South Korea’s National Assembly has approved a bill enabling Real Estate Investment Trusts (REITs) to engage not only in property investment but also in development and leasing projects. (Image courtesy of Pixabay/CCL)
SEOUL, April 17, (Korea Bizwire) — In a significant move to stabilize the nation’s troubled real estate project financing (PF) market, South Korea’s National Assembly has approved a bill enabling Real Estate Investment Trusts (REITs) to engage not only in property investment but also in development and leasing projects.
The Land, Infrastructure and Transport Committee’s subcommittee passed the amendment to the Real Estate Investment Company Act on April 16, paving the way for what the government calls “Project REITs.” These vehicles will be allowed to directly invest in and manage real estate development ventures, a role traditionally reserved for PF vehicles.
REITs, which pool capital from investors to buy and manage income-producing properties, are generally viewed as safer than traditional PF structures due to their higher equity ratios. According to the Ministry of Land, Infrastructure and Transport, REITs involved in development currently maintain an average equity ratio of 38%, compared to just 2–5% for PF vehicles.
The ministry has positioned Project REITs as a more stable alternative to PF in the wake of recent defaults and liquidity concerns in the real estate sector. While the initiative was first proposed in June 2024, it had faced legislative delays until now.
The revised law introduces a set of regulatory relaxations designed to make Project REITs more agile. These include exemptions from the 50% individual shareholding cap and a reduction in mandatory disclosure requirements, measures intended to accelerate decision-making and investment flows.
Alongside the REITs bill, the committee also passed a revision to the Real Estate Development Project Management Act, which aims to improve government oversight of PF-related ventures.
The updated legislation mandates the establishment of an integrated information system covering all development projects above a certain scale, including those led by state agencies, municipalities, and private firms.
It also authorizes the creation of a government-led coordination committee to oversee and, if necessary, intervene in large-scale private development projects.
Together, the legislative changes mark a shift toward greater transparency and institutional participation in South Korea’s real estate financing ecosystem, as the government seeks to prevent future systemic risks in the property market.
M. H. Lee (mhlee@koreabizwire.com)
