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he government may have to offer more incentives to attract investors and boost issuance in the local Real Estate Investment Trust (REIT) market, as current regulations are deemed unattractive compared to other countries, according to a Financial Services Authority'€™s (OJK) official.

Fahri Hilmi, supervisor for capital market II at the OJK, said the agency and the Finance Ministry were discussing plans to revise a new tax incentive for REIT, so that local REITs could be appealing for both investors and companies.

Fahri said some players in the property industry saw that the new tax incentive for REIT offered by the government continued to have some loopholes.

'€œ[The regulation] will probably be revised again in terms of taxation articles, so that it can be more accommodative for the market players and competitive enough compared to other countries,'€ Fahri said in Jakarta on Monday.

With more competitive regulations, Fahri said, Indonesian companies would be more inclined to issue REITs on the local bourse, rather than chose neighboring countries, especially Singapore, to raise funds.

OJK data show that REIT products issued by Indonesian companies and listed in Singapore amount to some Rp 30 trillion (US$2.14 billion) due to that country'€™s attractive tax rules.

'€œThey issue REITs in Singapore and other countries, although their projects are in Indonesia. As our property industry is developing, we hope to lure those products here,'€ he said.

The new incentive for REITs, which was signed in October as part of the government'€™s fifth stimulus package, removes double taxation on portfolio investors who invest in REIT by using the collective investment contract (CIC) system.

This system will enable investors to pool CIC funds in a collective investment vehicle (CIV), rather than investing them directly, without being liable for double taxation.

At present, the investment method is subject to double taxation; on its dividends and on the activities, because the CIV itself is considered a corporate body.

Finance Minister Bambang Brodjonegoro said previously that the government would consider the CIC and CIV as one entity, thus making them subject to a single tax. '€œThere will be no taxes levied on the dividend paid by the special purpose company [CIV] to CIC investors,'€ he said.

'€œAnd if an underlying asset sale occurs through the special purpose company, no tax will be charged either,'€ he said, adding that the government hoped the incentive would allow the REIT market to flourish and attract new investors into the country.

So far, the only locally listed REIT using the CIC system was issued by Ciptadana Asset Management on Aug. 1, 2013.

Meanwhile, Indonesia Stock Exchange (IDX) director for corporate listings Samsul Hidayat said at least 11 property companies were eager to issue REITs on the bourse.

'€œHowever, none of them have officially sent proposals to us. Perhaps, they will want to start issuing the units here if they see the benefits from the regulations,'€ he said.

Previously, James Riady, CEO of Lippo Group, a real estate development company, said the company was planning to move its two REITs from Singapore to Indonesia.

The Singapore-listed REITs are Lippo Malls Indonesia Retail Trust and First REIT.