Analysis of Awareness of Real Estate Investment Trusts
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Investment in general, and property investment in particular, have been traditionally regarded more as an art than a science, where investors, decision-makers and analyst rely more on their experience, subjective judgement and quantified evidence.
Real Estate Investment Trust or REITs is a new medium of investment specifically in property investment in Malaysia. Malaysia is the first country in Asia to introduce property trust and only in 1989 was listed in Kuala Lumpur Stock Exchange. The property trust was then facing some issues such as potential conflict of interest, a lack of focus on asset management and thin trading volume and then led the Real Property Investment Trust to be announced.
REITs in Malaysia growth perfectly with stimulate the growth of property sector in this country. Malaysia then introduces the first of its new REITs, with the Axis REIT. YTL Corporation, Malaysia's biggest builder, established the second REITs later, with properties in the REIT including the JW Marriott Hotel and Starhill Shopping Center in Kuala Lumpur. Besides that, other REITs that now established in Malaysia are Hektar REITs, Tower REITs, and also UOA REITs. Other companies in Malaysia that are expecting to join for REITs include Sunway City and the Landmarks Group.
Most of the REITs companies in Malaysia own the real property asset such as shopping malls, hotels and also apartment buildings and they generate income from owning the building and also rental income from the buildings. The investors physically own a part of the building depending on the size of the share that they invest. Through REITs, investors can invest any amount that they want to own REITs. They can sell it anytime with the easiest way through stocks market. Compared to normal properties, the transaction cost of buy and sell REITs are much lower. But REITs does not like other unit trust, which is sold through agents or other peoples, but it is traded in stock exchange. So it gives return to investors in form of dividend and also capital appreciation from price change. This way, shows that REITs is a secured investment that protect investors interest and it works under the guidelines or frameworks that have been set up by government.
The investment characteristics of property are significantly different from the characteristics of assets in other investments. REITs in Malaysia is so attractive as Malaysia now is developing country. There is still a gap between Malaysia and others develop country in Asia. In order to put Malaysia in same level with Asia develop country, most of REITs managers are with option and plan to growth their property portfolio to trade or manage rental in order to achieve it. It also will give a better yield for investor if our country is same level with others. In order to improve market performance of REITs, the REITs Company should consider developing new opportunities, acquiring more properties into their portfolio and also to some countries, or joint developing property project.
The relation of both legal frameworks and the market performance will give a picture to investor and other people who interested in this investment. The REITs sector need to provide more chance to other people to invest and it will help Malaysian generate more income others than monthly salary and to boost up economy in this country.
- Research Question:
Finance in real estate is just a popular way of investment nowadays. The market performance of REITs shows the good results this few years. With the regulation that set up by government, surely REITs is the secured investment. But is there many people in Klang Valley that come from middle-income group realise about this investment in this develop country?
The main objective of this study is to determine the level of awareness towards REITs among middle-income group in Klang Valley.
In line with above, this study also seeks to study types of REITs available in Malaysia Besides, these study also to discuss about the way to introduce REITs in Malaysia in order to make REITs the favourable investment medium.
- Scope of Study:
In overall, this research is confined to REITs in Malaysia which in an attractive investment nowadays. This study covers the types of REITs available in Malaysia and also people awareness about it. Other than that, this study is carried out to know what is the way of promoting REITs that people prefer.
This research would be done in an analytic study manner. The information that is needed to examine the issue will be obtained from primary and secondary data. The primary data refers to the first-hand data, which required data collection that is the distribution of questionnaire. The questionnaire will be distributed to certain amount of Malaysian with a different background.
Secondary data or desk research refers to the data that already exist, mostly in quantitative form. In this study, most of the secondary data were obtained from;
- Academic research on REITs and journals.
- Website of REITs Company.
- Other dissertations.
Data analysis will be done through frequency analysis. Frequency analysis is used to determine the frequency of certain choice for the questions. Most frequent answer will be given the priority. The results will be shows in diagram or graph to show the popularity answers.
It is hoped that the anticipated outcome of this study can benefit the:
- The REITs Company where they will more alert toward the middle-income people awareness of REITs and the way people wanted REITs to be promoted.
- The interested investor and also the student, as a reference on the information that relates to REITs.
- Organisation of Research:
This study consists of five chapters where the first chapter provides a brief concept and view on the topic that will be studied in this research. It consists of introduction, objective of study, scope of study, significance on research and also organisation of research.
Chapter two discuss on literature review about REITs in Malaysia. The discussion will be on definition of REITs, the types of REITs in Malaysia and also the list of REITs companies. Other than that, the discussion also will describe on how REITs work and also the benefit of REITs. The definition on middle-income people and background of Klang Valley also will briefly explain.
The next chapter, chapter three is on methodology. In this chapter, methods used to construct the questionnaires will be outlined. This chapter will highlight how the administration of the questionnaire which will conduct to respondents.
Chapter four is the finding and analysis of data obtained through questionnaires survey. The analysis of data obtained will determine the level of awareness towards REITs among middle-income people in Klang Valley. Through the survey, the preference way of promoting REITs also can be discover.
The last chapter, which is chapter five, is the conclusion and limitation of this study. The best suggestion of promoting REITs also will be stated in this chapter. The weaknesses and strengths of the study may be included. Some suggestions for further study will also be included in this study.
In the next chapter, a review of related information about REITs will be explained. The explanation will cover definition, types, how REITs work, REITs companies in Malaysia, the legislation of REITs Islamic REITs and also the future prospect of REITs.
Chapter 2: Literature Review:
REITs which stand for Real Estate Investment Trust is an investment that relates to properties. Trust fund has been introducing in this country since 1986, but REITS; a part of trust fund is a new medium investment only famous around few years back. REITs is an investment vehicle for investors to invest in large-scale income producing real estate.
With the concept like unit trust, this investment gathers pool of money from all sizes of investors. REIT based companies will invest, manage and distribute rental as dividend back to the investors by yearly basis or depends on the agreement that have been signed before.REITs is a liquidity investment which It is being trade in Bursa Kuala Lumpur with ease of buy and sells back like a normal equity.
As the years flow, REITs is not new to the world especially in many other developed countries. REITs usually targets for a long term investor with moderate risk such as insurance companies, unit trust funds and even individual investors. REITs invest in a variety of real estate properties such as office buildings, shopping malls, warehouses, apartments and hotels. The investor also has the added advantages of holding a liquid asset in the form of shares that can be sold on the market unlike the real estate itself which is illiquid. Investing in REITs provides the investor with dividend income and also allows them to own a real estate portfolio rather than just a single building.
This chapter then will briefly explain about Klang Valley, middle-income group, history of REITs in Malaysia, types of REITs, how REITs work, and REITs companies and also about the legislation of REITs.
- Klang Valley:
My research focus on awareness towards REITs among middle-income people in Klang Valley, Malaysia. Malaysia is located in Southeastern Asia, peninsula bordering Thailand and northern one-third of the island of Borneo, bordering Indonesia, Brunei, and South China Sea, south of Vietnam. It is comprised of two separate geographical regions which are Malay Peninsular and the states of Sabah and Sarawak.
Klang valley is an area in Malaysia comprising Kulala Lumpur and its suburbs, and adjoining cities and towns in the state of Selangor. Tis valley is named after Klang River, the principal river that flows through it which is closely linked to the early development of the area as a cluster of tin mining towns in the late 19th century. Development of Klang Valley took place largely in the area between Gombak and Port Klang but the urban areas surrounding Kuala Lumpur have since growth towards the border of Negeri Sembilan and the north towards Rawang.
Klang Valley has a total population around 7.6 million people in 2009 and estimated to growth due to the people migrate from other states towards Klang Valley and also a population growth. Klang Valley is the heartland of Malaysia's industry and commerce.
Regions of Klang Valley and their corresponding local authority:
- Federal Territory of Kuala Lumpur.
- Kuala Lumpur City Hall.
- Federal Territory of Putrajaya.
- Putrajaya Corporation.
- Selangor district of Petaling.
- Shah Alam City Council.
- Petaling Jaya City Council.
- Subang Jaya Municipal Council.
- Selangor District of Klang.
- Klang Municipal Council.
- Selangor district of Gombak.
- Selayang Municipal Council.
- Selangor district of Hulu Langat.
- Ampang Jaya Municipal Council.
- Kajang Municipal Council.
- Selangor district of Sepang.
- Sepang Municipal Council.
For further information about the location of Klang Valley.
- Middle-Income Group:
There are three classes of income in Malaysia. These classes indicate Malaysian monthly income and also their household. The three (3) classes including low-income people, middle-income people, and high-income people. Below is the income groups in Malaysia.
Middle-class income is define as the socioeconomic class between the working class and the upper class, usually including professionals, highly skilled labourers, and lower and middle management.( Source: http://www.answers.com/topic/middle-class).
- Background of REITs in Malaysia:
Malaysia is the first country in Asia to introduce property trusts. In 1989, the first trust was listed in Kuala Lumpur Stock Exchange. The regulatory framework of property trust, approved by the Bank Negara in 1986, was restrictive and provided no tax transparency. But there still an issues that arise such as lack of focus on property management and also conflict of interest which led the property trust to be private.
In 1995, a revision of the property trust guidelines were done but it fail to give a good impact to investors and also to market. Then, in February 2005, there is another revision with led the property trust be renamed as Real Property Investment Trust (REITs). The major income of REITs is from rental and the profit is required to distribute to holders or investors in dividend. The guidelines also been revised to provide a good regulation for a REITs in this country.
Malaysia was the first Islamic country to certify REITs and also the first country in Asia where REITs conquer agriculture land. A plantation REITs also much like conventional REITs. It will be the crops planted on the land and the success will depend on the sizes of assets injected to the trust. The potential plantation to be expected is oil palm because of the high demand on the production. Other than that, palm oil also undergoing the research to become a biodiesel product and in become more attractive after the increasing in oil prices. The plantation land or agriculture land also can be developed to residential area or commercial area due to the development of town.
- Types of REITs:
REITs has several types with drives to a different prospect of REITs but it still relates to property as a main core to invest on. In others country they apply a lot of types of REITs. But in Malaysia we only apply three types of REITs. There are Equity REITs, Mortgage REITs and also Hybrid REITs.
- Equity REITs:
Equity REITs is a publicly traded company that, as its principal business, buys, manages, renovates, maintains and occasionally sells real properties. (block,2006).Properties are usually purchased to invest is an income-producing real estate such as hotels, shopping malls and also apartment buildings. This type of REITs is different from others because REITs usually companies will purchase or develop the property and operate it as a part of their portfolio rather than sell it. Besides, Equity REITs is a long term investment because they earn dividend from rental. In additional, this type will let investors not only just to choose the type of property they want to invest in, but also the location of the properties. (Block, 2006). It means that the investors can make a choice on their own with the advice of the agent or REITs managers in order to make a good investment and to gain a good dividend.
- Mortgage REITs:
A mortgage REITs is a REITs that focus on makes on holds loans to the property developers. (All about Investing: The Easy Way to Get Started by Esme Faerber: page 89). Rather than investing in properties,this type of REITs sometime loans money for purchase existing mortgages. The revenue earns is from the interest charge on the mortgage loans and pass on shareholders. Mortgage REITs is more sensitive compare than other REITs because of the prices of mortgage REITs react opposite from interest rates. It is good REITs to invest if there is a rumour of dropping in interest rates.
- Hybrid REITs:
Hybrids combine the investing principles of mortgage and equity REITs, diversifying between making mortgage loans and direct property ownership. They earn both rental and interest income. (http://www.allaboutskyscrapers.com/REIT_types.htm). They buy, develop, and manage the properties and provide financing through mortgage loans. Most hybrid REITs have a stronger position in their financing account. The most famous industry that using hybrid REITs is private healthcare industries, where the financial company will provide mortgage to healthcare company, hospital management and also to buy properties such as land and building and also medical appliances.
Equity REITs seem to be the most popular REITs recently. Between three types of REITs, mortgage REITs is the most risky which in involve in lend money to developers. Every type of REITs has different level of risk so investors should study and evaluate which REITs they want to invest in. The wise result will make the investors smile widely because of the "big fish". Chan, Erickson and Wang (2003) find that equity REITs pay out more dividends than mortgage REITs. The reason is that equity REITs offer the potential for capital gains in addition to current income.
Structure of REITs:
Source: Practice and Prospect of Islamic Real Estate Investment (I-REITs)in Malaysian Islamic Capital Market by Dr. Asyraf Wajdi Dusuki.
Manager: A man or woman who controls an organization or a part of organization.
Property manager: A man or woman who controls the management and maintenance of the building. He or she will ensure the building in the good condition which safe to fit tenants in.
Tenant: A person who pays money (rent) to the owner of a room, flat, building or piece of land so that he or she can live in it or use it.
Trustee: A person who looks after money or property for somebody else.
Unit holder: An owner of one or more units in a mutual fund.
How REITs Works:
It's true that investment most favourable today will be the one most prized tomorrow, and then real estate is definitely due for love-in. Investing in income-generating real estate can be a great way to increase your net worth. But for many people, investing in real estate, particularly commercial real estate is simply out of their budgets. REITs is a saviour to people when with REITs people can invest in small amount but with a large-scale of real estate group.
REITs which means real estate investment trust essentially the organization that own and manage a portfolio of real estate and mortgages such as shopping malls, hotels, apartment buildings and also agriculture lands. REITs does not mean for a restrict group, but this share can be own buy anyone. REITs offer people the ownership of the property without any risks because all of the problems will be covered by agents or REITs managers.
There are advantages when investing in REITs because of the liquidity and diversity. It is unlike actual real estate, where REITs can be easily and quickly sold. People will face less financial risk because of investing in a portfolio rather than single building because of the problems such as irresponsible tenants, economy impact to the property rental market and market value, and so on.
REITs has a board of directors that elected by the shareholders. The shareholders have a power to eliminate any board of directors that does not fulfil their requirement. The board of directors usually came from a people with an investment background especially in REITs field. They will assist a REITs managers; person who will manages the operation of the property. The power to choose what types of real estate to invest in is on board of directors.
REITs investment for investors starts when they invest certain amount of money in a REITs fund. The amount of money depends on the REITs managers who will arrange the investment on the properties that have been agreed by board of director. The investors can have an eyes and ideas on what types of the properties and the location. They have a choice whether want to agree or not with the properties. If they agree with the properties, they can sign a document to clarify the investment.
Then the properties will be rent out or mortgage in order to earn money. REITs has a several method to measuring the profit but the suitable one called Funds From Operation (FFO). The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as:
Net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.
The REITs industry use FFO to measure performance and to establish dividend payouts. Kallberg et al (2003) reported that REITs consistently pay out about 85% of FFO as dividends. The payouts from REITs are consistently higher than other types of equities. In other words, FFO is defined as the net income, excluding gains and losses from debt restructuring and property sales, adding back property depreciation and amortisation, and after adjustments for unconsolidated partnership and joint ventures. The net income is referring to rent and sales computed according to Generally Accepted Accounting Principles (GAAP).
However FFO is not a necessary way to determine performance and dividend payouts. Not all REITs calculate FFO according to the NAREIT definition because some of the important items are missing from the formula such as maintenance, repairs and also expenses. Thus, investors must always read a company's report and any others supplemental information in order to get an exact FFO.
In Malaysia, there are several amount of business runs base on REITs. These companies have been success to put property market in this country in a good condition. These companies also expend the real estate industry with so much new types of building. Below is briefly an explanation about ten (10) well known REITs companies.
- Al-'Aqar KPJ:
Al-'Aqar KPJ REITs established on 28 June 2006 is a Malaysian-based unit trust. The objective of this investment is to own and invest in Syariah-compliant real estate and it has been acceptable to invest in properties which compromise Ampang Puteri Specialist Hospital Building, Damansara Specialist Hospital Building, Johor Specialist Hospital Building, Ipoh Specialist Hospital Building, Puteri Specialist Hospital Building and Selangor Medical Centre Building. There are nine (9) others hospital under KPJ that potential to be injected under Al-'Aqar KPJ such as Tawakal Hospital, Seremban Specialist Hospital and also Penawar Hospital.
- Amanah Raya:
Amanah Raya REITs is subsidiary of Amanah Raya Berhad and wholly-owned by Minester of Fianace Incorporated. Amanah Raya REITs listed on Bursa Securities Malaysia Berhad on 26 February 2007 with a total asset siza of RM337 million.
Today, Amanah Raya REITs has a diversification portfolio comprising hospitality, education and also commercial properties such as SEGI College, Holiday Villa Langkawi, Holiday Villa Alor Star, Wisma Amanah Raya Berhad, Wisma UEP, Permanis Factory and also Blocks A&B South City Plaza.
Established on 28 September 2006 under the Trust Deed, AmFIRST then entered into between Am ARA REIT Managers and Mayban Trustee Berhad. AmFIRST managed by Am ARA REIT Managers Sdn Bhd.
Three months then, Am FIRST was listing on the Main Board of the Bursa Saham Malaysia Berhad on 21 December 2006. It shows an innovative makeover of AmFIRST, the first listed property trust fund in Malaysia.
This REITS company is the largest Malaysia-based commercial REITs with exposure to the office, retail and hotel sector in Klang Valley area. Currently manages six office building, where three are located within the Kuala Lumpur Golden Triangle; AmBank Group Leadership Centre, AmBank Group Building, and also AmBank Tower, and one each in Petaling Jaya, Kelana Jaya, and Subang Jaya. AmFIRST also manages four-star hotel and a retail mall located in Subang Jaya, The Summit Subang, USJ.
Atrium REITs is a first logistic property approved in Malaysia. The objective of Atrium REITs is to invest in portfolio in order to reward investors or unit holders a maximise income and to acquire a high quality assets to achieve a long-term growth in a net income for distribution of dividend.
This REITs then was first approved by the Securities Commission in October 2006 and then listed on Main Board of Bursa Saham Malaysia Berhad in April 2007. Atrium REITs has an 809, 668 sq ft (75, 220 sq mt) approved portfolio of investment properties which comprises of four freehold industrial properties currently leased to reputable and strong financially tenants. All of their properties located in Kuala Lumpur and Selangor, the fastest growing area in this country.
Axis REITs is the first REITs list on Bursa Malaysia Securities Berhad on 3 August 2005. On 11 December 2008, Axis launched Islamic REITs which is the first in Malaysia. Axis own diversified portfolio of properties especially in Klang Valley, Kedah and Johor comprising of commercial offices, light industial building and also warehouse.
Buildings that portray an image of Axis are Axis Tower and also Crystal Plaza. Both if this building are next door to each other and located along the busiest road, Federal Highway. These buildings are well maintain and easier accessibility. Other Axis properties are Delfi Cocoa in and BMW Asia Technology Centre PTP in Johor and also Giant Hypermarket in Sungai Petani, Kedah.
Hektar REITs is a Malaysia's first retail-focused REITs. Listed on the Main Board of Bursa Saham Malaysia Securities on 4 December 2006, Hektar portfolio currently consists of shopping centres in Subang Jaya, Melaka and Muar. As of 31 December 2009, all of these properties was value of RM720 million.
Hektar REITs is managed by Hektar Asset Management Sdn Bhd which a part of Hektar Group.
QCT (Quill Capita Trust) REITs was listed in Main Board of Bursa Malaysia Securities Berhad on 8 January 2007. QCT is managed by Quill Capita Management Sdn Bhd. QCT main investment in REITs is a commercial properties.
Until 31 December 2009, QCT has ten (10) properties with 1,288,149 sq ft net lettable area valued RM 788.4 million. The properties including part of Plaza Mont' Kiara, Quill buildings, Wisma Technip and also tesco building in Jelutong, Penang.
This REITs was established on 18 November 2005 by a trust deed entered between Pintar Projek Sdn Bhd and Mayban Trustee and listed on Main Market of Bursa Malaysia Securities Berhad on 16 December 2005. Starhill REITs is focusing on retail and hotel properties investment.
As for February 2010, Starhill REITs is the largest Malaysia's real estate investment. This REITs has four (4) portfolio located in the heart of Kualu Lumpur; Starhill Gallery, JW Marriot Hotel, Lot 10 Shopping Centre and also The Residence at The Ritz-Carlton.
Tower REITs is established on 21 February 2006. The objective of this company is to invest primarily in a portfolio of quality office building and commercial properties to provide regular and stable distributions of dividend to unit holders or investors and also to achieve a medium-term growth in the net income. In order to achieve their objective, Tower REITs implement several key strategies such as optimisation of capital structure, active asset management and also acquisition growth.
The portfolio of this REITs company consists of three buildings located in Kuala Lumpur. First is Menara HLA, the 32-storeys office tower located in the heart of Kuala Lumpur Golden Triangle. With a net lettable area of 396, 820 sq ft, it has a blue chip tennats such as Hong Leong Assurance Berhad. Next, HP Towers comprises of two blocks of 9-storeys and 21-storeys and 3 levels of connecting podium. Situated in Bukit Damansara, this towers has a net lettable area of 350, 056 sq ft with a Hewlett-Packard (M) Sdn Bhd as a tenants. Lastly, Menara ING situated in Jalan Raja Chulan, the main central business district of Kuala Lumpur. Tower REITs only own 78.3% of the total share unit of the building and 100% leased out to ING Insurance Bhd.
UOA REITs was established on 28 November 2005 and listed on the Main Board of Bursa Saham Malaysia Securities Berhad two days later. UOA REITs is focusing on commercial properties.
With a diversification portfolio of properties, UOA manages to maintain four building in Kuala Lumpur area. First is UOA Centre, a stylish 33-storeys office building situated between Jalan Pinang and Jalan Perak. Tenants of the building include financial services companies and also trading companies.
Next is UOA II which located near to UOA Centre. With a contemporary designed, this 39-storeys building has a mixture of tenants from government agencies, multinationals insurance companies and law firms. Other than that, a 13-storeys office building located in Jalan Dungun, Damansara Heights name UOA Damansara is one of the UOA properties. Law firms, international associations and trading companies are a part of tenants for this building. Last is UOA Pantai located strategically in front of Menara TM. This 7-storeys of building consists of tenants include multinational corporations and so on.
- Regulation of REITs:
In Malaysia, REITs govern by a statutory body name Security Commission Malaysia (SC). SC was established on 1 March 1993 under the Securities Commission Act 1993 and it is a financial regulatory agency. It is the central authority to regulate and develop the capital market.
SC has big responsibilities in order to ensure the safety of the investors under the Act includes:
- Registering authority for prospectuses of corporations other than unlisted recreational clubs.
- Approving authority for corporate bond issues.
- Regulating all matters relating to securities and future contracts.
- Regulating the take-over and mergers of companies.
- Regulating all matters relating to unit trust schemes.
- Licensing and supervising all licensed persons.
- Supervising exchanges, clearing houses and central depositories.
- Encouraging self-regulation.
- Ensuring proper conduct of market institutions and licensed persons.
- New Islamic REITs:
The introduction of Islamic REITs is viewed as one of the most significant initiatives to broaden and deepen the product base of Islamic capital market in Malaysia. It can also help to enhance competitiveness of Malaysian Islamic capital market by attracting global Islamic investors who wish to diversify their investment portfolio which are Shariah compliant. Islamic REITs regulation was outlined in the Guidelines for Islamic REITs issued on 21st November 2005 by Securities Commission. (Securities Commission,2005).
The Guidelines were introduced to facilitate the development of new Islamic capital market products, making Malaysia the first jurisdiction in the global Islamic financial sector to issue such guidelines and setting a global benchmark for the development of Islamic REITs. The Guidelines essentially stipulate Shariah compliance criteria to guide management companies in their activities relating to an Islamic REITs, including the types of Shariah permissible and non-permissible rental and investment activities for such fund. Islam prohibited Muslim from investing in properties whose tenants sell alcohol, pork or allow gambling and invest in products that charges interest.(Islamic Finance: Principles and Practice by Hans Visser: pg115).
The listing of Al-Aqar KPJ REITs in August 2006, who owns six (6) hospitals in Malaysia which based on Islamic REITs nowadays, marks the first Islamic REITs to be publicly traded in the world. The creation of the Islamic REITs will be attractive to wealthy investors especially from middle-eastern countries, seeking to diversify their assets portfolio.
The future prospect of Islamic REITs in Malaysia looks very encouraging. It is envisaged that the growth of Islamic REITs in Malaysia to be further boosted following the recent tax transparency and incentives from the government.
- Future Prospect of REITs:
Today, many countries follow Malaysia's foot step. They currently are preparing their own REITs regulation. The new entries are such as China, India and Philippines. Only several countries those are prepared with their own regulation such as Singapore, Japan, Korea and also Thailand.
REITs sector in Malaysia getting bigger where there is a rumour where another two (2) companies going to be listed on Bursa Malaysia. SunCity and Capital Land. Malaysian who likes to own properties will discover that REITs is the best way to invest in properties with the small amount of money and in big return indeed.
In Malaysia also, Islamic REITs shows a good progress where it is a way to middle-eastern countries investors to diversify their assets portfolio and also to have an investment with secure. Other than that, I-REITs also is hope to diversify their portfolio other than hospitality sector only.
This chapter on literature review has discussed the definition of REITs, backgrounds of REITs in Malaysia, types of REITs, and the structure of REITs, how REITs work, REITs companies in Malaysia, regulation of REITs, Islamic REITs and also future prospect of REITs in Malaysia.
The following chapter will discuss on the research methodology used in gathering information needed and the structure of the question used for the questionnaire section. The process of data collection and analysis is also explained in the following chapter. It is vital part to ensure the objective of the study can be achieved in a proper and structured way.
In the previous chapter two , literatures works associated to this research had been reviewed. The definition on REITs and middle-income and related information such as Klang Valley area, types of REITs, how it's work and also legislation related also been discussed.
This chapter describes the research methods for determine the level of awareness of REITs among middle-income people in Klang Valley. Research methodology is a set of procedures or methods used to conduct research. There are two types of research methodologies. These two types of methodologies are qualitative and quantitative. Appropriate research methodologies may avoid deviation against objectives and give clear understanding on how that study is to be carried out in an effective manner.
- Data Collection:
There are various methods in collecting information or more precisely data gathering. But this research will be undertaken based on primary data and secondary data. Primary data will be obtained from survey that has been carried out to the targeted respondents and for secondary data, all information will be obtained through references and literature reviews such as books, journals, articles, web sites and many more that has been produced by local people or international.
- Technique Used in Collecting Data:
- Primary Data:
The main technique used to collect primary data for the purpose of the study is through questionnaire. Hand-held questionnaires are probably the most widely data collection technique for conducting surveys. For this research, questionnaires were used for analytical surveys in order to determine middle-income people in Klang Valley awareness towards REITs.
A questionnaire defined as a form that people fill out, used to obtain demographics and views and interests of those question. (Brehob 2001) Questionnaire encompassed of a series of questions for the purpose of gathering data or information from potentially a large number of respondents. One of the advantages of questionnaire over other types of data gathering methods is that it is inexpensive and does not require as much effort from the questioner as compared to face-to-face survey or tele-conversation type of survey. These are the steps taken to design a questionnaire for this dissertation purpose:
- Objectives of the survey are defined
- Determined the sampling group
- Designed the questionnaire by creating the questions
- Administered the questionnaire
- Results interpretation
- Secondary Data:
Secondary data are being obtained from the books that comprise of journal, reference books, newspaper articles, internet or website searching and others. From the secondary data, all authors' opinion will be a reference in order to gain a better understanding on this topic. Other publications also were being reviewed to add rationality of doing this research.
- Questionnaire Structure:
Before questionnaire can be drafted, the main objectives should be outlined and well understood. The questionnaire is meant to evaluate on the issue related to the awareness of REITs among middle-income group in Klang Valley. The questionnaire was divided into three sections in order to fulfil the three objectives stated earlier. The questionnaire was distributed to one hundred (100) people from various backgrounds. The questionnaire included;
- Section A: General Information
This section is mainly to obtain background information of respondents. The questions are basically about gender, age, location, monthly income and profession.
- Section B: Level of Awareness of REITs
This section is aims to know the Malaysian knowledge about REITs. The questions asked are related to basic information on REITs.
- Section C: Strategy to Improve the Awareness of REITs
This section is aims to obtain an opinion from people what is the best way to promoting REITs towards Malaysian.
- Distribution of the Questionnaire:
The survey questionnaires were distributed to respondents to complete manually. There are one hundred (100) respondents were completed the questionnaires. These questionnaires were distributed to public in Klang Valley area randomly. The objective for this questionnaire survey is to understand the level of middle-income people in Klang Valley awareness towards REITs. The results and information gained from this questionnaire can help in improving the way to introduce REITs. This can ensure people getting sufficient information about REITs. The results from the survey will be discussed on the next following chapter.
- Data Analysis Technique:
Response from the questionnaires survey sheet received from the respondents will be accumulated and sorted before the analysis is done. The suitable analysis method applied will ensure the success of the analysis. The process of analyzing will be carried out by using Statistical Package for Social Science (SPSS) computer software and also "Microsoft Excel" and the results are produced by the mean score for the variable.
Qualitative and quantitative analysis will get from the analytical research. The main objective is to analyse the opinions gathered from the respondents. Opinions gathered would be classified, identified and summarized according to the distinctive response in the form of charts or words. Then, the answers are evaluated and described for getting better understanding.
There are some statistical analyses had been carried out to obtain the results of the research, which include frequency analysis and Likert Scale Analysis.
- Frequency Analysis:
The frequency procedure provides statistics and graphical displays which are useful for describing many types of variables. This frequency statistic analysis also can help me to prepare the frequency counts, percentages, cumulative percentages, bar charts and pie charts.
- Likert Scale Analysis:
Likert Scale is a measure of attitudes designed to allow respondents to rate how strongly they agree or disagree with carefully constructed statements, ranging from very positive to very negative attitudes toward some objects; several items may be used to form a summated index. (William G.Zikmund, 2003, p.343).
This type of Likert Scale questions are appropriate to analyse by means for since the number that is coded can give us a feel for which direction the average answer is. The standard deviation is also important as it give us an indication of the average distance from the mean. The highest mean value of response indicates that the priority of that alternative in this question. A lower value indicates a lower presence of the alternatives.
Cross-tabulation is to organize data by groups, categories, or classes to facilitate comparisons; a joint frequency distribution of observation on two or more sets of variables. (William G.Zikmund,p.527).
The purpose of using cross-tabulation is to compare the group the monthly income and location.
This chapter discussed the methodology that has been used in the study. The research methodology has been identified by conducting questionnaires survey. Then all the data from primary and secondary data was analysed.
In the subsequent chapter, the finding obtained through the conducted survey will be revealed. In chapter four (4) the analysis of data obtained for this research will also be discussed.
Finding and Data Analysis:
In the previous chapter, we had discussed on the methodology used in doing this research. The structure of the survey had been explained in the preceding chapter. This chapter will discuss the analysis of the survey being carried out to obtain Malaysian awareness of REITs.
Finding and Analysis of Data Obtained Through Survey:
- Section A: General Information:
Section A of the questionnaire deals with the profile of the respondents which constitutes the personal information of respondents. For this section, the results will be based on 100 respondents.
This chapter is about the findings and discussions on the study. This chapter shows the analysis on the data obtained and analysis on the findings for level of awareness towards REITs among middle-income people in Klang Valley area.
The following chapter will discuss about the conclusion of the analysis from the data obtained in this chapter. Recommendations also will be stated as well to provide the best way in promoting REITs as a medium of an investment.
Conclusion and Recommendation:
This chapter summarizes the findings from the previous chapters and draws the conclusion and recommendations. It illustrates on the confirmation of the objectives and overall summary for the whole study. Some suggestions for further study also are included in this study.
This study aims to identify either people in this country realize about the new tools of investment, REITs. This study only focuses on middle-income people in Klang Valley area.
- To determine the level of awareness towards REITs among middle-income group in Klang Valley;
- To study the types of REITs available in Malaysia; and
- To identify the way to introduce REITs in Malaysia in order to make REITs the most favourable investment tool.
From the analysis presented in Chapter four using data collection from hundred (100) respondents, conclusion can be drawn to establish the issues investigated for this study.
- To determine the level of awareness towards REITs among middle-income group in Klang Valley:
In overall, it can be concluded that most of the middle-income group in Klang Valley still do not aware about REITs, the new tool of investment in Malaysia. The respondents also do not know about the basic of REITs.
- To study the types of REITs available in Malaysia:
There are three types of REITs available in Malaysia; Equity REITs, Mortgage REITs, and Hybrid REITs. All of explanations about types of REITs are briefly explained in Chapter two.
- To identify the way to introduce REITs in Malaysia in order to make REITs the most favourable investment tool:
From the survey that have done, most of respondents prefer to know about this investment thru internet. Internet is the best medium to introduce REITs because from internet they can get unlimited information from this country and also international. The second medium that respondents suggest to be the way to introduce REITs is thru newspapers or magazines.
Recommendation for Future Research:
It is believed that this study has given insight of level of awareness of REITs among people in Klang Valley area. However, there are other areas that could be improved and studied in more details, which is as per stated below:
- REITs: regulation and significance.
- Performance of REITs in Malaysia
As a developed country, investment in real estate is the best way in order to develop property market based on the economic plan this country. It is hoped that REITs company will started to invest in agriculture land because our country has a lot of undeveloped agriculture land.
Finally, it is hoped that this study will be beneficial to all parties that involved in property investment as well as academic research, students and other professionals in property industry.
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