Real estate investment trusts are growing in popularity around the world, as investors seek new ways to access an increasingly institutional market. REITs are listed as private funds which are tax-transparent, so investors are only taxed on their dividends.
This puts them on a level playing field with those who hold real estate directly. The Trusts are required to distribute the majority of taxable net income to shareholders and must adhere to certain restrictions on its operations, organisation and ownership.
The security of an institutional regime, low barriers to entry and more liquidity than direct property investment, offer an attractive option for investors. In Russia for example, REITs are attracting high levels of interest as the property market recovers, following a slump in 2014-2016.
Collective investment including REITs schemes have become more popular in Russia as macroeconomic conditions have improved, says Olesya Dzuba, Head of Research, Russia & CIS, at JLL.
“Their popularity is supported by declining bank deposit rates, which encourage savers – both individual and institutional – to seek alternative, higher yielding investment instruments.”
The market has seen rising interest from overseas investors and more equity deals in 2017 after two years of debt restructuring, according to JLL.