Real Estate Investment Companies (REICs – REITs) are closed-ended companies, usually listed, which invest in real estate and benefit from a special preferential tax regime. A REIC is licensed by the Hellenic Capital Market Commission and aims to develop and manage a strong portfolio of high-quality properties. With the objective of achieving stable financial results and providing competitive returns to its shareholders, a REIC implements a strategy based on the careful selection of investment opportunities, enabling private and institutional investors to invest in large-scale income-producing real estate assets, with income distributed in the form of dividends.
The success of REICs is attributed to the achievement of three-dimensional advantages. As has been stated, “REITs smell like real estate, look like bonds and walk like equity”, meaning that REICs combine indirect investment in large real estate assets through shares with stable dividend income.
Institutional Framework
A REIC is therefore a real estate investment company operating in Greece under a strict legal framework introduced in 1999 by Law 2778/1999. A REIC is supervised by the Ministry of Economy and Finance and the Hellenic Capital Market Commission and is listed on the Athens Stock Exchange, which belongs to one of the leading global stock exchange groups, Euronext. Euronext is now twice the size of the London capital market and operates as the largest liquidity pool in Europe, providing unlimited access to investors and companies worldwide. As a leader in the European capital market, Euronext connects the Greek capital market with global markets, enhancing international visibility and growth opportunities for listed companies.
The overall operation of a REIC is governed by the provisions of Greek law.
Specifically, a REIC:
- invests in large real estate portfolios, with professional management and diversification
- provides high liquidity of assets with low transaction costs, which is not typical of direct real estate investment
- achieves stock market capital gains, as investors hold shares with immediate valuation and without valuation uncertainty; historically, REICs achieve higher returns compared to direct real estate investment or investment in property companies
- enjoys a favorable tax regime with tax-free profits and tax-free dividends
- thoroughly analyzes each investment proposal and evaluates high-return prospects based on strict qualitative criteria
- continuously updates its business plan to respond to changing market conditions
- geographically diversifies its investments to reduce location-specific risks
- optimizes portfolio composition by investing in various property categories
- enters into long-term leases with reliable tenants to ensure stable income
A REIC aims to increase the value of its properties through improvement and upgrading, placing particular emphasis on investments contributing to sustainable development and social value creation. It maintains a diversified property portfolio, including income-generating assets such as retail stores and residential units, as well as development properties such as industrial, hotel, office and other facilities.
Permitted real estate investments
Minimum real estate investment: At least 80 percent of the total investments of a REIC must be allocated to real estate or real-estate-related rights.
Investment variety: In addition to direct property acquisitions, a REIC may invest in financial instruments linked to real estate, such as lease contracts or surface rights.
Restrictions on properties under construction: The total cost of properties under construction may not exceed 20 percent of total investments, limiting liquidity risk and enhancing security.
Investment diversification: The value of each individual property may not exceed 25 percent of the total value of the REIC investment portfolio.
Restriction on properties for own use: Properties acquired for the company’s own use may not exceed 10 percent of total assets.
Profit distribution to shareholders
Mandatory profit distribution: A REIC must distribute at least 50 percent of its annual net profits to shareholders each year. In this case, the REIC commits through its articles of association to distribute 60 percent of annual net profits, exceeding the statutory minimum and adopting a strategic policy aimed at strengthening shareholder trust, ensuring stable returns and establishing the REIC as a reliable and dynamic investment institution, promoting long-term value for all shareholders.
Exceptions: Profits arising from the sale of properties are not included in distributable profits.
Borrowing
Borrowing for investments: A REIC may borrow up to 75 percent of the total value of its assets to acquire or develop properties. In this case, the REIC will choose to borrow up to 50 percent, adopting a conservative risk-management strategy to maintain capital adequacy, limit excessive leverage and ensure resilience during economic fluctuations.
Borrowing for operational needs: A REIC may also borrow up to 10 percent of its equity to acquire properties for its own use, subject to reduction depending on investments already made.
Share capital and structure
Minimum capital: A REIC must be established with minimum capital of EUR 25 million. In this case, the REIC is founded with capital of EUR 27 million, plus founding capital, strengthening the initial investment base and capital adequacy from inception.
Capital formation methods: Capital may be raised through cash contributions, investments in financial instruments, shares in real estate companies or transfer of properties.
Type of shares: Shares are registered.
Amendments to articles: Any amendment to the articles of association or capital increase requires approval from the Hellenic Capital Market Commission.
Investment valuation: An independent certified valuer assesses the value of properties and other investments annually. In this case, valuation is performed twice per year, ensuring more accurate and up-to-date valuation information for investors.
Registered seat: The REIC is domiciled in Greece.
Tax benefits of REICs
REICs enjoy significant tax advantages, making them attractive investment vehicles, encouraging long-term real estate investments, supporting market development and attracting capital.
Main tax benefits include:
Exemption from property transfer tax: REICs are exempt from property transfer tax when acquiring or disposing of real estate, allowing higher net returns and more competitive investment products, particularly attractive for foreign investors seeking a Golden Visa through real estate investments.
Investment through a REIC for participation in the Golden Visa program
The Greek Golden Visa program sets the minimum investment amounts by law as follows. The required investment varies depending on geographical zones for the acquisition of eligible real estate, with a minimum property size of at least 120 sq.m., as outlined below:
EUR 800,000
– Attica, Athens, Thessaloniki, Mykonos, Santorini, Corfu, Crete, and all islands with a population exceeding 3,100 inhabitants: EUR 800,000
EUR 400,000
– All other areas of Greece (mainland and small islands): EUR 400,000
EUR 250,000 (with no minimum size requirement of 120 sq.m.)
– Anywhere in Greece, provided that the investment relates to conversion of commercial property into residential use or listed / preserved buildings under restoration.
Example of property acquisition with a notarial contract value of EUR 800,000
- Real Estate Transfer Tax (RETT) – 3% of the contract value
RETT: EUR 24,000. - Registration with the Land Registry / Cadastre – 0.9% of the contract value
Registration cost: EUR 7,200. - Minimum Notary Fee – Contract drafting cost: EUR 6,770 plus VAT 24%, total EUR 8,344.80 (up to EUR 120,000: 0.80%, from EUR 120,000.01 to EUR 380,000: 0.70%, from EUR 380,000.01 to EUR 800,000: 0.95%).
- Minimum Lawyer’s Fee: EUR 7,849.20, including VAT 24% (Appearance at signing: EUR 4,220.00 + VAT EUR 1,012.80, Title search: EUR 2,110.00 + VAT EUR 506.40, Total net fee: EUR 6,330.00 + VAT EUR 1,519.20).
- Real Estate Broker Fee – 2% (as commonly applied under applicable law) + VAT 24%
EUR 16,000 + VAT EUR 3,840 = EUR 19,840.
Total taxes and ancillary costs: EUR 67,234.
The investor’s benefit is evident when choosing to acquire an equivalent-value real estate exposure through a REIC, as the above significant amount of EUR 67,234 is entirely avoided. By investing in real estate through a REIC, the investment becomes immediately more efficient and competitive, while the net capital required for the acquisition of a residence and residence permit is substantially reduced. Through investment in a REIC, the investor pays only the EUR 500,000 required for participation in the Golden Visa program and avoids all additional costs associated with direct property acquisition, obtaining an attractive, income-generating and tax-efficient investment.
Income tax exemption
REICs do not pay corporate income tax. Instead, they are subject to a special tax of 10 percent on the ECB reference rate increased by one percentage point, calculated on the average value of investments and cash reserves. This taxation method is transparent, portfolio-based and maintains competitiveness.
Exemption from advance tax payment: Shareholders are not required to pay any advance income tax.
Exemption from capital gains tax: Profits arising from the sale of real estate assets are not subject to taxation.
Tax-free dividends and interest: Dividends distributed to shareholders, as well as interest income generated from the REIC’s investments, are exempt from tax.