ARA Asset Management (ARAM.SI) and Qatar's Regency Group plan to launch the first real estate investment trust in Singapore that will comply with Islamic principles, as investor interest returns to the REIT sector. 

 

The proposed Islamic or sharia-compliant REIT will comprise hotels and service apartments in Qatar with an initial portfolio of around 164,000 square metres of gross floor area, said ARA, which is part-owned by Hong Kong property giant Cheung Kong. 

Islamic finance is one of the world's fastest growing banking sectors 

 

ARA hopes to list the proposed REIT in the second half of 2010. It declined to give an estimated value for the properties, which belong to Regency, a large Qatari developer that also owns car rental and travel agencies. 

 

Singapore's REIT sector is the third largest in Asia after Japan and Australia. Unlike their regional counterparts which stay closer to home, the city-state's REITs invest across Asia and currently own around US$34 billion ($47 billion) worth of properties ranging from industrial parks in India to malls in China. 

 

Nicholas Maclean, managing director for the Middle East for property consultancy CB Richard Ellis, said Qatar has been building offices and hotels in a bid to attract banks and firms keen on expanding into the Middle East. 

 

”Qatar sees an opportunity to take some of the market share from Dubai,” he said, noting concerns about Dubai World's debt repayments have cooled interest in the emirate, which serves as the main base for Western firms doing business in the region. 

 

Qatar, which unlike Dubai is rich is oil and gas, currently has 23 four and five-star completed hotels with around 5,600 rooms in total, according to CB Richard Ellis, far below the number in gateway Asian cities such as Hong Kong and Singapore. 

 

According to www.booking.com, hotels in the Qatari capital Doha, such as the Grand Hyatt and Intercontinental, currently charge around US$212 a night, similar to asking prices in Asian financial centre Singapore. 

 

Interest in Singapore REITs has picked up in the past month with several trusts raising new equity or announcing acquisitions as confidence in Asian commercial property markets returns. 

 

Suntec Real Estate Investment Trust (SUNT.SI), a REIT managed by ARA, last week raised $152.9 million by selling new units through a private placement that was more than five times oversubscribed. 

 

DBS Group is the financial advisor for the proposed ARA REIT.