The government has given more details of the planned US-style funds as a guide, which would allow private investors and institutions to invest in residential and commercial properties ranging from suburban semis to office blocks. A consultation process has started, and the new funds could be available from next year.
It is proposed as a guide that the property investment funds would be closely modelled on America’s real estate investment trusts (Reits), which allow individuals, mutual funds and others to invest in different types of properties.
In the US and other countries, the funds operate as collective schemes which give investors the revenue from the rental income and capital appreciation from holding the property.
The consultation document proposes that – as happens in the US – the trusts should be required to pay at least 90% of their taxable income to investors.
The new funds would make it easier for investors to use properties to fund their retirement.
At the moment, smaller investors are limited to riskier routes such as buy-to-let of Real Estates. The Treasury also hopes that bringing in more investment guide and professional companies should drive up standards in the private rented sector and drive out slum landlords.
The government plans to impose a charge for properties owned by company converted into property investment funds, and there could be large up-front tax costs for companies setting up a Property fund. Agents who are involved in any such deal will be penalised as well.
What will be the Role of the Estate Agents in dealing with such Property?
As Estate Agents will soon be regulated by the FSA , agents will be a useful guide to Real Estate owners of properties on this type of investment. Agents might act as substitutes to Financial Advisors in this matter.
Estate Agents will be required to acquaint themselves with this issue if they were to advise their clients.