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Budget 2011: Tories may not go far enough on Reits

Budget proposals to relax the real estate investment trust regime have been well received by property consultants but some question whether the Government will do anything more than remove the 2 per cent conversion charge.

This week’s Budget outlines the Government’s intention to support good business practices and remove barriers to entry and barriers to investment in the Reits market.

This includes removing the 2 per cent charge paid by property companies for conversion to Reit status.

CB Richard Ellis EMEA chief economist Peter Damesick says: “In principle, the consultation is positive but the Budget speech and documents are vague and uncertain in terms of reform beyond the specific proposal of removing the conversion charge.”

Deloitte real estate tax partner Phil Nicklin, involved in the creation of Reits in 2007, says: “What we could see is two or three institutions joining together to form their own Reit.

“Reits must be diversely owned and this type of arrangement has historically been seen as having just one or two shareholders. But institutions such as life companies, life insurers and pension funds are diversely owned due to their share- holder structure.”

Nicklin thinks reducing stamp duty on bulk purchases of residential property will significantly lower the cost of assembling big portfolios, improve returns and make residential property more attractive for institutional investment.

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