Performance and Growth

FINANCIAL MARKET ACTIVITY

BOX 8
THE SINGAPORE REIT MARKET

The market for real estate investment trusts (REITs) in Singapore has grown significantly. A REIT is a company that owns, and in most cases, operates income-producing real estate such as apartments, shopping centers, offices, hotels and warehouses. Some characteristics of REITs listed in Singapore include:

  • The trust pays out 90 % of taxable income as dividends to unit holders.
  • At least 70 % of assets are invested in real estate.
  • Debt does not exceed 35 per cent of the value of the deposited property.

The first REIT was listed on the SGX in 2002. As at 31 March 2005, there were five listed REITs worth S$10.6 billion, including Singapore’s first cross-border REIT which has properties in Hong Kong.

The value of the listed REITs has also grown steadily since their initial public offerings, as a result of an improved economic outlook, a stronger stock market
and an aggressive yield-accretive acquisition of properties by the REIT managers.

Several regulatory and tax measures have been put in place to facilitate the development of the REIT market. Under the Property Fund Guidelines in the Code on Collective Investment Schemes, total borrowing limit on a REIT was raised from 25% to 35%, in 2003. Those with single “A” credit rating can now borrow beyond 35%.


Another change introduced by the Ministry of Finance in 2005 is a 3% stamp duty waiver on the transfer of properties into REITs listed on SGX. A withholding tax of 10% on REIT distributions to foreign investors was also granted.