REITs – a global tool for real estate investing gaining popularity in Ukraine
REITs – a global tool for real estate investing gaining popularity in Ukraine
Our expert: Oleksandr Demchuk, Counsel of EVERLEGAL Real Estate Practice.
The EVERLEGAL lawyer article was also published in Property Times at the following LINK.
Real Estate Investment Trusts (REITs) have become an established, reliable asset class worldwide. As of the end of 2024, more than a thousand listed REITs operated across 40+ countries with an aggregate market capitalization exceeding USD 2 trillion; their number has nearly doubled over the past decade. The mechanics are straightforward: a company owns a portfolio of (typically commercial, high-margin) real estate, earns rental income, and distributes at least 90% of profits to investors, which in turn qualifies it for corporate tax exemption.
Ukraine does not yet have a standalone “REIT Act,” but a functional analogue exists in the form of collective investment institutions (CIIs) – namely real estate operation funds (FONs). The first public solutions appeared in 2022 (with Inzhur among the pioneers). As of 31 March 2025, 30 companies held licenses to manage FFB/FON structures. Today’s public segment includes, among others, Inzhur (six funds in commercial real estate and energy), S1 REIT (rental housing), Gruntovno, SI Capital, Tvoie Kolo (land investments), and other players.
Why REITs beat buying “square meters”
Investing through a fund enables broad retail investors participation with small tickets – from just a few tens of thousands hryvnias – into large, stable projects. Transaction costs are minimal: no notarization, state registration, or paperwork for each individual deal. The tax profile is efficient: the fund does not pay corporate income tax, while retail investors’ dividends are taxed at 9% plus military tax. Another benefit is centralized asset management by a single management company (KUA), with the flexibility to structure distinct offerings within separate funds.
Launch and administration: where it gets hard
Despite their advantages, FONs come with a high organizational threshold: complex legal setup and notable ongoing administrative costs.
Only a licensed asset management company (KUA) may manage a FON. Founders therefore choose between two paths:
1. Set up their own KUA and obtain a license (in practice, this can take up to ~6 months);
2. Engage an existing professional KUA on an outsourced basis.
The KUA then establishes the FON (a future REIT-style project as a unit or corporate fund), or the investor purchases a “ready-made shell” FON from a professional manager. For a viable start, market practice usually targets assets over UAH 10 million to make the management economics work, ensure diversification, and provide basic liquidity.
Operations also require budget. Administration in-house or via an external provider typically costs from UAH 200–300k per month and higher, depending on asset mix, number of investors, and redemption frequency. Ongoing requirements include:
- Regular reporting to the NSSMC (monthly, quarterly, and annual), plus disclosure on issuances and asset structure.
- Accounting and control of redemption of certificates or shares, including interaction with the depositary.
- Internal and external audit, independent property valuations.
- AML/CFT and compliance, and updates to internal risk-management policies and procedures.
As follows a FON is an instrument with heightened structural and transparency requirements. It demands time and budget to launch and maintain, but in return provides investors and developers with an institutional framework, clear redemption/distribution rules, and market trust that informal “fractional” schemes lack.
The Ukrainian specifics of REIT funds
Unlike many foreign jurisdictions, Ukraine does not mandate distributing ≥90% of net profit as dividends. This is manager policy: most FONs declare distributions above 90%, yet a KUA may change its approach and retain profits for reinvestment, which may not coincide with the strategy of small investors.
A second key distinction is limited exchange liquidity. Whereas REIT units trade actively on exchanges in developed markets, in Ukraine investors typically exit through managing company redemptions of fund units, with over-the-counter deals between private investors occurring far less frequently.
In summary
Ukraine’s REIT market is still taking shape but shows strong potential in the post-war economy. The combination of rigorous disclosure, transparent redemption mechanics, and prospects for exchange listings makes FONs an effective alternative to ad-hoc “equity share” investment. For developers, they offer long-term, comparatively cheaper capital; for investors, they provide regular cash flow and protection from inflation and FX risks through real assets that are steadily gaining liquidity on the local market.
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