• REIT legislation is currently adopted in 41 countries around the world. In Romania, the legislative initiative regulating REITs passed the Senate 
• Hungary, Mexico, Germany, France, Germany, UK are just a few countries where legalizing the operation of REITs has brought visible results in the number of IPOs and more investors. 
• Markets that have implemented REITs have seen significant increases in real estate investment and IPOs.
• In December 2022, there were 893 REITs listed globally, with a total market capitalization of $1.9 trillion, a significant increase from the 120 REITs listed in two countries in 1990.

The Romanian real estate market is underrepresented on the local capital market, despite a significant contribution to Romania's GDP of 7.2% in 2023. Legislation of REITs (Real Estate Investment Trusts), real estate investment trusts, would make it easier for players in the real estate industry to attract capital and ensure a better representation of the sector on the stock exchange, according to an analysis carried out at regional and global level by a team of researchers employed by Meta Este Trust (stock symbol MET), a holding company active in the Romanian real estate sector and acting as a portal between the real estate market and the capital market. The main advantages of REITs are high liquidity, low transaction costs compared to direct real estate transactions, transparency, accessibility, and inflation protection.

Alexandru Bonea, CEO of Meta Estate Trust: "REITs are the way for Romanians to invest in the real estate sector by paying the cost of a listed share. They are the link between the capital market and the real estate market. Three years ago, together with the other founders of Meta Estate Trust, we set out to democratize real estate investments. The evolution of Meta's business in the last three years shows us that the Romanian economy needed and still needs a very good connection between the real estate and capital markets, both to increase the liquidity of the capital market and to diversify the development options for the real estate market. The Meta Estate Trust team was able to raise capital, invest in the real estate sector, list the company, generate good financial results, and reach almost 1,000 shareholders. The functioning of REITs is thus proven, and in order to move to the next stage, the market needs related legislation to scale up businesses in this field and further contribute to the development of the capital market, real estate, and the Romanian economy.".

Currently, 41 countries and regions, representing 83% of global GDP and nearly 5 billion people, have adopted REIT legislation, according to analysis by Meta Estate Trust. As of December 2022, there were 893 REITs listed globally, with a total market capitalization of $1.9 trillion, a significant increase from the 120 REITs listed in two countries in 1990, the analysis said. Hungary, Mexico, Germany, Sweden, the Czech Republic, and Germany are just a few countries where legislating the operation of REITs has brought visible results: more real estate IPOs, improved market capitalization, and more investors investing in real estate through the stock exchange. In Romania, the legislative initiative regulating REITs passed the Senate this year.

Germany, through the use of REITs, has been able to significantly increase the real estate sector's share of market capitalization as a share of GDP. Mexico introduced FIBRAs (the Mexican equivalent of REITs) in 2004, which led to a substantial increase in the number of listed real estate companies. From 2013 to 2023, the number of publicly traded FIBRAs increased from 9 to 26, while market capitalization grew at an annualized rate of 33.4%. REITs in Hungary attracted significant investments and contributed to the diversification of real estate portfolios. In 2023, the market capitalization of REITs in Hungary's REITs increased by 15% compared to 2022, reflecting increased investor interest. In Hungary, the REIT market saw an increase in IPOs in 2023 when the market capitalization of REITs in Hungary increased by 15% year-on-year. 

Main findings of the study

• Romania should implement as soon as possible the necessary legislation to support the creation and development of REITs in order to attract capital and stimulate the real estate market.
• Government and financial institutions should promote financial education for investors, especially small investors, to raise awareness of the benefits of REITs.
• The introduction of REITs will most likely have a positive effect on the tax collection rate and increase dividend tax revenues.
• Clear and transparent regulation is essential to creating a safe and attractive environment for REIT investment, reducing speculative risks, and protecting the market from large fluctuations.

How do REITs work?

In a nutshell, REITs (or real estate investment trusts) are listed companies that own and operate entire real estate portfolios with the sole purpose of sharing 90% of the returns generated with their shareholders.

These companies have three very important characteristics:

1. Particular investment model: these companies are in the business of owning real estate portfolios and operating them to generate recurring income;
2. Special legislation: A REIT is only a REIT in the true sense of the word when it has special legislation governing how it operates. The main aim is that an entire real estate portfolio behaves like direct ownership of a real estate asset. To this end, in all jurisdictions, these companies are obliged to distribute almost all profits as dividends.
3. Considerable scale: these vehicles only deliver maximum value when the size of their portfolios and capital structure is large enough to fully exploit economies of scale.

Thus Romanians have the possibility, instead of buying an apartment for investment purposes, to acquire REITs, shares listed on the stock exchange, through which they have exposure to a number of real estate assets professionally owned and managed by the REIT. The REIT legislation provides easy access for both institutional and small investors to real estate assets that, through their presence on the capital market, become more liquid, with an impact on portfolio diversification and stability.

The introduction of REITs could contribute to a better representation of the real estate sector in Romania, offering regulated and accessible financial solutions that facilitate its integration into the capital market. Currently, the Romanian real estate market is only marginally present in the overall market capitalization, despite the economic importance of the sector.

The legislative proposal to regulate in Romania real estate investment trusts, known internationally and locally as REITs, passed this year's vote by senators. To enter into force, the legislative initiative also needs the vote of the Chamber of Deputies. The proposal was initiated by PNL MEPs Diana Morar, Gabriel Andronache, and Sebastian Burduja.