The amended Real Estate Investment Company Act (hereinafter referred to as the “Amended Act”), promulgated on May 27, 2025, will take effect as of November 28, 2025. 

Under the Amended Act, the Project Real Estate Investment Company (“Project REITs”) system will be newly introduced. As a result, a range of regulations previously applied to traditional REITs will be significantly relaxed. This change will make it possible to directly develop real estate through REITs under more relaxed regulations from the early development stage. The introduction of this system is considered a significant positive change for asset managers, investors, and other stakeholders involved in real estate development projects.

Below, we summarize and introduce the key points of the Project REITs system introduced by the Amended Act. For your reference, the Enforcement Decree of the Real Estate Investment Company Act (hereinafter referred to as the “Amended Enforcement Decree”), which had been announced for public comment on August 13, 2025 was promulgated into law on November 25, 2025, with content similar to the notice of proposed rulemaking.^[1] It is scheduled to take effect on the same day as the Amended Act. 
 

• Development business possible with a simple establishment report without business approval: Unlike general real estate investment companies that require business approval or registration, Project REITs can engage in real estate development business without business approval by submitting a simple establishment report within six months from the date of incorporation registration, and business approval must be obtained at the time specified by the Enforcement Decree after the development project is completed (Article 26-4, Paragraphs (1), (2), and (4) of the Amended Act).^[2] This will allow Project REITs to promptly and efficiently proceed with development-related work during the development phase without business approval and by allowing the business approval to be obtained after certain stabilization period post-completion, it could facilitate continuous holding and operation structure.
   

• Relaxation of public offering obligation: Previously, general real estate investment companies were required to conduct a public offering of at least 30% of issued shares within two years after business approval which presented challenges in practice. However, the Amended Act extended the public offering deadline from “within two years from the business approval date” to “within three years from the business approval date” for real estate investment companies, and particularly for Project REITs, the public offering deadline is extended to “within five years from the business approval date” (Article 14-8(2) of the Amended Act). Additionally, Project REITs are allowed to issue new shares to non-shareholders within the scope and method prescribed by the Enforcement Decree after establishment reporting (Article 26-4(5) of the Amended Act). With these further relaxations of public offering obligations compared to general real estate investment companies, it is expected that more flexible shareholder composition and business operations will be possible during the development stage.
   

• Relaxation of stock dispersion and ownership limit regulations: The Amended Act extended the application timing of the stock ownership limit per person from “six months after the business approval date” to “after the completion of the public offering” (Article 15(1) of the Amended Act). This applies not only to Project REITs but also to general real estate investment companies. However, since the public offering deadline for Project REITs is extended to five years after the business approval date, the regulation on stock dispersion is also extended accordingly. This relaxation of stock ownership limit, which was considered a downside of REITs compared to other investment vehicles for development projects that require substantial initial capital input, is expected to be an important factor for increased utility of Project REITs in development projects.
   

• Conversion of general real estate investment companies to Project REITs: The Amended Act allows existing general real estate investment companies that have not yet conducted a public offering to convert to Project REITs by meeting the requirements and submitting an establishment report within six months from the enforcement date of the Amended Act (Article 2 of the Supplementary Provisions of the Amended Act). Thus, general real estate investment companies established before the enforcement of the Amended Act can convert to Project REITs before public offering and enjoy the benefits of Project REITs.
   

• Regarding asset leasing and operation: PFVs are focused on distributing profits, such as sales gains, to investors after the implementation of specific real estate development projects. When using PFVs in development projects, leasing activities are allowed for a certain period after completion of construction to stabilize the assets, but it is debated whether long-term leasing beyond the existence period is possible. In contrast, Project REITs can transition to a structure that holds and operates the assets for the long term even after development is completed. Therefore, various investment strategies can be explored, including not only the sale of developed real estate but also long-term leasing, stock sales, or investment recovery through public offerings or listings of shares.
   

• Tax benefits: PFVs also enjoy tax benefits under the Special Tax Treatment Control Law, where a dividend income paid deduction applies if more than 90% of distributable profits are paid as dividends (Article 104-31 of the Special Tax Treatment Control Law). However, this provision is subject to a sunset clause, so the tax benefit is applied on the assumption of continued extension of the tax benefit (currently, the dividend income deduction benefit is scheduled to expire at the end of 2025, but according to the Ministry of Strategy and Finance’s “2025 Tax Reform Plan” announced on July 31, 2025, it is expected to be extended for three years until the end of 2028). On the other hand, Project REITs can receive the dividend income deduction tax benefit under the Corporate Income Tax Law if more than 90% of distributable profits are paid as dividends, from the development stage through the operation stage, without any sunset limitation for this tax benefit (Article 51-2(1)4 of the Corporate Income Tax Law).
   

• Tax deferral on contribution in-kind: Furthermore, according to the “2025 Tax Reform Plan,” if domestic individuals or domestic corporations contribute land or buildings in-kind within five years from the date of approval of Project REITs establishment, capital gains tax and corporate tax arising from such contribution will be deferred until the disposal of the shares acquired by the contribution in-kind (subject to certain condition). The introduction of this tax deferral benefit is expected to act as an incentive for Project REITs in development projects involving planned contributions of land in kind, such as joint holding business.

^[1]   The Amended Enforcement Decree includes some changes from the announcement, such as stipulating that Project REITs must dissolve if they fail to obtain business approval or registration within the designated time frame (Article 43-4 of the Amended Enforcement Decree). However, most of the content is similar to the announced proposal, with only some changes in structure and the order of the provisions.
^[2]   The Amended Enforcement Decree also requires Project REITs to obtain business approval or registration within 18 months after the completion of the real estate development project (such as use approval or completion inspection) (Article 30-2(2) of the Amended Enforcement Decree).

[Korean Version]