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Poland warned it could lose billions from government bungling of real estate law

Poland's property market could miss out on billions of dollars of investment if its government fails to deliver on promises to introduce a real estate investment trust regime for commercial property, according to the CFO of one of the country's largest listed landlords.

Speaking at the MIPIM property conference and exhibition in Cannes, France, Marcin Juszczyk, CFO, chief investment officer and board member at Capital Park SA, said the Polish government's reduction of the scope of its plans for the regime was a "very unfortunate decision."

Plans for a REIT regime in Poland were launched in 2016 with a draft bill that would have allowed the establishment of real estate investment trusts for both residential and commercial property. However, since then, political wrangling over the legislation has caused the proposal to be revised to cover residential properties only. This version of the legislation has yet to be passed into law by the Polish parliament.

"We need to restart the REIT project," Juszczyk said during a panel discussion on the Polish real estate market. REIT legislation is of much greater benefit to commercial property markets than residential, he noted. "Hopefully, this first phase for residential property will be delivered shortly, but then I would really encourage the government to start thinking about the second phase for commercial property," he added.

The introduction of a REIT regime for commercial property in Poland would help attract further foreign investment to the country, Juszczyk said, noting that only 2% of the Polish real estate market's transaction volume derived from domestic investors. "We'd love to invite foreign investors to Poland," he said.

A REIT regime for commercial property would also boost investment from within Poland, Juszczyk added. "We have to also take care of our own money [in Poland], and the 700 billion zlotys in bank deposits to have an [attractive Polish property market] to invest in," he said.

REITs are a more attractive vehicle for investors in listed real estate companies due to the tax advantages they offer. Investments in other listed property vehicles incur double taxation as both the company and the investor pay tax on profits and dividends, respectively. REITs do not pay taxes at a corporate level.

The Polish real estate market enjoyed another record year for investment in 2018. Investors pumped more than €7.2 billion into the market during the 12 months, a 45% increase in the €5.0 billion invested in 2017, according to real estate services firm Savills.

As of March 12, US$1 was equivalent to 3.81 zlotys.