Currently, there are 61 property funds (Property Fund)<\/span><\/strong> and real estate investment trusts (REIT)<\/span><\/strong> listed on the stock exchange, comprising 32 Property Funds<\/span><\/strong> and 29 REITs<\/span><\/strong>. In the past, Property Funds enjoyed certain tax advantages over REITs, such as value-added tax, stamp duty, specific business tax, and dividend tax for certain types of investors. However, the government later revoked these tax privileges, eliminating the tax advantage of Property Funds compared to REITs. Additionally, due to the regulations set by the SEC, which do not support Property Funds, they have been unable to invest or increase capital since 2014 unless they convert to REITs. This aligns with international REIT regulations, allowing REITs to borrow more. The differences between Property Funds and REITs can be summarized as follows:

Key Differences Between <\/em><\/strong>Property Funds <\/em><\/strong>and <\/em><\/strong>REITs<\/em><\/strong>

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One of the main limitations in converting from Property Fund<\/span><\/strong> to REIT<\/span><\/strong> is the taxes and fees incurred during the conversion, such as value-added tax, stamp duty, specific business tax, and property transfer fees, which lead to high operational costs for Property Funds. Moreover, the conversion process requires approval from the unitholders, making it likely that Property Funds will not receive approval if unitholders do not clearly see the benefits of converting to REITs, such as opportunities for additional investments and improved capital structure for generating more income. In 2017, tax benefits for converting from Property Funds to REITs were approved, leading several Property Funds in the industry to convert, including CPNREIT, TREIT, SSTRT, SRIPANWA, DREIT, and WHART, which later invested in additional assets.

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On January 24, 2023, the Cabinet considered and approved tax benefits for the conversion from Property Funds to REITs, with the benefits effective until December 31, 2027. Relevant government agencies were instructed to draft the necessary legislation for submission to the Cabinet. Currently, some parts of the law are still being drafted before further approval. Some Property Funds have the potential to convert to REITs and advance to the next round, while those that do not convert using the benefits in this round may have little chance of proceeding further, as it is unlikely that the government will offer tax benefits for a third time.

In the next installment, I will summarize which Property Funds have the opportunity to exercise their conversion rights.