The introduction of REITs to the South African property market: Opportunities for fund managers
Date
2014-07-29
Authors
Naidoo, Hannalisha
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Abstract
On 1 May 2013, real estate investment trusts (REITs), a listed property
product, had legislation about it introduced in the South African property
market. Prior to the introduction of this REIT legislation, property unit trusts
(PUTs) and property loan stocks (PLSs) were the two predominant types of
listed property investment products in South Africa. However, both the PUT
and PLS are subject to uneven regulation and taxation, and they lack
flexibility.
The REIT legislation was introduced to eliminate some of the problems of the
PUTs and PLSs, by creating: a more unified tax treatment of listed property
companies, more stringent regulatory requirements and uplifting the South
African property market to a level that is internationally competitive. It is
therefore considered valuable to empirically investigate whether or not the
introduction of the REIT framework into the listed South African property
market will be advantageous to investors, and whether or not it would lead to
improvement in the efficiency, regulation and taxation of the listed property
market.
A questionnaire was used to collect primary data to analyze the research
problem. The questionnaire used a Likert scale format that consisted of 20
questions. There were a total of 58 useable respondents, each of who fell into
1 of 5 occupational categories. The questions were divided into 4 unifying
themes and the findings were analyzed according to these themes.
From the analysis of the responses it was found that the REIT legislation is
perceived as a welcomed and suitable introduction to the South African listed
property market. We could also infer that REITs allow for a more favorable tax
dispensation, improved regulation, increased international competitiveness
and enhanced liquidity within the listed property market. Overall, there is a
perception that investors, especially fund managers, would find it potentially
advantageous to include South African REITs or a higher proportion of such
REITs in their investment portfolios.
Description
Keywords
Real estate investment trusts, Property market, South Africa, Investment, Legislation