REAL ESTATE INVESTMENT TRUSTS

REAL ESTATE INVESTMENT TRUSTS: 5.

Mrs Fang Ai Lian asked the Deputy Prime Minister and Minister for Finance in view of recent changes in the Hong Kong and Malaysian budgets to improve their competitiveness in Real Estate Investment Trusts (REIT), what steps are being considered to maintain Singapore's lead in this industry and will the abolishing or reducing of the stamp duty on REIT properties be considered.

Mr Lee Hsien Loong: Mr Speaker, Sir, the Monetary Authority of Singapore (MAS) recognises the importance of property funds in creating liquid, transparent investment alternative for real estate investors and broadening the choice of tradeable securities in Singapore. Through the securitisation of their assets, property developers, both in Singapore and overseas, have an additional avenue for fund raising via a REIT listing here.

This is why we have sought to improve the environment for REIT offerings. The Government has selectively granted tax transparency status to the REITs, which means that income is taxed at the investors' level and not at the trust level. This measure had allowed REITs to obtain certain operational cost benefits. MAS had also raised the gearing level for property funds to 35% (from 25% previously) of the fund's deposited property in March 2003. Furthermore, a Singapore REIT's borrowings may exceed 35% of its deposited property if the credit rating of the fund or all of its borrowings is rated at least "A" by Fitch, Moody's or Standard & Poor's. These changes give REITs more flexibility to manage their capital structures. Hence, Singapore is still well-positioned as a competitive REIT centre.

In addition, Singapore's capital markets track record, strong presence of global fund managers and developed financial industry infrastructure make us an attractive location for REIT listings. We believe these are important value propositions for the development of

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Singapore as an international REIT centre.