Cash raised by REITs are invested in assets that generate a cash flow, such as mortgage payments from a office building, shopping mall, warehouse or apartments.
Channa de Silva Director General of Securities and Exchange Commission (SEC) says, REITS is being introduced to even up the playing field in the properties market.
"That would give the small investor space to enter the real estate market," he says.
"A small scale investor who only has 100 rupees can enter the real estate market of Sri Lanka."
REITs were originally structured as legal trusts which allowed only distributions to be taxed in the hands of the REIT holders.
SEC's Namal Kamalgoda says REITS also offers an exit option for investors.
De Silva says they are studying models in Thailand, Malaysia and Singapore.
However the funds are required to disburse 90 percent of their profits as dividend payments which maybe taxable in the hands of the investors.
Kamalgoda says in Sri Lanka the requirement may be brought down to 75 percent.
All Rights Reserved.