No support for preferential supply of land for the 2nd and 3rd new towns... Loan investment also has no results

Two years have passed since the government announced that it would expand the REITs (real estate investment company) market to the level of advanced countries, but it is pointed out that investment performance and system improvement are still insufficient.

According to the government on the 5th, the Ministry of Land, Infrastructure and Transport announced the 'REIT Revitalization Plan' in June 2024, which includes diversifying REIT investment targets and expanding financial investment.

Among the plans announced at the time, there was a system that was actually introduced, such as 'Project REITs', which allows REITs to not only invest in real estate but also lease and operate through direct development. After expanding investment targets, five REITs, including one in healthcare and four in data centers, emerged in new fields.

However, looking at the data submitted by the Ministry of Land, Infrastructure and Transport by Representative Heo Young of the Democratic Party of Korea, a member of the Land, Infrastructure and Transport Committee of the National Assembly, it appears that there has been no support to date for the plan to provide business and commercial sites in excellent locations in the 2nd and 3rd new cities to REIT operators first and support equity investment.

The government has established supervisory regulations that include loan screening, limits, collateral and recovery procedures to ensure REITs' stability and profitability through loan investment, but REIT loan investment results have not been released to date.

The key task of changing REIT fund management and dividend structure is also making slow progress.

The government has proposed a plan to allow internal reserves so that part of dividends can be used as new investment resources and a plan to allow monthly dividends for investors who want stable cash flow, but these have not yet been implemented.

It was also announced that a plan to prepare guidelines for the composition and operation of the board of directors in order to improve REIT operation will be promoted by the end of 2024, but it has been confirmed that it has not been completed to date.

In order to diversify the profit structure of REITs, a plan to abolish the limit on mortgage bonds and commercial real estate mortgage bonds (C-MBS) to expand financial investment in real estate such as mortgages as well as real real estate was proposed to revise the related enforcement ordinance, but it failed.

Rep. Heo Young said, “The Ministry of Land, Infrastructure and Transport is actively using REITs for various policies, but the improvement of the systems that support the REIT market is not progressing as quickly as expected.” He added, “We will take a close look at whether there are any institutional blind spots between the Ministry of Land, Infrastructure and Transport and the Financial Services Commission during this government audit.”