without direct ownership
• Professional management of assets

Next steps

Dubai Residential REIT represents a landmark opportunity in the UAE’s capital markets evolution. As the first listing under new REIT regulations, it establishes crucial precedents for the market’s development while offering investors professionally managed, liquid, and diversified exposure to Dubai’s residential real estate market.

The combination of mandated income distributions (minimum 80 per cent of profits), tax efficiency for UAE investors, professional management, and portfolio diversification creates an attractive investment vehicle for those seeking real estate exposure without direct ownership complexities.

Key considerations for investors

For investors considering participation in a REIT offering, several key steps should be taken to make informed decisions. First and foremost, it’s essential to thoroughly review the official prospectus and all accompanying offering materials. These documents provide critical information on the REIT’s structure, assets, financials, risk factors, and governance—serving as the foundation for any investment decision.

Seeking guidance from qualified financial advisors can provide added clarity, particularly for those unfamiliar with real estate investment trusts or the regional market. An advisor can help interpret the REIT’s offering documents, explain the tax implications, and advise on how the investment fits within long-term financial goals.

For those planning to participate in an initial public offering (IPO), it’s crucial to prepare in advance. This includes ensuring that brokerage accounts are active and eligible for subscription, and understanding the mechanics of the IPO process.

Finally, investors should stay up to date on broader market developments. Dubai’s real estate landscape and the REIT sector are both dynamic, and ongoing awareness of economic trends, regulatory changes, and sector performance will help investors make more agile and informed decisions over time.

Remember:

• All investments carry risk
• Past performance doesn’t predict future results
• Professional advice is recommended
• Investment decisions should align with individual circumstances

Key terms glossary

• Gross Asset Value (GAV): The market value of investment properties as determined by independent valuations
• Net Asset Value (NAV): Total assets minus total liabilities, representing REIT’s book value
• Occupancy Rate: Percentage of units currently leased to tenants
• Yield: Annual dividend payment as percentage of current unit price
• Retention Rate: Percentage of tenants renewing their leases
• EBITDA: Earnings before interest, taxes, depreciation, and amortisation
• Professional Investor: As defined by SCA regulations, typically institutions with significant assets

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Investment involves risk. This article is for educational purposes only and should not be considered as investment advice. Potential investors should carefully read the prospectus and consult with financial advisors before making any investment decisions.