Council of Ministers approved the Real Estate Investment Trusts

The Government has approved this Thursday a legislative decree which aims at establishing a legal framework for real estate investment and management societies, usually known as Real Estate Investment Trusts (REIT), as announced by the Council of Ministers.

Given the nature of the legislative initiative, the decree now is directly forwarded to the President’s office, without the need to go through the scrutiny of the Parliament (even though this regulation includes fiscal benefits for the companies which have joined it).

“This decree creates a legislative framework for real estate investment and management societies, which contribute to the revitalization of the real estate market, especially in regards to the renting segment. This initiative is following up on the tendencies already established in other European reference markets, and we are benefiting from years of experience from other European Member States in terms of regulation of real estate societies, which are commonly known as Real Estate Investment Trusts”, the note from the Council of Ministers showed.

The topic had already been discussed last year during the last meeting of the Council of Ministers, but the Government still had some work to do on the project by then. ECO announced at the time that the Government had to be extra careful, as there was pressure from the Parliament since this legislative initiative included fiscal benefits for the societies it would affect.

In that moment the information we gathered by our sources showed that there could be the need for the legislative initiative to become a legislative proposal, as to make it go through the Parliament’s scrutiny and not directly forwarded to the President.

However, that was not the winning scenario, as the diploma has already received the approval of the Council of Ministers, and needless to say, will not require the approval of the Parliament.

One of the goals of these instruments is to increase the amount of offer in the segment of long-term rentals in the country, and it is following the examples of for instance Socimi in Spain.

These societies’ capital is already accepted in the stockmarkets as feasible for investment in real estate, which will be specifically transformed into long-term rentals. They are also obliged to invest in a long term basis in real estate, capitalizing it through long term rentals.

REITs allow investors to apply their savings in real estate, with the high profitability of the sector being one of the main magnets for investment.

The application of REIT shall attract around ten to €15bn in investment for the real estate market in Portugal.