Chancellor Gordon Brown, the minister responsible for government finances, revealed his intention to introduce REITs in the budget after seeing their success in countries such the US, Australia and France. Brown is particularly keen to see REITs operate in the housing market where he wants to encourage greater institutional investment to boost build rates.

REITs would also enable property companies to convert to investment trust status, bringing considerable tax advantages and increasing liquidity in the property market. The move is likely to accelerate the contraction of the public property sector and Hammerson, which has already taken advantage of French-styled REITs for some of its continental portfolio.

While the industry is backing government's introduction of REITs, it has expressed concern that regulation, intended to protect retail investors, may be too restrictive. " To ensure that REITs become the success that we believe they could be," says Liz Peace, chief executive of the BPF, "they need to have the maximum operational freedom possible, in terms of their corporate and management structure, gearing levels and development activity. REITs present a unique opportunity for retail investors and savings vehicles to invest in UK real estate through diversified investment vehicles in a tax-efficient manner. "However, it would be regrettable if, after all these years of trying, we ended up with a regulatory regime that made it unattractive for REITs to operate."