The Effect of Consequences in Utilizing Real Estate Investment Trust (REIT) on Property Development

Abstract

There are many financing sources in the property development investment process. Conventional financing often produces an un-optimal and unprofitable cost of capital. Real Estate Investment Trust (REIT) is one of the alternative financings that has been applied in global property projects. This financing strategy can be used as an option in property development in Indonesia. Real estate companies in Indonesia understand the development of REITs and also the advantages of using REITs. But still doubtful about the implementation. This study examines the consequences of using REIT and its influence on financing for developers. Two research methods were carried out. The first is a meta-analysis to determine the consequences of using REITs based on previous research, and the second is a questionnaire survey to confirm the results of the meta-analysis to the respondents of developer companies in Surabaya. Data were then analyzed using multiple linear regression. The findings indicate that the consequences of REITs are tax advantage, financial report transparency, 90% dividend distribution obligations, and the need to enter the capital market or acquire property. Then from the statistical results, it is found that the necessity to enter the capital market or acquire property is the most significant consequence of the decision to use REIT. These consequences affect the decision to use REIT by 40.4%, which means that the effect is considered weak, and all of the independent variables positively influence the dependent variables.