With the introduction of a new regulation, investments in the Sultanate’s real estate have been opened up for the public, both nationals and foreigners. “The regulation is a constructive step that would contribute to creating a financing instrument for a large segment of the community and attract more foreign funds for the stimulation of real estate sector,” said Abdullah bin Salim al Salmi, Executive President, Capital Market Authority (CMS). Through Administrative Decision No 2/2018, the regulator on Sunday issued the Real Estate Investment Trusts (REITs) Regulation as part of the National Economic Diversification Programme (Tanfeedh).
“Real estate investment funds will be available to the public through offer of part of the capital for subscription in accordance with the regulation. The units would be traded on the Muscat Securities Market (MSM),” said Al Salmi. REIFs are collective investment schemes in properties through financing investment by rights in title. The funds own income-generating properties by developing and management. Abdullah bin Salim al Mukhaini, Secretary-General of Real Estate Register, said the decision realises the aspirations of investors, whether nationals or foreigners. “The regulation makes investment in such funds easy and less risky besides providing employment opportunities for citizens,” he said. The funds may not be wholly owned by Omanis and the whole capital may be held by non-Omanis to attract funds from abroad, he said.
According to Al Salmi, REITs will be managed by professional entities licensed, regulated and supervised by CMA in accordance with the stock market’s rules and regulations. He said the regulation comes as a culmination of the efforts to improve the business environment and strengthening the real estate sector. REITs will allow residents, both Omanis and foreigners, to purchase part of a real estate development at the MSM, similar to purchasing shares in the stock market. This was one of the 120 initiatives proposed by Tanfeedh, the National Plan for Economic Diversification in November 2016. Explaining the main features of regulation, Al Salmi said the minimum capital of real estate investment funds will be RO 10 million.
“The funds would be offered for public subscription and the special purpose vehicle should distribute not less than 90 per cent of the annual profits to the holders of its shares. The funds would have exemption from taxes as per the income tax law,” he said.
Rules allow investment of part of the fund’s assets at 75 per cent of the total assets in the Sultanate.
The founders can invest not more than 25 per cent of the total assets abroad to encourage investment in the Sultanate and allow investment opportunities outside the Sultanate.
The regulation provides for Sharia-compatible real estate investment funds to expand the base of participation of the community.
The Ministry of Housing issued Ministerial Decision No 95/2017 dated November 15, 2017, relating to ownership of properties in Oman.
The decision allows ownership of properties by buying, except in the prohibited areas.
After obtaining the license from CMA, owners of the fund can apply to the Ministry of Housing to own properties in accordance with terms and conditions, and obtain the title deed.
Al Makhaini said the decision allows owning of residential complexes provided the area is not less than 10,000 square metres, but the fund shall not own empty lands or agricultural use properties.
Applications for ownership of properties by real estate investment funds not wholly owned by Omani at the prohibited areas shall not be admitted.
Real estate investment funds may be in the form of investment fund or financial trust and can borrow directly through issuance of bonds or Sukuk up to 60 per cent of the total assets.
Foreign investment is open up to 100 per cent but will be obligated to offer not less than 40 per cent of the capital to the public.
Funds may not invest in properties under construction at more than 10 per cent of the total assets and are allowed to establish and own special purpose vehicles in the form of fund to obtain tax exemption.
Samuel Kutty
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