Senator Niculescu-Ţâgârlaş: The Real Estate Investment Funds Law - prepared for the final debate in the Chamber of Deputies

The legislative initiative that regulates REITs (Real Estate Investment Trusts) in our country has passed the Senate vote, and is currently in the Chamber of Deputies, which is the decision-making chamber, Senator Cristian-Augustin Niculescu-Ţagârlaş said yesterday, during a business environment debates about REITs.

"From my point of view, this law has the necessary maturity because it has been sufficiently debated in the Senate, all the preliminary forms have already been analyzed, so it can be debated in the Chamber of Deputies even in this session. We have a peculiarity, because being a campaign, parliamentarians are very busy with electoral activities. However, the parliamentary activity does not stop and it should pass in this very session", said Cristian-Augustin Niculescu-Ţagârlaş, who is the initiator of the REIT law.

According to Meta Estate Trust, the real estate market in our country is underrepresented on the local capital market, despite a significant contribution to Romania's GDP, of 7.2% in 2023. "Legislation of REITs (Real Estate Investment Trusts), companies for real estate investments, would facilitate the attraction of capital for players in the real estate industry and would ensure a better representation of the sector on the stock market", according to an analysis carried out at regional and global level by a research team employed by Meta Estate.

According to the study, it is opportune for our country to implement as soon as possible the necessary legislation to support the creation and development of REITs, in order to attract capital and stimulate the real estate market. Also, the introduction of REITs will most likely have a positive effect on the tax collection rate and increase the revenue collected from the dividend tax.

The establishment of clear and transparent regulations is essential to create a safe and attractive environment for investment in REITs, reducing speculative risks and protecting the market from large fluctuations, the authors of the study also say. Last but not least, the Government and financial institutions should promote financial education for investors, especially small investors, to increase awareness of the benefits of REITs. REITs (or real estate investment companies) are listed companies that own and operate entire real estate portfolios with the sole purpose of distributing 90% of the returns generated with their shareholders.

According to the presentation, REITs have three very important characteristics:

1.Private investment model: there are companies active in the business of owning real estate portfolios and operating them to generate recurring income

2.Special Legislation: A REIT is in the true sense of the word a REIT only when it has a special legislation regulating the way it operates. The main goal is for an entire real estate portfolio to behave like direct ownership of a real estate asset. In this regard, in all jurisdictions, these companies are required to distribute almost all of their profits in the form of dividends.

3.Considerable scale: These vehicles only come to deliver maximum value when the size of the portfolios and capital structure is large enough to fully exploit economies of scale.

To enter into force, the legislative initiative also needs the vote of the Chamber of Deputies, according to yesterday's report by the Meta Estate Trust.