Government could limit REITs regime: Merlin and Colonial to be little affected by focusing on malls and offices

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Intermoney | The President of the Government, Pedro Sánchez, announced on Monday his intention to restrict the REITs regime except in the case that the companies promote housing at affordable rents. This measure is one of 12 that the president announced with the intention of tackling the current housing crisis. Specifically, Sánchez declared: “We are going to change the regime of tax advantages that the so-called REITs have. Why? So that they only apply these advantages to the promotion of affordable rental housing; to put an end once and for all to this injustice, which is that some investors use this instrument to pay less tax than ordinary citizens when buying the same property”.

Assessment: It is complicated to really interpret the Government’s concrete intentions. It is likely that it will limit the REITs regime for those companies that have a very limited number of homes as assets to what is considered at the time as high rents, or that are considered family office vehicles with the sole objective of avoiding paying taxes.

In this case, these restrictions would not affect the main listed REITs, which are not present in housing assets, such as Inmobiliaria Colonial (Buy, PO €8.5) or Merlin Properties (Buy, PO €12). Nevertheless, it is inevitable that, in any case, stocks will be at least slightly affected over the next few months, during which this reform will be processed. Last November, Congress did not approve the elimination of the REITs regime proposed by the Left; Merlin and Colonial estimated a potential negative impact of -6% and -2%, respectively.

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