Thanks to regulatory reforms in Saudi Arabia and Bahrain, listed real estate investment trusts (REITs) have at last taken off in the GCC.

Riyad REIT Fund, managed by Riyad Capital, listed on the Saudi Stock Exchange (Tadawul) on 13 November with a capital of SR500m ($133m). Bahrain’s Eskan Bank is opening subscriptions on 22 November for its REIT, which will be listed on the Bahrain Bourse.

Dubai’s Emirates REIT, the only other listed REIT in the GCC (Nasdaq Dubai), is performing well despite a weak real estate market in the UAE. The sharia-compliant fund recorded a 22 per cent increase in property income to $36m in the first nine months of 2016.

Previous attempts to popularise REITs have suffered from regulations limiting foreign investment and land ownership, and lack of liquidity. Earlier REITs were not listed, such as Kuwait’s sharia-compliant Al-Mehrab Tower REIT Real Estate Company, which started in 2008. This meant investors found it hard to cash in their investment.

With low or non-existent taxes in the region, REITs did not offer a particular advantage for real estate investors.

Appetite for property investment in the GCC has traditionally been strong, and listed REITs could bring in smaller investors.

Foreign investment of up to 49 per cent and improved capital market regulations could stimulate a flood of listed REITs in the UAE, Saudi Arabia and Bahrain.

This is being seen as one solution to the GCC’s affordable housing shortage. REITs, especially sharia-compliant ones, could tap new pools of liquidity for real estate finance. While REIT funds so far have focused on high-end or commercial properties, government-supported social housing could provide an interesting and reliable yield.