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REAL ESTATE INVESTMENT TRUST (REIT)

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REITREIT

• Real Estate Investment Trust

• Investment in immoveable properties

• Real Properties

• Offer stability because the properties owned should continue to generate rental income.

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Why REIT

• Minimum Investment• Low risk• Income stability• Diversification• Both Stock and Real Estate• Liquidity-as traded security• Tax advantages• Quality real estates• Expert Management

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What is REIT?

• A corporation, business trust or association primarily developed to own or finance real estate

• There are board of directors-trustee

• REIT must not engage in short-term property holdings that are sold for quick profits.

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TYPES OF REIT

EQUITY REIT

HYBRID REIT

MORTGAGE REIT

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Mortgage REITs

• Mortgage REITs do not own real estate but rather make loans that enable others to buy real estate

• Invest money in short term or long term mortgages and derive income from fees and interests on the loans

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Equity REITs

• Invest directly in real estate assets • The goal is to invest primarily in income-

producing properties• Equity REITs acquire properties that will

increase in value and whose rental stream will increase

• Shareholders will receive dividends from rents and sale of properties, benefits from rental income and from appreciation in the value of properties.

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Hybrid REITs

• Combination of both equity and mortgage REITs

• Invest in both real estate and mortgage interest.

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Legal And Regulatory Framework

• Securities Commission Act 1993

• Guidelines on Real Estate Investment Trusts

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Parties in REIT

1) Management Company-subsidiary of financial companies, or property development company

2) Trustee- a trust company registered under the TCA 1949 or pursuant to PTCA 1995

3) Purchasers of the shares/Beneficiaries

- Passive investors- may choose which company to invest but will not be able to dictate types of shares to be bought-has no say.

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ISLAMIC REAL ESTATE INVESTMENT

• Interest

• Types of properties

• Halal/haram business

• Board of Syaria’ Panel

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• Roxburgh J in Re a Solocitor [1952] Ch 328, 332 said “ as the principles of equity permeate the complications of modern life, the nature and variety of trust ever grow”

• Moral of the dicta: Trust is growing and may defeat the orthodox definition of trust