The German Coalition Cabinet has backed draft legislation for the introduction of real estate investment trusts (German REITS or G-Reits). As expected, properties that are 50% or more residential and built before 2007 have been excluded from the REITs. This is a bid by Finance minister Peer Steinbrueck (SPD) to placate the left of his party over fears of higher rents for tenants. The government has also forecast the new law will generate EUR 235 mln in tax revenues for regional authorities.
The German Coalition Cabinet has backed draft legislation for the introduction of real estate investment trusts (German REITS or G-Reits). As expected, properties that are 50% or more residential and built before 2007 have been excluded from the REITs. This is a bid by Finance minister Peer Steinbrueck (SPD) to placate the left of his party over fears of higher rents for tenants. The government has also forecast the new law will generate EUR 235 mln in tax revenues for regional authorities.
It was reported on Wednesday that the government had made alterations to the draft REIT legislation due to protests from the left of the SPD. German newspaper Die Welt said the reduced exit tax (20% versus 39%) for conversion of properties into REITs had been cut from four to three years. In addition, it was decided no more than 50% of a building may be residential space in order to qualify for sale to a REIT. But new residential properties to be built in 2007 and later will be eligible.
Steinbrueck originally planned to include both residential and commercial property in the legislation, but signalled his readiness to remove the residential element to try to get the legislation passed in time for introduction next year. He is worried Germany will lose competitiveness if it does not follow the UK in introducing REITS next year.
