Key proposals for the introduction of tax-efficient Real Estate Investment Trusts (REITs) in 2007 have been announced by the government.

Property companies wanting to qualify for REIT status will have to pay an exit tax, which the treasury has confirmed will be the conversion charge levied at 2% of the gross market value of the investment assets.

The rules covering the amount of debt a REIT can use in its investment must now exceed interest payments by 1.25 times, not 2.5 times, while the required distribution rate will be 90% of net profits.

Martin Graham, Director of Market Services at the London Stock Exchange has welcomed the details on UK REITS published in yesterdays budget: "There has been a very constructive dialogue between government and the industry around REITS, and the detail announced demonstrates how much progress has been made. We very much look forward to continuing to work with the property industry to create an environment that will make London the natural home for the European REITS industry."