The Hong Kong government recently launched a HK$270 million ($35 million) plan to encourage property owners to put their assets under real estate investment trusts (REITs) to defray listing expenses. The subsidy plan, to be implemented by the Securities and Futures Commission, will also be offered to fund managers who launch open-ended funds in the city.


For Hong Kong, which has been viewed as trailing behind regional competitors like Singapore and Japan in the REIT space, the developments are expected to be game-changing.


Cindy Shek, a Hong Kong-based partner at King & Wood Mallesons, says the Hong Kong government is looking to revive REITS as a way to bolster the financial services market in Hong Kong.

“The government has been very proactive in rolling out various incentives to revitalise the REITs market, addressing issues from both the regulatory, investor and cost angles,” says Shek, noting these measures will help to promote the city’s status as a “leading capital-raising centre and its role as an asset and wealth management hub.”

Among the incentives on offer is the relaxation of investment restrictions of REITs by way of amendments to the Code of Real Estate Investment Trusts, “a key piece of the REITs regulatory framework,” says Shek.

“Implementing measures to expand the investor base of REITs by allowing greater flexibility in investments in REITs by MPF schemes” and “the latest HK$270 million grant scheme which will provide up to HK$8 million subsidy for each REIT listing,” notes Shek, calling now a “great time for REIT listings.”

While the developments are promising, it may take some time before Hong Kong can rival its competitors. “Japan and Singapore are two dominant market players in the Asian region in terms of market capitalisation,” Shek says.


Shek says there have been ongoing efforts by the government to “reduce the hurdles and challenges in the REITs framework.”

“The recent measures by the government to provide momentum to the REITs industry are likely to be pull factors that will further the development of the Hong Kong REITs market. Hong Kong has lagged behind a bit in terms of the development of our REIT market and these recently introduced incentives will act as a catalyst for it,” Shek adds.

Stephen Chan, Hong Kong-based partner at Dechert says that there have been various initiatives rolled out over the years to improve the market and regulatory environment for REITs in Hong Kong, “including the recent REIT Code amendment in December 2020 (which allowed, among others, REITs greater flexibility in investing in minority-owned properties, in borrowings, and in property development project investments) and also the government grant scheme announced in May 2021.”

But more recently, things have changed, and momentum is growing. “As noted in a recent report on revitalising the REITs market published by the Financial Services Development Council (FSDC), among the various asset classes, REIT has gained wide popularity around the globe but is yet to gather remarkable momentum in Hong Kong,” Chan adds.


As is the case with any significant market development, lawyers are playing an important role in navigating any complexities and providing clarity.

“With amendments to the REIT Code having taken effect in December 2020, and with the rollout of a new grant scheme, lawyers will play an increasingly significant role in helping managers and trustees alike with issues relating to structure and investment types. More importantly, lawyers will help clients to navigate the evolving regulatory landscape to capture growth opportunities,” Chan says.

Throughout the REIT lifecycle, lawyers play an important role, Shek says, noting in addition to assisting with the establishment, authorisation and listing of REITs, “lawyers will also be involved in the acquisitions and disposals of properties, provide legal advice on various financial matters and regulatory requirements in connection with the investment and ongoing operations of REITs, and act for issuers, arrangers and sponsors in the equity/debt capital raising activities in connection with REITs.” Taking a broader view, Shek says the market developments in Hong Kong are encouraging. Given the ever-rising property prices in Hong Kong, “Hong Kong REITs have again outperformed its Asian peers notwithstanding COVID-19’s impact on the financial markets generally,” she says.

“Together with the latest governmental incentives, we have seen an increased interest in this space and expect to see further growth in the REITs market. In particular, it would be interesting to see if there is traction from ‘new economy’ property owners, which has also been forecasted by the Financial Services and the Treasury Bureau,” Shek adds.


To contact the editorial team, please email ALBEditor@thomsonreuters.com.

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