Published on : Tue, 06 Dec 2005 14:52GMT
by : David Parker

LONDON - Chancellor Gordon Brown has announced that he will move legislation to allow Real Estate Investment Trusts (REITs) next year. Property firms were vocal in demanding that Brown follow the example of other countries where the scheme is a big success and Brown finally gave his nod on Monday.

He said that the tax details of the scheme would be made public before the end of this year. Announcing the proposal to introduce REITs in his pre-budget speech before the Parliament, Brown said, "To widen the number of investors in the residential and commercial property markets, we will this month publish legislation to set up in Britain Real Estate Investment Trusts that will increase the funding of new property developments." REITs basically give tax breaks to big property firms if they commit to return 95 percent of their income to shareholders. This scheme is already in place in the United States and Australia. REITs has naturally won the vote of property firms and could herald in rapid growth in the country's listed sector.

Property watchers were delighted with Brown's move. Martin Graham, the Market Services chief at the London Stock Exchange said, “The creation of a tax efficient and transparent investment vehicle will expand investor choice by giving a pure exposure to the property market without the complications and restrictions of holding property directly.”

Even though the Treasury has not released any details and is unlikely to do so before Christmas, the announcement was widely welcomed and property firms are lining up to have an unlisted REITs as well. Gareth Lewis, director of finance and investment in British Property Federation said that the government had taken a positive step with this announcement. "I think it is encouraging they (the government) have committed to 2006 and adopted the tax-exempt model," he said.