As Dubai Residential REIT launches its IPO, here is what to know about investing in REITs

Debut marks significant moment for UAE’s property and financial sectors

With a portfolio of more than 35,000 units, Dubai Residential REIT stands out for its size and strategic focus.

The debut of the Dubai Residential REIT, the region’s first listed real estate investment trust focused exclusively on residential leasing, marks a significant moment in the evolution of the UAE’s property and financial sectors.

With a portfolio of more than 35,000 units and a gross asset value exceeding Dh21.6 billion, Dubai Residential REIT stands out for its size and strategic focus. It is also the first listing under the UAE’s recently updated real estate investment trust (REIT) regulations - making it a timely opportunity to explore how REITs work, why they matter and the growing role they are expected to play in the investment landscape.

A REIT is a company or fund that owns and operates income-generating real estate assets and distributes the majority of its earnings to investors as dividends. Designed to offer the economic benefits of property ownership without the complexities of managing property directly, REITs allow individuals and institutions to invest in diversified real estate portfolios with relatively low capital requirements.

What is a REIT?

REITs are publicly traded on stock exchanges and operate much like listed equities. Investors can buy or sell units in a REIT as they would shares in a company, offering greater flexibility and liquidity than traditional property investments. In a real estate-driven economy such as the UAE’s - where property has long been a favoured asset class - REITs provide a structured, transparent and regulated way for a broader segment of investors to gain exposure.

One of the core appeals of REITs is their ability to generate regular income. In the UAE, REITs are required to distribute at least 80 per cent of their annual net profits to unitholders. These distributions, typically funded by rental income, offer consistent cash flow -particularly attractive in times of market uncertainty. Over the long term, dividends account for the majority of total returns from REITs, with capital appreciation playing a secondary role.

These dividend distributions are now more tax-efficient than ever. As part of new regulations issued in April, UAE-based REITs are exempt from corporate income tax, and UAE-based individual investors are not required to pay tax on dividends or capital gains. These changes bring the UAE’s REIT framework closer in line with international models and make the structure more attractive for long-term investors.

The purpose of a REIT

REIT diversification is another key advantage. A REIT typically holds properties across different sectors or geographic locations, spreading risk and reducing exposure to volatility in any single asset. For example, a residential REIT might include premium apartments, mid-market housing, and affordable rental units in various districts across a city. Achieving this breadth as an individual property investor would be expensive and time-consuming.

REITs also benefit from professional asset management. Specialist teams are responsible for asset acquisitions, leasing management, tenant retention, and property maintenance, ensuring the portfolio is actively managed to maximise returns. This relieves investors of the day-to-day challenges of property ownership while offering the benefits of scale, experience, and strategic oversight.

When evaluating a REIT, investors should consider operational and financial performance indicators. Metrics such as occupancy rates, rental income growth, tenant retention and cost efficiency provide insights into a REIT’s ability to generate stable income. Financial measures such as funds from operations (FFO), net asset value (NAV), and dividend yield help assess profitability and market valuation. Together, these indicators offer a clear picture of the REIT’s underlying strength.

Investment characteristics

REIT performance is also influenced by macroeconomic factors. Interest rates, inflation, real estate demand and government policy all play a role. In the UAE, long-term real estate fundamentals remain strong, supported by continued population growth, infrastructure investment, and regulatory reforms such as expanded residency options. These fundamentals are boosting demand across residential and commercial real estate sectors.

Liquidity is another important differentiator. Unlike traditional real estate, which can take months to sell and incur high transaction costs, REITs are traded on exchanges and can be bought or sold quickly. This liquidity makes them a more agile and responsive option for investors seeking to adjust their portfolio allocations over time.

The listing of Dubai Residential REIT under the UAE’s revised REIT regulations is a milestone, not just because of the trust’s scale - more than 35,000 residential units and a gross asset value of Dh21.6 billion - but because of what it represents. It reflects the growing maturity and sophistication of the country’s investment infrastructure, where real estate exposure is no longer limited to direct ownership but is now available through transparent, regulated vehicles suitable for a range of investors.

For retail investors, REITs open doors that were previously closed. With low minimum investment thresholds, regular income, and diversified exposure, REITs provide an accessible entry point into real estate. For institutions, they offer efficiency, scale, and the ability to allocate capital into property markets without the operational overhead.

As awareness of REITs increases and the regulatory environment continues to support their growth, these vehicles are expected to become a permanent fixture in the UAE’s investment landscape. Whether for income generation, capital preservation, or long-term growth, REITs offer a compelling alternative to traditional property ownership - combining the reliability of real estate with the flexibility of public markets.