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REITs Legalised in Portugal

23 January 2019

The President of the Republic today promulgated a decree creating the regulatory regime covering Real Estate Investment and Management Companies (SIGIs), commonly known as REITs (Real Estate Investment Trust), according to a note published by the Executive.

The SIGI is an investment vehicle aimed at boosting the real estate sector, particularly the rental market, and has long been demanded by investors in the country.

The Council of Ministers approved the new financial instrument on January 10 and then sent it to the President of the Republic for final approval.

The Portuguese Association of Real Estate Developers and Investors (APPII) stated that it considers the measure “very welcome and correct” in that it will create the necessary conditions to undergird international investment in real estate development, including in the housing sector.

“The problem with supply shortages and rising domestic real estate prices can only be solved on the supply side, i.e. by placing more assets on the market, including those that are placed at lower prices and are accessible to the Portuguese,” said a statement by APPII.

APPII believes that there are companies and international funds willing to enter the Portuguese market but were waiting for financial instruments that they are familiar with, such as REITs.

REITs are long-term, publicly traded real estate investment vehicles created in the USA and replicated in several other countries. SOCIMIs, the Spanish equivalent, have already managed to channel more than 26 billion euros of investment into the country’s real estate sector.

As a rule, REITs have a tax regime similar to that of Real Estate Investment Funds (for rentals). In both, it is possible to eliminate double taxation (in IRC first, and later IRS) that usually applies to companies. Alongside the tax issue, REITs have the advantage of greater liquidity.

Original Story: Lusa / Diário Imobiliário

Translation: Richard Turner