REAL Estate Investment Trusts (REITs) came into being in the UK as part of the Finance Act 2006, but there are still only 24 of them in existence.

At nearly five years old, their future may now look brighter.

Under new proposals announced at the beginning of this month, the 2% entry charge is being abolished in summer, 2012, giving access to the global REIT brand, and all its tax benefits, for free.

In addition, a new diverse ownership rule for institutional investors will help attract more institutional money into the built environment and hopefully into residential property.

The permitted list of institutions includes sovereign wealth funds and UK pension schemes, insurance companies and unit trusts (and each of their overseas equivalents).

The Government is clearly making great efforts to attract overseas institutional money into UK property, which means that it is a pity that charities, property investors such as overseas REITs, and financial institutions such as banks are not counted as institutions.

However, all the proposals remain open for consultation and it is to be hoped that the Government will change its mind to encourage further international investment.

The new proposals also contain a number of relaxations, which should be instrumental in encouraging the formation of new REITs.

We can expect a number of North West property groups to actively consider the REIT regime now.

A major boost will be the three-year grace period for new REITs to meet the diverse ownership requirement, and, in addition to this, REITs will be allowed to be traded on less costly stock exchanges such as the Alternative Investment Market.

This makes the proposals good news for a whole range of stakeholders, from shareholders in existing REITs to those wishing to launch new REITs.

However, further changes are still needed to encourage residential and social housing REITs.

The draft legislation is certainly a step in the right direction, but there is a great deal more to be done to encourage the institutional and overseas investment that is badly needed for UK property and to help ease the housing crisis.