Want to invest in high-income real estate in Dubai but lack upfront capital? Real Estate Investment Trust (REIT) offers a low-barrier entry into the real estate market. These investment management companies own and manage real estate assets. Investors can buy real estate stocks from these companies and earn impressive dividends.
Whether you are a seasoned investor or are new to real estate, REITs are an ideal way to diversify your investment portfolio. But how do these trusts work and what are the REIT investment benefits and risks? Read ahead to get answers to all your queries.
- What Is a REIT?
- Who Can Invest in REITs?
- Public Vs Private REIT Stocks
- REIT Vs Traditional Property Investments
- How REITs Work in Dubai?
- Benefits and Risks of REITs
- Top REITS in Dubai for Investment
- FAQs
What Is a REIT?
Investing in Dubai real estate requires significant upfront capital and let’s not forget the recurring payments. With the introduction of the Real Estate Investment Trust (REIT), property investments have become more accessible. But what’s a REIT and how does it work? Let’s learn about REITs in detail:
A REIT is a company or a trust that buys and manages an income-producing real estate asset. Similar to other businesses, REITs offer stocks that investors can purchase in exchange for dividends. The Dubai Securities and Commodities Authority (SCA) regulates REITs and protects investor rights.
Who Can Invest in REITs?
REIT investments are open for both personal and institutional investors. Here is who can invest in these income-generating instruments:
- Personal Investors: Individuals such as employees, business owners and retirees are turning to REIT investments. This is a hassle-free option offering passive income with low capital.
- Institutional Investors: REITs have also become a popular investment option for institutions such as pension funds and hedge funds. This is because institutions can earn impressive returns with low risk.
Public Vs Private REIT Stocks
Let’s understand the difference between private REIT vs. public REIT stocks:
| Factor | Public REIT Stocks | Private REIT Stocks |
| Meaning | These types of REITs are publicly listed on the Nasdaq Dubai stock exchange. | Private REITs are not publicly listed and are reserved for institutions and large investment companies. |
| Returns | Lower than private REITs. | Higher than public REITs. |
| Risk | Lower risk than its counterparts. | High income comes with higher risk. |
| Example | Emirates REIT | SEDCO Capital |
REIT Vs Traditional Property Investments
Most investors are unaware of the differences between a REIT and traditional property investment. Before jumping into more details about REITs, let’s first compare them with property buying:
| Factor | REITs | Direct Property Investments |
| Capital | Low capital requirement, which varies based on the REIT’s share price and brokerage requirements. | High capital requirement, depending on the property. |
| Liquidity | Very high, can sell quickly on stock exchanges. | Low, as selling a property can take weeks or months. |
| Income | High dividends and passive income. As per the rules, REIT stocks pay at least 80-90% of their net income as dividends. | Passive rental income depends on the property. |
| Risk | Low as investors can diversify their REIT investment portfolio. | Usually, the risk is low. However, the risk can be high in unfortunate events because the investment is concentrated in one place. |
| Management | Saves time and property management costs, as it is under the control of a trust. | Property management on your own can be time-consuming and costly. |
How REITs Work in Dubai?
REITs in Dubai follow laws and rules set by the local government. Here is how they work:
- The different Real Estate Investment Trusts list REIT stocks on the Dubai Financial Market (DFM) or Nasdaq Dubai.
- Before listing, the companies must meet legal requirements and submit the required documents.
- Investors can buy REIT stocks from the stock exchange depending on their budget.
- Lastly, the trusts rent out the real estate property and distributes 80-90% of the net rental income as dividends to the shareholders.
Benefits and Risks of REITs
Let’s look at the benefits and risks of investing in REITs:
Benefits
1. Low Capital Investment
One of the main benefits of REITs is that different budget owners can invest in real estate. REIT investments vary based on the share price and brokerage requirements. However, you may start for as low as AED 5,000.
2. High Passive Income
Dubai law mandates REITs to distribute at least 80-90% of the annual net income as dividends. Considering this percentage, this passive income source is predicted to yield around 6% to 8% dividends in 2025.
3. No Corporate Tax
Another benefit of REIT investments is that they are free from corporate taxes on capital gains and income. This benefits all the shareholders as they can enjoy high profits without deductions.
4. Portfolio Diversification and Risk Mitigation
Unlike direct property investments, investors can purchase shares in different properties through a REIT. From residential to commercial and retail, REITs offer a diverse property portfolio, which reduces investment risks.
5. Hassle-Free Property Management
Tired of managing and renting out a property? REIT investments have made it quick and convenient. Invest in shares and enjoy annual dividends while the firm finds a tenant and manages the property.
6. High Liquidity
Investors can enjoy high liquidity as REIT shares can easily be exchanged on stock exchanges. This mitigates risks and offers impressive returns.
Risks
While the benefits of investing in REITs are several, some risks are also there. With proper market research, most of the below-mentioned risks can be mitigated:
1. Property Management Fees
REITs typically charge an agreed-upon property management fee. However, this can affect overall profits in low-dividend REITs.
2. Macroeconomic Factors Impact on Dividends
While REITs are generally a safe investment option, the changing market conditions can affect returns. This includes economic conditions, geopolitical tensions and policy changes. Similar to any other investment, they carry the risk of lower profits or loss.
3. Liquidity Risks
Sometimes it can be challenging to resell a REIT, especially if it’s underperforming. It is crucial to consider liquidity risks before buying a REIT.
4. Limited Control
Investors don’t have much control over management and rental decisions. This is because the respective firm is responsible for renting out, marketing, and managing a property.
Top REITS to Invest in Dubai in 2025
Similar to choosing the right investment property, selecting a high-performing REIT can be challenging. Before buying a REIT, it is crucial to analyse factors like property location, dividend history, and economic conditions.
To make the choice easier for you, we have rounded up the top five high-performing REITs in Dubai in 2025. Let’s go through our list:
1. Emirates REIT
Emirates REIT is a publicly listed REIT on the Nasdaq Dubai stock exchange. Founded in 2010, it is considered the largest Sharia-compliant REIT today. It owns and manages commercial properties such as office spaces, buildings, and schools. By the end of the financial year 2023, the company had a Net Asset Value of USD 499.7 million (AED 1.8 billion).
2. ENBD REIT
Another top-performing REIT in Dubai is Emirates NBD’s ENBD REIT. This firm manages a diverse portfolio, including residential and commercial properties. The company owns a Net Asset Value of USD 216 million (AED 793.3 million) as of Q4 2024.
3. SEDCO Capital
SEDCO Capital, a Saudi Arabian investment management company, offers a high-performing REIT. Currently, it manages around USD 5.9 billion (AED 21.6 billion) real estate assets.
4. Al Rajhi Capital
Founded in 2008, Al Rajhi Capital is a Riyadh-based investment management company. It owns total assets worth SAR 469 billion (AED 459 billion) and offers high-performing REIT funds.
5. Al Bilad Capital
Lastly, Al Bilad Capital allows investors to buy shares and enjoy Shariah-compliant returns. The total asset value of its REIT fund is SAR 13 billion (AED 12.7 billion).
FAQs
A Real Estate Investment Trust (REIT) is a trust or a firm that finances, owns and manages an income-generating real estate asset. The trust offers stocks that individual and institutional investors can purchase in exchange for dividends.
Choosing an income-producing REIT involves thorough research. Some key factors include real estate location, previous performance and macroeconomic factors.
Some of the top performing REITs in the UAE include Emirates REIT, ENBD REIT, SEDCO Capital and Al Rajhi Capital.
Some of the best places to invest in rental property in Dubai include International City, Dubai Sports City, and Discovery Gardens.
To sum up, REITs in Dubai are a smart investment option in 2025. From low capital to high returns and hassle-free management to low risks, investing in a REIT is beneficial in the long term. Remember to research and invest in top-performing REITs only.
Furthermore, investors can learn about commercial vs residential real estate investing to choose the best one for their needs.
