Recently, the Enforcement Decree of the Real Estate Investment Trust Act has been amended. This amendment relaxes the regulatory regime on real estate investment trusts ("REITs") and grants REITs with more discretionary power in conducting their businesses. Further, additional bills proposing further amendment of the Real Estate Investment Trust Act have been presented at the current session of the Korean National Assembly, which, if enacted, are expected to further relax the regulatory regime on REITs.

For potential investors interested in the Korean real estate market, this newsletter intends to summarize key aspects of both the amendment of the Enforcement Decree of the Real Estate Investment Trust Act which took effect in 2014 and the bills proposing to further amend the Real Estate Investment Trust Act that are pending at the current session of the Korean National Assembly.

1. Major Amendment to the Enforcement Decree of the Real Estate Investment Trust Act in 2014

In 2014, the Enforcement Decree of the Real Estate Investment Trust Act was amended twice. A. Amendment of the Enforcement Decree of the Real Estate Investment Trust Act dated January 16, 2014 (effective January 17, 2014):

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B. Amendment of the Enforcement Decree of the Real Estate Investment Trust Act dated October 28, 2014 (effective October 28, 2014):

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2. Content of Amendment Bill of the Real Estate Investment Trust Act

A total of four bills proposing amendment of the Real Estate Investment Trust Act are pending before the current session of the Korean National Assembly, and three of them are designed to relax regulations on REITs. Among those three, two have been proposed by members of the National Assembly rather than by the executive branch; however, they are, in a larger context, consistent with the policy direction the Park administration has recently announced. We thus summarize key aspects of all the bills without distinguishing among them.

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3. Implications

The amendment to the Enforcement Decree of the Real Estate Investment Trust Act in 2014 and the currently proposed amendments to the Real Estate Investment Trust Act, if enacted, are expected to help address concerns that REITs are subject to stricter regulations when compared to other real estate collective investment vehicles to which other laws apply. In fact, we witnessed a visible outcome of the relaxed regulations on REITs, when a REIT, for the first time in Korea, invested in an overseas real estate asset by establishing an investment vehicle abroad. As amendments to the Real Estate Investment Trust Act and the Enforcement Decree thereof may allow new structures for investing in domestic and overseas real estate assets, it is advisable for potential investors to keep up with the process and content of such amendments.