Polish REITs: A chance to develop the real estate and capital markets

The concept of REITs (real estate investment trusts), known in Poland as ‘Spółki Inwestujące w Nieruchomości’ (SIN), has captured the imagination of participants in the Polish real estate and capital markets for years. Perceived as a means of boosting investment, increasing market accessibility for a wider group of investors, and improving sector transparency, REITs have a long-standing presence around the world.

They originated in the US, where Congress passed a law in 1960 to allow small investors to participate in the profits of large real estate projects, which had previously been mainly available to institutions. This model gained popularity, spreading to many countries, evolving and adapting to the specifics of local legal and economic markets. The most developed REIT markets in Europe are found in UK (UK REITs), France (SIICs), the Netherlands (FBIs), Belgium (GVVs/SIRs) and Spain (SOCIMIs).

The basic principle of REITs is to invest in commercial real estate that generates rental income, distributing a significant portion of the profits to shareholders in the form of regular dividends. REITs combine the advantages of investing in fixed assets such as real estate, with the liquidity and transparency of shares listed on the stock exchange.

The debate on introducing REITs in Poland has been ongoing for over a decade, with varying intensity and legislative activity. Despite the lack of final regulations, the Polish commercial real estate market is experiencing dynamic growth and growing interest from domestic investors. According to CBRE data, the value of commercial real estate transactions reached €5 billion in 2024, with the share of domestic capital increasing to 10%. This represents a significant – albeit still relatively modest – improvement compared to other markets. Not so long ago, this figure was around 5%.

The key assumptions of the proposed Polish REITs (SINs) are as follows:
The current known assumptions for law on SINs (companies investing in real estate) provides that these will be joint-stock companies with a minimum share capital of PLN 100 million, whose main activity will be investing in real estate located in Poland. A key requirement is that these properties must be intended for rental, with the option to sell them after at least one year from the acquisition date. SIN management will be entrusted to specialised and experienced entities (asset managers), whose activities will be supervised by the Polish Financial Supervision Authority (KNF). This will entail regular reporting (quarterly). The proposed taxation system provides for a preferential corporate income tax (CIT) rate of 10% at the time of dividend payment to shareholders. A key performance indicator for SINs is the requirement to maintain a minimum of 80% of the balance sheet value in real estate assets.

Potential benefits for the Polish economy and capital market:
Introducing a stable and attractive legal framework for REITs (SIN) could generate a wide range of benefits for the Polish economy. It is expected to stimulate the development of the property rental market, which, in the long term, could lead to more affordable rental housing and stabilise property prices. Additionally, REITs could encourage investment in renewable energy sources within the construction sector, thereby promoting sustainable development.

For institutional and individual investors alike, REITs could become an attractive new instrument for saving and generating passive income, as well as for diversifying investment portfolios. Crucially, from the perspective of developing the Polish capital market, REITs could significantly increase the proportion of domestic capital in the commercial real estate market, which has so far been dominated by foreign entities. An increase in the number and capitalisation of companies listed on the Warsaw Stock Exchange (WSE) could boost its development and appeal to investors. The potential to create new jobs in real estate management and the capital markets, as well as additional tax revenue for the state, is also significant.

Market figures such as Mark Noetzl of NEPI Rockcastle emphasise that delaying the introduction of REITs represents a loss for the Polish market, which could benefit significantly from clear, favourable regulations for this type of entity. He also highlights the potential for Polish investors to expand and invest in real estate abroad, following the lead of companies from other countries in the region. Daniel Bienias from CBRE emphasises that, alongside REITs, creating a more comprehensive ecosystem to support real estate investment is crucial, including through regulatory reforms concerning investment funds and eligibility criteria for individual investors. Increasing the share of local capital is essential for long-term, sustainable market development.

Regulations and amounts in the world’s largest REIT markets:
In order to gain a better understanding of the potential and characteristics of REITs, it is worth examining the regulatory framework and operational scale in the three largest REIT markets worldwide: the United States, Japan, and Australia.

US: This is the largest and most mature REIT market in the world. The main regulations are contained in the Internal Revenue Code (IRC). Key requirements include:
Structure: They must be managed as corporations or trusts.
Assets: At least 75% of assets must consist of real estate, cash, and US government securities.
Income: At least 75% of gross income must be derived from rent, interest on mortgages, or the sale of real estate.
Distribution: At least 90% of taxable income must be paid to shareholders in the form of dividends.
Number of shareholders: They must have at least 100 shareholders after their first year of operation.
Ownership concentration: No more than 50% of the shares may be owned by five or fewer individuals at any time during the second half of the financial year.
Market value: US REITs are capitalised at trillions of dollars and cover a variety of real estate sectors, including offices, shopping centres, warehouses, apartments and infrastructure.
Japan (J-REITs): Established in 2001, the J-REIT market is now the second largest in the world. It is regulated by the Japanese Investment Trusts and Investment Companies Act. Key features include:
Structure: They must be established as investment trusts.
Assets: Most assets must be real estate.
Distribution: As in the US, J-REITs must pay out a significant proportion of their income (typically over 90%) to shareholders to qualify for preferential tax treatment.
Supervision: They are regulated and supervised by the Financial Services Agency (FSA).
Market value: J-REITs have a market capitalisation in the tens of trillions of yen and are strongly represented in the office and retail sectors, as well as in logistics and residential properties.
Australia (A-REITs): The Australian REIT market is the third largest in the world and is known as Australian Real Estate Investment Trusts (A-REITs). The regulations are contained in various pieces of legislation, including the Corporations Act. Key aspects include:
Structure: Most A-REITs are unit trusts.
Assets: They mainly invest in commercial real estate.
Distribution: As in the US and Japan, A-REITs distribute high incomes to investors in order to maintain their preferential tax status.
Supervision: They are regulated by the Australian Securities and Investments Commission (ASIC).
Market value: A-REITs have a market capitalisation reaching hundreds of billions of Australian dollars and a significant presence in the retail, office, logistics and infrastructure sectors.
A comparison of these markets shows that clear and stable regulations, a requirement for high income distribution to shareholders and effective supervision are the key elements of REITs’ success worldwide. Differences in legal structure and detailed requirements reflect the specific nature of local legal and market systems.

Summary and outlook for Poland:
Taking into account the assumptions developed and global best practices, the introduction of REITs in Poland offers promising prospects for reviving the commercial real estate market, increasing the share of domestic capital and offering new, attractive investment opportunities. The expected regulatory changes, the result of many years of discussion and analysis, could strengthen the Polish capital market and real estate sector by increasing their transparency and attractiveness to domestic and foreign investors. The final form of the regulations and how they are implemented will be crucial in realising the potential of REITs in the Polish economy.