As asset market volatility intensifies—with sidecars and circuit breakers triggered repeatedly in the stock market amid the Iran war and Bitcoin prices plunging since the start of the year—real estate investment trusts (REITs) are gaining popularity among investors seeking stable returns.
REITs are companies that pool funds to invest in real estate and distribute the resulting income. By law, they must distribute at least 90% of profits to shareholders as dividends.
While REITs rarely see explosive price gains like growth stocks during bull markets, their smaller volatility during downturns offers relatively stable returns. Total assets surpassed 100 trillion won in 2024, and as of late February 2026, 449 REITs have grown to a combined 118.2 trillion won. In 2024, listed REITs averaged 7.5% annual dividend yields with an average price-to-book ratio of 0.8.
Listed REIT Market Cap Exceeds 10 Trillion Won, 25 Years After Introduction
According to the Korea REITs Association and Korea Exchange, the combined market capitalization of 25 listed REITs reached 10.0381 trillion won based on the February 27 closing price, surpassing 10 trillion won for the first time. This milestone comes 25 years after the REIT system was first introduced in Korea in 2001.
Market cap, which stood below 8 trillion won at 7.8997 trillion won at the end of December 2024, broke through 9 trillion won at 9.2048 trillion won in September of the following year, then surpassed 10 trillion won just five months later.
As of the April 10 closing price, combined market cap stood at 10.2955 trillion won. Individual REITs are also growing rapidly. Four have joined the "1 trillion won club" by market cap: SK REIT (395400.KS) at 1.9416 trillion won, Lotte REIT (330590.KS) at 1.3784 trillion won, ESR Kendall Square REIT (365550.KS) at 1.1443 trillion won, and Hanwha REIT at 1.0094 trillion won. Shinhan Alpha REIT follows closely at 710.6 billion won.
Despite global asset prices fluctuating following the U.S.-Iran war outbreak, REITs have maintained solid growth. While the KOSPI fell 6.2% from 6,244.13 on February 27 to 5,858.87 on April 10, the KRX Real Estate REIT Infrastructure Index actually rose from 1,415.91 to 1,432.20.
Individual REIT returns have also been solid. As of April 10, Hanwha REIT posted the steepest gain at 35.59% year-to-date, followed by Samsung FN REIT (448730.KS) at 26.33% and Lotte REIT at 20.45%. Expected returns are even higher when dividends are factored in. Despite ongoing uncertainty about global rate cut timing, REITs are demonstrating defensive strength backed by solid dividend yields from their real asset base.
Prolonged war remains a concern. Hana Office REIT, which had attracted attention as Hana Financial Group's first listed REIT, withdrew its planned KOSPI listing originally scheduled for April 17. The withdrawal filing stated the decision was made "after comprehensively considering current domestic and international financial market volatility expansion and uncertainty."
However, most domestic REITs are considered stable as they primarily hold office properties in prime Seoul locations such as Jongno and Gangnam. Hana Office REIT also remains a candidate for future listing. Its underlying assets—Hana Financial Group's Gangnam headquarters and Taekwang Tower—are located in prime areas with low vacancy rates. Vacancy rates in Gangnam's major business districts currently stand at only about 2%, with rents steadily rising.
"REITs are linked to real assets, so they tend to show relatively stable performance during periods of extreme market volatility caused by war," said Park Se-ra, a researcher at Shinyoung Securities. "However, given their strong sensitivity to interest rates, investors should be cautious about potential base rate increases."
Government Signals Growth Commitment with Tax Incentives
The government continues policies aimed at activating the REIT market. The Lee Jae-myung administration is pursuing shareholder-friendly policies, including introducing separate taxation on dividend income from high-dividend stocks with payout ratios of 40% or higher. REITs, which must distribute 90% of profits to shareholders, are typical high-dividend products.
The government specified plans to pursue REIT separate taxation benefits in its "2026 Economic Growth Strategy" announced earlier this year. Expectations are growing that separate taxation on REIT income will become available starting next year. Separate taxation would eliminate comprehensive financial income tax burdens, increasing investors' after-tax returns. Tax rates ranging from a minimum of 15.4% to a progressive maximum of 49.5% would drop to a flat 9.9%.
Previously, receiving REIT separate taxation benefits required holding investments for three years within a 50 million won limit and filing individually.
The government also introduced the Project REIT system last year. Designed to address the low-capital, high-debt vulnerabilities of existing project financing (PF) and create a feasibility-focused development environment, Project REITs allow participation from the development stage, unlike regular REITs that invest in completed assets. The structure enables all processes from development through completion and dissolution within a single REIT framework.
Project REITs also differ from Project Financing Vehicles (PFVs). While PFVs were temporary entities that dissolved after development and sales, Project REITs directly hold and operate assets after development, managing rental income and asset values over the medium to long term.
The Ministry of Land, Infrastructure and Transport is encouraging PFV conversion to Project REITs. The conversion period has been extended from May 29 to November 29, and acquisition tax obligations during conversion have been waived. Tax deferral on in-kind contributions is considered a Project REIT advantage—capital gains taxes on land or buildings contributed as in-kind investments can be deferred until REIT shares are sold. Nine Project REITs have completed establishment filings to date.
Challenges Remain: Calls for Shorter Dividend Cycles and Acquisition Tax Exemptions
Korea's REIT market still has far to go. Listed REIT market cap of around 10 trillion won significantly trails the U.S. (2,064 trillion won), Japan (156 trillion won), and Singapore (110 trillion won).
The Korea REITs Association is calling for shorter dividend cycles and acquisition tax exemptions. While investors want monthly or other frequent dividends, commercial law prevents REITs from shortening dividend cycles through interim dividends. The association argues shorter cycles are needed to reduce dividend adjustment impacts.
The industry also wants to revive the 30% acquisition tax reduction for REIT-acquired properties, which expired in 2014. Arguments for acquisition tax reduction include expanding opportunities for retail investors to invest small amounts in real estate through REIT shares and helping stabilize the housing market by channeling investment into large, quality commercial properties rather than speculative residential investments. Japan and the U.S. imposing lower acquisition taxes is also cited as a consideration.
There are also calls to exclude REITs from holding company regulations under the Fair Trade Act. While holding company regulations aim to prevent conglomerate-style ownership and control, REITs pool funds from multiple investors to distribute rental income, meaning corporations gain no benefit from controlling them.
"The Real Estate Investment Company Act requires distributing 90% of distributable profits as dividends, and dividends are paid according to investor ownership ratios, so REITs need to be excluded from holding company regulations under the Fair Trade Act," said Cho Jun-hyun, head of policy at the Korea REITs Association.
