is seen as a logical development whereby investors will be able to target specific real estate sectors rather than taking blended real estate exposure. This will be particularly important for investors seeking exposure to non-cyclical, defensive sectors such as healthcare and education,” comments Majdalani.
For Majdalani, REITs traditionally appeal to investors looking for more liquid exposure to the real estate sector, with the added benefits of diversification and long-term stability as well as regular dividend income and potential capital appreciation. The REIT market in Saudi Arabia will provide a wider range of investors exposure to the commercial real estate market, a sector that is typically illiquid and has large minimum entry requirements, she says.
“We welcome the establishment of the recent REIT regulations as another step toward a more transparent market, a key factor when it comes to institutionalising the sector and attracting international capital. Over the longer term, REITs are expected to increase private sector participation in the financing of the real estate market. This appears to bode well with a real need for investing capital in the kingdom’s real estate market and falls in line with the broader goals of the Saudi Vision 2030 and the National Transformation Plan (NTP) which aim to stimulate the real estate sector and increase its contribution to overall GDP, while encouraging private sector participation in this process,” comments Majdalani.
Stefan Burch, Partner at Knight Frank Saudi Arabia says: “The recent approval of REIT regulations signal an important step in the government’s drive to increase transparency in the real estate markets where visibility around asset performance, ownership and legislation are key to attracting capital to the sector.”