| Brown promises to publicise REITs details in a month |
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LONDON: The British treasury will publish detailed proposals for the Real Estate Investment Trusts (REITs), the proposed tax-exempt property investment vehicles, later this month, chancellor Gordon Brown said. REITs will bring in increased funding for new property developments, he said. The chancellor had mooted REITs in his pre-budget proposals Monday.
Brown has planned the REITs on the U.S. and European models to be tax-efficient investment vehicles, set up to develop, manage and sell real estate assets. In the U.S. and Europe, the schemes enjoy exemption from corporation tax, provided certain investment conditions are met.
Brown said in his address announcing the pre-budget report that while there is need for 190,000 new homes a year, only 150,000 are built every year and only investments with proper tax exemption can fill up this gap. He said local authorities will be asked to speed up their planning application processes and provide more sites for house building.
The treasury explained that only property companies listed on the stock exchange will be entitled to participate in the REITs. The companies will be able to earn the exemption only when at least 95 per cent of the net taxable profits on rental income is returned to the investors, who will then pay capital gains tax at the marginal rate.
Two of the largest property developers in the country, British Land Co Plc and Land Securities Group Plc., welcomed the REITs proposal. They had indicated earlier that they are ready to have their entire commercial property portfolios (worth 18.3 billion pounds and 11.5 billion pounds respectively) placed in the RITEs.
The chancellor also unveiled a shared-equity scheme in which three leading mortgage lenders are participating. This is intended to help first-time house buyers and key workers own homes. The scheme provides for homebuyers to take out a mortgage for 75 per cent of the property's value, while the lender and the government will share the rest of the cost.
Another proposal in the pre-budget report is a new windfall tax on commercial landowners. Called planning gain supplement, the tax will be levied on landowners whose property prices go up in value after gaining planning permission.
The treasury wants to raise money, which can used in providing local infrastructure once the buildings come up. It will also prevent landowners make undue profits. There is, however, doubts in the minds of landowners on how to assess the increased value. The government had suggested certification from surveyors.
Brown has clarified that the tax would not be introduced until at least 2008.
Housing and planning minister Yvette Cooper said after the pre-budget report release that current house-building levels were running below those at the end of the second world war and the 1980s. She said unless the number of new homes are increased significantly, in about 20 years, less than a third of 30-something couples will be able to own a home.
Posted
on : Tue, 06 Dec 2005 09:10 GMT | Investments News
By : Pippa Fielding
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