Property industry sounds alarm over REITs regulation

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The Independent Online

An alliance of bodies representing the property industry will urge the Government today not to over-regulate the incoming trusts which will offer tax breaks to individuals who invest in real estate.

An alliance of bodies representing the property industry will urge the Government today not to over-regulate the incoming trusts which will offer tax breaks to individuals who invest in real estate.

If there is too much red-tape surrounding the new investment trusts, they will be a flop because property companies will choose not to embrace the change, the group will warn.

The views are contained in the property industry's response to the Government on the new investment vehicles, commonly known as real estate investment trusts (REITs).

The Government flagged its intention to introduce REITs in the Budget, after seeing their success in countries such the US, Australia and France in boosting investment flowing into the property sector.

An area of concern is over the amount of housing available for the low-paid. The Government is keen to find ways to expand affordable housing without increasing the amount of buy-to-let properties on the market, which it considers to be a risky investment, and leads to variable standards of property management.

Under REITs, property companies will be able to convert to investment trust status, bringing considerable tax advantages.

Shares in property companies have traditionally been less favoured by investors, with many trading at a considerable discount to their net asset value. As a consequence, most companies welcome the introduction of REITs, which are expected to inject a lot more liquidity in the market.

But there are fears that the regulations which will surround the trusts, set to be launched next year, will be too restrictive.

Liz Peace, chief executive of the British Property Federation, said: "To ensure REITs become the success that we believe they could be, they need to have the maximum operational freedom possible, in terms of their corporate and management structure, gearing levels and development activity."

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