Upcoming REIT legislation in Hungary

The Hungarian government is contemplating to introduce the concept of REIT (Real Estate Investment Trust), in order to re-vitalise stagnant real estate market activity and to support utilisation of the high volume of distressed properties.

REIT, a relatively new form of real estate investment, working as a combination of a real estate fund and a corporate entity, has been successful in many countries all over Europe in the past years. Although REIT entities may have different characteristics in each country, they all have similar advantages: better tax conditions; relatively high profitability; liquidity and stability.

According to the plans, REITs in Hungary would be set up as corporations listed on the stock exchange. The contemplated REIT regulation will most likely contain a clause stating that 75-90% of the portfolio of such entities has to be represented by real property investments. Further, as a common average, 80-90% of the REITs' income will need to