President Barack Obama has signed into law a measure that will stop a 35-year-old tax on foreign investment in the real estate market. Experts say that this move will open doors for more purchases by overseas investors which are major sources of capital since the country's financial crisis, a Gulf News report said.
The $1.1 trillion spending measure is a provision that treats foreign pension funds equally as their US counterparts for real estate investments. The provision waives the tax imposed on such investors under the 1980 Foreign Investment in Real Property Tax Act, known as FIRPTA.
Foreign investors turned to the US since the global economic meltdown, especially turning on the safety of assets of commercial establishments to partments and warehouses. This has significantly increased commercial real estate prices to record highs. This easing allows foreign pensions to purchase as high as 10 percent of a US publicly traded real estate investment trust without causing FIRPTA liability.
Jeffrey DeBoer, president and chief executive officer of the Real Estate Roundtable said in a statement,"By breaking down outdated tax barriers to inbound investment, the FIRPTA relief will help mobilise private capital for real estate and infrastructure projects." He also said that overseas investment in US real estate has totalled around $78.4 billion this year according to Real Capital Analytics Inc Pension funds accounted for about $7.5 billion or around 10 per cent, of the foreign total.
Foreign investment has increased from just $4.7 billion in 2009, according to Real Capital. This is "is a huge deal," said Jim Fetgatter, chief executive of the Association of Foreign Investors in Real Estate. Definitely it will increase foreign investment in US real estate.
