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Real Estate Investment Trusts in Singapore

Real Estate Investment Trusts in Singapore

Real estate investment trusts (REITs) are companies gaining income from investing in real estate products. In SingaporeREITs fall under the category of collective investment schemes which allow investors to put money into real estate property.

Most of these properties are commercial buildings, shopping malls, and even office space which usually generate a generous income. REITs in Singapore fall under the Collective Investment Schemes Code and the Securities and Futures Law. Our law firm Singapore can offer more information on the legislation related to real estate investment trusts.

How to set up a REIT in Singapore

First of all, a Singapore REIT must be managed by a qualified professional, usually a trustee or a management company with a registered office in the city-state. REITs can alsobe listed on the Singapore Stock Exchange, provided that certain requirements are met. Our attorneys in Singapore can provide more information on the listing requriements available for trading on the local Stock Exchange.

In order to establish a REIT in Singapore, the company’s shareholders must make available funds worth minimum  SGD 1 million. The REIT may invest in the following:

  1. real estate, which can be within or outside Singapore;
  2. assets related to real estate property;
  3. unlisted or listed securities;
  4. governmental securities;
  5. cash.

Also, at least 75% of the REITs’ funds must be invested in real estate which generates income. Our attorneys in Singapore can offer more information on the restrictions REITs are subject to.

What are the main categories of SG REITs? 

Foreign investors can open a REIT in Singapore (SG) in several industries. Currently, investors can opt for 1 of the 7 types of SG REITs:

  1. diversified REITs – they are set up with the purpose of investing and managing a variety of assets, not just a single class of assets’;
  2. healthcare REITs – they can be registered by those who invest in the healthcare sector, which can include many types of healthcare units, such as hospitals, retirement homes, nursing homes, etc;
  3. hospitality REITs – suitable for those operating in the accommodation sector; 
  4. retail REITs  – for investments in various types of shopping units (malls, centers, etc.);
  5. residential REITs – SG REITs can be set up for the management and rental of residential property;
  6. office REITs – available for investments in commercial real estate offices;
  7. industrial REITs – they generally are used for investments in industrial properties, such as warehouses. 

Set up a REIT in Singapore – management requirements 

In order to start SG REITs, investors must comply with a few basic requirements, some of which refer to the management structure of the entity. Regarding this, it is necessary to know that the law states to appoint a REIT manager

Our law firm in Singapore can present other matters concerning the management of the SG REITs, but in the list below we invite you to discover some of the most important aspects concerning the appointment of a manager: 

  • the manager must be a licensed person, as per the requirements of the Securities and Futures Act 2001;
  • the managers must follow the rules prescribed by the Notice SFA 04-N14 to All Holders of a Capital Markets Services License for Real Estate Investment Trust Management;
  • the managers must also abide by the Code of Corporate Governance, which is applicable in Singapore since 1 September 2007, according to the Monetary Authority of Singapore (MAS);
  • the manager is required to disclose information concerning the remuneration of the CFOs and directors, as per the paragraph 3.3 of the Notice SFA 04-N14 and, if he/she opts to not offer information about this matter, then he or she can do so in accordance with the rules of the paragraph 3.4.  

Singapore is one of the global leading financial centers, therefore, if you opt to invest or to open SG REITs, they will most likely be successful. However, you must know that, at the moment, some of the best REITs in Singapore are the ones operating as diversified REITs (the affirmation is made based on the dividend performance).  

This category of REITs is the best SG REITs, followed by those operating as industrial, hospitality and office REITs. Please address our Singapore law firm for additional information on how to invest in this category of REITs

If you represent a foreign investor, we invite you to receive legal assistance from our immigration lawyers in Singapore, provided that you want to move here on a long-term basis for investment purposes. Our law firm can present your visa options and can help you apply for a residence permit in Singapore

What is Singapore REIT ETF?  

If you plan to open a REIT in Singapore, there is also the possibility to opt for a REIT under the form of an ETF (exchange traded fund). The Singapore REIT ETF appeared on the Singaporean market in 2016 and since then, 5 such entities have been created. 

The advantage of the Singapore REIT ETF is that the investor has the possibility to invest in a variety of REITs at the same time and not just in a single REIT, an option which is correlated with a lower investment risk. 

You can learn more about the advantages of the ETF REITs from our team of lawyers in Singapore. Additionally, our team is ready to advise on how to invest in the best REITs in Singapore and what are your tax advantages when doing so. 

Taxation of real estate investment trusts in Singapore

Foreign and local participants in REITs in Singapore benefit from several tax advantages. Among these, tax exemptions on the dividends distributed by the trust. However, the REIT must distribute 90% of its chargeable income in order to benefit from this exemption.

Where this provision does not apply, foreign investors will be subject to a 10% tax rate. Listed REITs may benefit from stamp duty exemption when selling properties in their portfolio, but also when transferring shares in SPVs (special purposes vehicles) owning real estate outside Singapore. Trustees will be subject to the corporate tax in Singapore.

For assistance in setting up a real estate investment trust or more information on the taxation of these investment funds, please contact our lawyers in Singapore.