Hong Kong strengthens bid to become global REIT market leader

20th March 2024 – (Hong Kong) Hong Kong is advancing its strategic development of Real Estate Investment Trusts (REITs), according to a statement by the Secretary for Financial Services and the Treasury, Mr Christopher Hui, in the Legislative Council today.

Dr Kennedy Wong raised inquiries on the Government’s efforts and future plans for REIT market enhancement, referencing the Mainland’s active promotion of infrastructure REIT projects and potential investment by the National Social Security Fund.

Mr Hui, in concert with the Securities and Futures Commission (SFC), outlined several pivotal reforms aimed at bolstering the REIT sector. These moves include liberalising regulations in 2020 to permit investments in minority-owned properties and property development projects beyond the prior 10% asset value cap, with unitholder consent. The borrowing ceiling was also hoisted to 50% of gross asset value.

Moreover, the Mandatory Provident Fund Schemes Authority has eased investment restrictions in REITs, broadening the investor base since 2020. The SFC is also investigating ways to simplify corporate restructuring for REITs.

To stimulate the establishment of REITs in Hong Kong, the Government introduced a Grant Scheme in May 2021, subsidising listing-related expenses. The scheme, having garnered industry acclaim, has been extended in the 2024-25 Budget for another three years until 2027. The Budget also proposes a stamp duty exemption on REIT unit transfers to sharpen market edge.

Negotiations are underway to extend mutual-market access with the Mainland to REITs, anticipated to entice more enterprises and capital influx into Hong Kong’s market. These measures aim to slash REIT transaction costs and elevate market liquidity and appeal.

Addressing the notion of listing government assets as REITs, Mr Hui noted the need for careful consideration of financial implications and market conditions.

The Government remains committed to collaborating with the industry to identify further enhancements to the REIT market’s competitiveness and support the broader asset and wealth management sector’s growth.