Pension Savings Funds Also Allowed to Invest in Listed REITs... "Expanding Opportunities for Retirement Asset Formation"

Apartments in the Mapo area as seen from the observatory at 63 Square in Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

The government is significantly easing regulations on real estate investment trusts (REITs). In the future, investments in listed REITs will be possible not only through retirement pensions but also through pension savings funds for retirement preparation, and the screening procedures for public REITs will be simplified.

The Ministry of Land, Infrastructure and Transport, the Financial Services Commission, and the Fair Trade Commission announced on the 12th that they have prepared the "Improvement Plan for REITs System to Revitalize Public Offering and Listing" after deliberation by the Real Estate Service Industry Policy Committee to enable citizens to invest in REITs more safely and conveniently.

REITs have recently become a preferred investment destination for the public, but despite rapid growth, there have been many criticisms that their scale and maturity are insufficient compared to advanced countries such as the United States and Japan.

Accordingly, the government has prepared this improvement plan to resolve issues related to the operation of public offering and listed REITs and fundraising, and to provide incentives for listing in the industry, creating an environment where the general public can invest with confidence.

First, the government will simplify the overlapping procedures of consultations between the Financial Services Commission and the Financial Supervisory Service during the approval of public REITs and public REIT asset management companies.

For REITs currently subject to the registration system, the review of business plans will be omitted to enable prompt registration within the statutory period. Instead, the ratio requirement for pension funds and others will be raised from 30% to 50% to secure public interest, and the development project ratio will be liberalized as a matter for shareholders' meetings.

In addition, regulations on holding companies for large listed REITs with a parent-subsidiary structure exceeding 500 billion KRW will be relaxed to support an increase in the listing of high-quality REITs. The parent-subsidiary structure is preferred because it facilitates trading after listing and enables stable dividends through diversified investment, but when the size exceeds 500 billion KRW, holding company regulations apply, restricting investment.

Considering the special nature of listed REITs as indirect investment vehicles solely for real estate investment, holding company regulations will be excluded within the scope where there is no concern about economic power concentration, allowing free investment.

Along with this, investment in publicly listed REITs will be allowed through pension savings funds, which many citizens use for retirement preparation. This is expected to expand opportunities for citizens to build retirement assets and promote the activation of REITs. Previously, investment in publicly listed REITs through retirement pensions was already permitted at the end of 2019.

The next-generation REIT information system will be developed, and subscription information guidance will be expanded during public offerings to improve accessibility for general investors. It is expected that cases where public offering information was difficult to know, such as information being disclosed close to the subscription deadline, will be greatly reduced.

If approval under the Real Estate Investment Company Act is not obtained, the use of the name "REIT" will be restricted to prevent disruptive acts such as fraudulent real estate schemes impersonating REITs.

The government stated, "We will allow investment in listed REITs through pension savings within the first half of the year and will proceed smoothly with legal revisions for excluding holding company regulations and improving approval and registration procedures," adding, "We will continue to guide market liquidity toward productive directions such as expanding commercial real estate and infrastructure, which form the basis of economic activities."

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