Final Report of the Working Group on Real Estate Investment Funds

Summary

The final report of the Working Group on Real Estate Investment Funds contains a Government legislative draft bill proposing amendments of the Act on Real Estate Investment Funds, of the Investment Funds Act and of certain ancillary legislation.

The present Act on Real Estate Investment Funds was enacted in 1997 and it only concerns limited companies. For tax reasons many institutional investors prefer direct investments in real estate, or fiscally more transparent investment instruments rather than investments in the form of limited companies. Because institutional investors have a key role for introducing securities on the real estate market and because the disadvantages of the regulation of limited companies subject to the  Act on Real Estate Investment Funds are considered to be more important than the advantages, no real estate investment funds have been founded under the auspices of that Act.

Joint investments in real estate will be promoted by introducing in the Investment Funds Act provisions concerning special investment funds that primarily invest their assets in real estate and in real estate based securities. The Act on Real Estate Investment Funds will also in the future concern public limited companies that make joint investments in real estate. That Act will be supplemented by provisions concerning limited partnerships whose shares are offered for sale to the public and constitute securities under the Securities Act. On the basis of experience gained in the application of the Act on Real Estate Investment Funds and the Investment Funds Act and as a consequence of modifications of other legislation certain amendments of a technical nature are proposed to be introduced in the Act on Real Estate Investment Funds and in the Investment Funds Act. The competence to deal with petitions concerning confirmation of statutes of real estate investment funds, concerning exemption permissions and other petition matters will the transferred to the Financial Supervision Authority.

The Working Group believes that institutional investors will be the most important group investing in real estate investment funds. For that reason the Working Group has taken particular note of the views expressed by pension institutes and insurance companies. In respect of real estate investment funds, both in the form of investment funds and in the form of general partnerships, only investors will be taxed. There is no need to modify tax legislation.

The Working Group has also made certain other studies to serve as background of the draft legislative bill. These studies are published as annexes to the draft bill and the main conclusions of those studies are presented in the draft bill itself. The annexes contain an evaluation of the financial impact of real estate investment funds, an overview of the current international situation and an abstract of the comments made on the intermediate report and on the draft legislative. These annexes give more details than can be set out in the bill that has to be drawn up according to a certain form.

Language versions

• Kiinteistörahastotyöryhmän loppuraportti
  18.08.2006
• Slutrapport av arbetsgruppen för fastighetsfonder
  18.08.2006

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