REITs

Australian REITs

The REIT concept was launched in Australia in 1971. General Property Trust was the first Listed Property Trust (LPT) on the Australian stock exchanges (merged in 1987 to form the Australian Stock Exchange - ASX). REITs which are listed on an exchange are known as Listed Property Trusts (LPTs), distinguishing them from private REITs which are known in Australia as Unlisted Property Trusts.

There are now more than 60 LPTs listed on the ASX, with market capitalisation in excess of A$100bn.

Australia is also receiving growing recognition as having the world’s largest REITs market outside the United States. More than 12 per cent of global listed property trusts can be found on the ASX. The EREIs in Hong Kong does not catch much attention yet.

Bulgarian REITs

REITS were introduced in Bulgaria in 2003 with the so called "Special Purpose Investment Companies Act". They are pass-through entities for corporate income tax purposes (i.e. they are not subject to corporate income tax), but are subject to numerous restrictions.

Canadian REITs

Canadian REITs were established in 1993. They are required to be configured as trusts and are not taxed if they distribute their net taxable income to shareholders. REITs have been excluded from the income trust tax legislation proposed in the 2007 budget by the Conservative government. Many Canadian REITs have limited liability.^[1]

German REITs

Germany is also planning to introduce German REITs (short, G-REITs) in order to create a new type of real estate investment vehicle. Government fears that failing to introduce REITs in Germany would result in a significant loss of investment capital to other countries. Nonetheless there still is political resistance to these plans, especially by the social democratic party ('SPD'). As of June 2006 the ministry of finance has announced that they still plan to introduce G-REITs in 2007. The legal details seem to adopt much of UK-REITs regulations (taxation, public listing, etc.), as far as it is possible to tell yet.

A law concerning G-REITs was enacted 1 June, 2007, and is retroactive to 1 January, 2007.^[2]

Qualifications

• REITs will have to be established as a corporation "REIT-AG" or "REIT-Aktiengesellschaft".
• At least 75% of its assets have to be invested in real-estate.
• At least 75% of the G-REIT's gross revenues must be real-estate related.
• At least 90% of the REIT's taxable income has to be distributed to its shareholders through dividends.
• The corporation is income-tax-exempt, but the shareholders will have to pay individual income tax on the dividends.

Hong Kong REITs

REITs have been in existence in Hong Kong since 2005, when The Link REIT was launched by the Hong Kong Housing Authority on behalf of the Government. Since 2005, there have been 7 REIT listings as at July 2007, most of which, including Sunlight REIT have not enjoyed success due to low yield. Except for The Link and Regal Real Estate Investment Trust, share prices of all but one are significantly below IPO price. Hong Kong issuers' use of financial engineering (interest rate swaps) to improve initial yields has also been cited as having deterred investors' interest^[3]

Indian REITs

India is currently in the process of formulating definitive legislation for the introduction and smooth functioning of REITs in the Indian real estate market. Once introduced these Indian REITs (country specific/generic version I-REITs) will help individual investors enjoy the benefits of owning an interest in the securitised real estate market. The best benefit being that of fast and easy liquidation of investments in the real estate market unlike the traditional way of disposing real estate. The government and Securities and Exchange Board of India SEBI through various notifications is in the process of easing the norms of investing in real estate in India directly and indirectly through foreign direct investment, through listed real estate companies, mutual funds etc. With the current real estate boom and the market being flooded with Initial Public Offer of various listed real estate companies in India it will be the best time for investors to own a share of the profiting market economy. Legislative framework, revised investment norms and a favourable investment opportunity, and a clear taxation policy will provide the right kind of investing opportunity in India in the time to come.