When it comes to real estate and legislation, there are a lot of complex issues involved which ultimately becomes a global issue.
The expansion of REIT legislation all across the globe led to the formulation of a broadly accepted rule in the global real estate market. According to a past article by commercialobserver.com, "It has become one of the most important legal issues for international real estate investors as of late." Bloomberg previously posted that "REITs are publicly traded companies that own property or mortgages."
REITs are easier said than done. Often times REITs create a global issue in trading and in marketing. According to a past article by commercialobserver.com, "These countries are also debating the legal issue of foreign real estate ownership." Commercial Observer further reported that, "Among those working on new REIT structures in Asia, each country has its own little barrier on direct real estate ownership."
Many years had passed after the U.S. implemented the first REIT structure in 1960 and tax reforms in the 1980s. It made REITs more alluring to investors. It also became an ideal option for other countries, such as France, Singapore, as their legal system in the early 2000s.
Other countries that followed suit are Mexico, Spain and Ireland. These countries have created mature REIT systems. While in the Philippines, India and Italy, the framework is already implemented. China and Brazil are likely to join and implement the framework in their national legislation.
As a general rule, REITs do not pay corporate income taxes as long as they distribute the bulk of their income as dividends as stated in a report by commercialobserver.com. Also, REITs need to implement certain restrictions on their operations, association and even in their ownership. One example given by Bloomberg, is Pershing Square Capital Management founder Bill Ackman, who was the first activist to encourage a large retailer to set up a REIT.
Although some countries are successful in implementing REITs, other countries are struggling. Priyaranjan Kumar, regional executive director of capital markets at Cushman & Wakefield for the Asia Pacific region, said that, 'Worldwide, this has not always been an easy process. Countries such as India, the Philippines and China are looking at how to make the current REIT proposals more tax efficient. Kumar further noted that the REIT structure needs to pass through exemptions so that the dividend yields would match up with what the market expects.