10 January 2019
Thursday, the Council of Ministers approved a decree-law on the investment regime covering real estate management companies.
The Portuguese government approved the decree-law on investment and real estate management companies, commonly known as Real Estate Investment Trusts (REIT), according to a press release issued by the Council of Ministers on Thursday. Being a decree-law, the measure will go directly to Marcelo Rebelo de Sousa’s desk, without first heading to Parliament, even though it contains tax benefits for the companies that adhere to the new regime.
“The legal framework for investment and real estate management companies (SIGI) is designed to the allow for the creation of investment vehicles that will help boost the real estate market, in particular, the rental market. This Portuguese government is following the example of other big European markets, benefiting from the experience that some Member States have had regulating these kinds of investment companies, commonly known as Real Estate Investment Trusts, over the last few years,” the statement said.
The subject had already been considered by the Council of Ministers last year, but at the time, the Portuguese government was still considering some final issues. ECO reported on that date that the government had to deal with additional questions based on the fact that the decree had to pass through Parliament, as the regime includes tax benefits.
According to reporting at the time by ECO, the decree would need to be changed into a draft law – thereby requiring passage by the National Assembly. Regardless of that initial reporting, the measure was maintained as a decree and was approved today in that form by the Council of Ministers. It will now be submitted directly to Marcelo Rebelo de Sousa for approval.
The objective of the REITs, which are already in use in other countries such as Spain, where they are known as Socimis, is to increase the supply of long-term rental homes in the country.
REITs are listed on the local stock exchange, capturing savings for subsequent investment in long-term rental properties and developments. The companies may only hold properties in their portfolios on a long-term basis, and all of the investments must be in the rental market.
REITs allow both large and small-scale investors to invest their savings in the real estate sector. The investments generally have high dividend yields, a major attraction considering the low yields offered in traditional savings accounts.
In Portugal, the sector estimates that the creation of a regulatory framework for REITs in Portugal would attract investments totalling between 10 and 15 billion euros.
Original Story: Economia Online – Marta Moitinho Oliveira
Translation: Richard Turner