Daetolitz Establishes Special Registration Before Business Approval... "Prospects for Activating Daetobo Compensation"

[Image source=Yonhap News]

[Asia Economy Reporter Moon Jiwon] To revitalize land compensation (Daeto compensation) where compensation is received in land instead of cash during new town and other land development projects, the government is easing regulations on Daeto REITs.

The Ministry of Land, Infrastructure and Transport announced that the amendment to the Real Estate Investment Company Act, which includes the establishment of a special registration procedure for Daeto REITs, will take effect today.

According to the amendment, a special registration procedure has been newly established to allow Daeto REITs to receive Daeto compensation rights as in-kind contributions before obtaining business approval.

Allowing early in-kind contributions of Daeto compensation rights before REIT business approval is expected to reduce project uncertainties.

Previously, it took about five years from the time of the Daeto compensation contract to the full establishment of the Daeto REIT through in-kind contributions of Daeto compensation rights, but with the legal amendment, this period is expected to be shortened to one year.

Regarding the shares of Daeto REITs, resale is restricted until three years have passed from the Daeto compensation contract date or before the Daeto REIT obtains business approval. Landowners contribute Daeto compensation rights to the Daeto REIT and receive shares as REIT equity, and this measure is to prevent indirect cashing out of these shares.

The Ministry of Land plans to ease the tax burden while applying resale restrictions on Daeto REIT shares. Measures under consideration include expanding the capital gains tax reduction rate from 15% to 30% when Daeto compensation rights are contributed as in-kind assets to the REIT.

The government emphasized that, as public concerns over Daeto compensation have increased due to allegations of land speculation by employees of Korea Land and Housing Corporation (LH) in new towns, thorough anti-speculation measures will also be prepared. LH employees have been immediately excluded from Daeto compensation eligibility, and institutional improvements are being pursued to prevent related personnel from the Ministry of Land, local governments, and other related agencies from receiving Daeto compensation. To prevent short-term land speculation, priority will be given to original residents who have held land for a long time when selecting Daeto compensation recipients.

Kim Hyung-seok, Director of Land Policy at the Ministry of Land, said, "We expect Daeto REITs to be revitalized through this amendment," adding, "we will apply strict procedures to ensure that benefits of Daeto REITs are not granted to land speculators during the process."

This content was produced with the assistance of AI translation services.