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REIT investment grows amid tough regulations on housing market

The Seoullo 7017 park in Seoul built atop a former highway overpass. (Park Hyun-koo/The Korea Herald)
The Seoullo 7017 park in Seoul built atop a former highway overpass. (Park Hyun-koo/The Korea Herald)



Real estate investment trusts, which allow individuals to make indirect investment in properties, have gained traction recently from investors facing heavier regulations on home buying.

The entire value of assets owned by REITs stood at 61.4 trillion won ($55 billion) in January, up 26.3 percent on-year from 48.6 trillion won, according to the Ministry of Land, Infrastructure and Transport on Thursday.

The government has strengthened rules on mortgage loans, real estate tax, and redevelopment, among others, in a bid to stabilize the heated housing market. As the government strictly regulates the real estate market, investors have been seeking alternatives, like REITs, instead of directly purchasing properties, according to market watchers.

“Tough rules on tax, loans and house purchases have made things difficult for real estate investment,” said Cho Hyun-taek, a researcher at local research firm SGLab, adding that “interest toward REITs has been rising as investors enjoy tax benefit and receive relatively stable returns from the REIT investment.”

Although returns of some REITs, including those that invest in hotels and offices, were relatively low last year due to the coronavirus crisis, logistics-linked REITs are expected to grow significantly this year.

ESR Kendal Square REIT, the first listed REIT dedicated to logistics properties in Korea, for instance, has climbed 16 percent since its debut in the local equity market in December.

By Kim Young-won (wone0102@heraldcorp.com)
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