Investment in direct real estate
Ting Kien Hwa | 12 Jan 2018 00:30

Since 2010, several institutional investors from Malaysia have invested in direct real estate in overseas property markets, particularly the UK and Australia. They include the Employees Provident Fund (EPF), Retirement Fund Inc (KWAP), Lembaga Tabung Haji, Permodalan Nasional Bhd and life insurance companies. Direct real estate is now playing a greater role in their investment portfolios and is treated as an asset class of its own.

Real estate as an investment has distinctively different characteristics from bonds and shares. It has its own unique strengths and weaknesses.

Real estate is lumpy, capital intensive, illiquid, indivisible and difficult to create a well-diversified property portfolio. Real estate also requires management and suffers from depreciation.

Despite these disadvantages, real estate continues to be favoured by institutional investors for its positive characteristics that could help provide consistent and higher returns to their portfolio.