Decree allows property as REIT capital
Decree allows property as REIT capital
Following a recent draft amendment to a Decree, investors might be allowed to contribute capital to a real estate investment trust (REIT) in the form of property assets, besides cash.
However, experts have urged further support to encourage the development of this investment tool, which was officially permitted in Viet Nam in 2012, but none have been established in the country till date. Instead, Viet Nam is currently seeing the dominant presence of foreign REITs.
According to Nguyen Thanh Long, capital contribution is currently only allowed in the form of cash, and the money is used to buy property assets so that investors can invest in real- estate assets by buying REIT fund certificates. He said many investors wished to contribute capital through property assets in exchange for fund certificates.
Nguyen Van Dung, director of the VinaWealth Fund, which is looking to establish a real-estate fund in Viet Nam, was quoted by Dau Tu Chung Khoan (Securities Investment) newspaper as saying that property assets, which are used as capital contribution to REITs, if allowed, must be those which can generate good money flow, such as trade centres, offices for rent, and apartments for rent.
"It would be difficult to find investors with such good property assets," he said, adding that such good property assets were already generating high profits and owners would not want to joint REITs as the profits might be lower.
Dung also pointed out that in many countries in the world, REITs were permitted to use their property assets as mortgages for loans, which might help boost their investment efficiency. However, this has not been mentioned in the draft amendments of Decree 58, he said.
VinaWealth said that to promote the development of REITs in Viet Nam, support policies, such as tax exemptions on income from property fund certificates were needed. Currently, incomes from dividends were taxed 5 per cent for individuals and 22 per cent for organisations.
According to Le Hoang Chau, president of HCM City Real Estate Association, detailed regulations about the kinds of property assets that REITs were permitted to invest in should be based on their net asset value and were needed to ensure efficiency and transparency.
