The President of the European Property Federation (EPF), Pedro Gamero, has asked the European Commission to take an initiative that would spread real estate investment and development to all regions of the Union: an EU Real Estate Investment Trust or EU REIT.
The REIT is a vehicle under which investment can be directed in a tax efficient manner into the real estate sector. It has been adopted in several EU member states and is planned in several more, but the lack of a pan-European property investment vehicle is handicapping the Union in many ways:
- by creating competitive distortions in the Internal Market as capital flows to REIT countries;
- by stunting the capacity of the property industry to develop on a European scale;
- by hurting small member states and their savers;
- by causing poor allocation of capital in the EU.
The solution is a European legislative instrument setting the framework for an EU REIT. This builds on the welcome national initiatives already underway.
Minimum coordination of some aspects of tax treatment of REITs in various member states through enhanced cooperation could create a sector of such scale and diversity as to bring stability to real estate across Europe as well as competing with foreign REITs already venturing into the European market.
By REIT we mean a corporation, which:
- has to derive the majority of its income from property or assets or businesses related to property
- pays no taxes at corporate level but is obliged to pay out the majority of its net earnings as dividends to its shareholders who are then taxed
- has the option but not necessarily the obligation of public listing
- functions within a specific legislative framework and under supervision of authorities
Commenting on the initiative, Michael MacBrien, EPF Director General, said: "An EU REIT will help the property industry to develop from a local business to a pan-European business, and that has the potential to ensure that funds for real estate investment and development can be spread across the EU. In this way, the industry can help the less cash-rich economies to build a modern infrastructure and move more towards the EU average, and ultimately better integration. Better quality property and infrastructure attracts business and has a multiplier effect on regional development."
MacBrien continued: "At a time of conflict over the EU budget, a large part of which is spent on structural funds, an EU REIT can give a private sector boost to regional development."