- Project plans
- Project activities
- Legislation and standards
- Industry context
Last edited 04 Aug 2020
Real estate investment trust REIT
A Real Estate Investment Trust (REIT) is a company that owns and manages property on behalf of investors where revenue is principally (not less than 75%) derived from rent or interest on mortgages. As such, REITs receive special tax considerations. Owner-occupied properties are excluded from such trusts.
This structure offers certain tax advantages to investors as well as providing property investment opportunities to those investors who do not wish to invest directly into the property market, either commercial or retail, and who wish to be able to trade in and out of the asset class.
REITs are exempt from paying corporation tax or capital gains tax on profits, but must instead pay out at least 90% of property income to investors in the form of dividends which are then subject to tax depending upon the circumstances of each investor. A withholding tax is applied at the time that dividends are paid.
Typically, the REITs market offers the investor high yields and liquidity not usually associated with the ownership of property. Investors can purchase individual REIT shares through the stock exchange or can invest in a fund that specialises in property holdings thereby spreading risk across the property sector. Generally, REIT investments apply to commercial buildings, shopping centres, warehousing and residential apartment blocks.
To become a REIT a company must be listed on a recognised stock exchange.
Subject to the rules, companies and groups can become REITs paying an entry charge on 2% of the value of their investment properties which can be spread with interest over four years. This is taxed at the main rate of corporation tax.
No investor may have more than a 10% stake in a REIT.
On the condition that a REIT distributes at least 90% of its property income and capital gains by way of dividends, distribution is made without deduction of tax. While the investor will be taxed on the basis of property income it is not subject to capital gains tax. Effectively, it is a way of an investor benefiting by capital gain on property without having to pay capital gains tax.
 Related articles on Designing Buildings Wiki
- Affordable housing.
- Capital allowances.
- Investment property.
- Investment Property Databank (IPD).
- Property ownership.
- Real estate.
- Speculative construction.
- Tax relief.
- Tenant management organisation.
- Types of development.
 External references
Featured articles and news
Results show guarded optimism and payment concerns.
Noteworthy navigable aqueducts.
Technology is making remote work a reality.
Carefully placed structures add drama to pastoral vistas.
Report provides actions required by 2030 to achieve a zero carbon economy.
What type of cool roof is most suitable?
Active Travel programme prioritises cyclists and pedestrians.
CIAT issues caution for use of new standard.
Industry leaders discuss climate change, the economy and other influences.
The building manager is key to operations.
The impact Scotland’s dynamic coast has on the historic environment.
IHBC announces role in new APPG.