Financial innovation and the real estate industry in Italy: securitisation, investment funds and REITs

The Italian real estate industry improved quickly in the last decade of the past century due to a large investigation on public contracts and calls for tenders in many sectors of the economy, the so called "mani pulite" affair, and the increasing attention paid to the Italian market by international investors, banks and other financial operators, since real estate's relative prices were lower than expected. This paper aims to explore the legal features related to the recent large increased adoption of financial instruments in the real estate sector, expecially with respect to investment funds on real estates and properties and mortgage loans. Financial instruments used by the Central Government and other local administrations in their real estate activities, as well as by other Italian public and private bodies, are fully analysed. It also deals with Italian tools as managed funds and REITs, starting from a retrospective analysis (from both a regulatory and fiscal approach) of the processes of privatisation and exploitation of real estate public assets, which have been put in place through securitisation and creation of real estate investment funds. The analysis takes into account the most recent tax law changes. At the end, useful comments on the political corrective measures recently adoped by the Financial Act for 2009 on real estate financing and its fiscal implications, and to the so called "residential estates' plan" are advanced.