Avoiding Risks in Investing Income Generating Real Estate Fund (Trading)‎

The income-generating real estate fund (circulating) is the investment fund that aims to invest the fund’s money in real estate purposes, allowing each investor to obtain a share of the income without the need to purchase assets, and rent is one of the main sources of income for these real estate, and the real estate fund must be Income (trading) has a closed fund and it must be listed on the stock exchange.

In order to avoid risks in investing the income-generating real estate fund (circulating) in the State of Kuwait, the following requirements, rules and conditions must be observed:

Conditions that must be met in the real estate subject of the investment

The fund manager must ensure that the real estate under investment meets the following conditions:

  • To be generating periodic income for a period of not less than one year and in proportion to the feasibility of investing in it.
  • That it has a good historical record, or that there are promising prospects for the fund to obtain a good level of income from the income derived from the real estate.
  • To be economically feasible according to market studies.
  • It shall be free of any lien, mortgage or lien rights, with the exception of the mortgage rights restricted on the property as a result of the facilities or loans obtained by the Fund.
  • The Fund may not invest in real estate outside the State of Kuwait.

The income-generating real estate fund owns the property under investment

The real estate must be fully owned by the fund according to an ownership document issued by the competent government authority, or the fund must have a separate share in it in the event that the fund owns the real estate directly, and the usufruct rights must include the entire real estate or a separate share in it when the investment is in the real estate It is an arrangement of usufruct rights over it.

The approval of the unit holders assembly must also be obtained in the event of selling or assigning usufruct rights to the only real estate in which the fund invests, if the purpose of the income-generating real estate fund (circulated) is to invest in one real estate.

The term of the income-generating real estate fund is ten years

The term of the income-generating real estate fund shall not be less than ten years, and renewal shall be made in accordance with the fund’s articles of association.

The fund’s investments shall not exceed 30% of its net asset value

The income-generating real estate fund’s investments in money market funds or income-generating real estate funds (traded) directly or indirectly in one real estate at the time of investment must not exceed 30% of its net asset value, as well as in the case of offering one or more real estate as an in-kind share in the fund With the exception of the fund, which aims to invest in a specific property, the value of which is not less than 30 million Kuwaiti dinars.

Not to borrow in transactions that result in commitments of more than 50% of the fund’s net asset value

The fund shall not borrow or engage in operations that directly or indirectly entail obligations of more than 50% of its net asset value.

The Fund refrains from dealing in investments related to one of its parties

The Fund is prohibited from dealing in investments in which the counterparty is a related party to the Fund, except after obtaining the approval of the Investment Controller and the approval of the Capital Markets Authority.

Approval of the fund’s real estate planning

All properties of the fund must be approved for planning, free from violations, and built with an official statement from the competent government authority (certificate of descriptions).

Real estate valuation income generating fund

The fund manager may not rely on an evaluation report that was prepared more than three months ago when entering into or exiting an investment in a real estate asset.

Registering the property in the name of the fund upon purchase

In the case of buying a property, it is registered in the name of the fund or company that is established for the purpose of investment, and in the case of obtaining usufruct rights, this must be in accordance with a written contract.

Real estate insurance under investment by an insurance company

The fund manager must insure all real estate that is invested with one or more insurance companies, with the full value and the risk of rent loss upon the occurrence of the accident covered by the insurance.

Appointing a real estate company to manage the fund’s properties

The fund manager must appoint a real estate company to manage the fund’s properties, and it will be responsible for all aspects of real estate management, including its maintenance, leasing, rent collection and other matters related to management.

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