Georgia is set to establish a regulatory framework for real estate investment trusts (REITs), with amendments to the Law on Investment Funds expected to be considered by Parliament during its autumn session.
REITs have a structure similar to investment funds and primarily invest in real estate, allowing both institutional and individual investors to gain exposure to the sector and diversify their portfolios. The investment sector views the introduction of REITs positively, with Foresight Investment Group CEO Rati Morchiladze saying the instrument could provide a new source of financing beyond bank lending.
Morchiladze said liquidity will be the main challenge for REITs to operate effectively. Since real estate itself is relatively illiquid, REIT units would need to be listed and actively traded on a secondary market. He added that a functioning REIT market could also contribute to improving liquidity on Georgia’s stock exchange, although attracting enough institutional and individual investors remains a challenge.
According to a study prepared under USAID’s Economic Governance Program, the development of real estate investment funds could generate more than GEL 2 billion in additional economic value over 10 years. The study estimates that the direct and indirect contribution of REIT-created products to GDP could increase from 0.44% to 4.2%.
