Hans Volkert Volckens, board member at the Bavaria-based Hannover Leasing and the property sector representative on the German Industry Association (BDI), told PIE in an interview that though the new federal coalition is more sympathetic to property than its predecessor, these three elements are urgent now.

"When you break it down there are three main issues currently, the most prominent being the interest expenses cap (Zinsschranke) where the relief the government has granted only partially helps the real estate industry," he said. "The interest expenses cap is still a big, big problem for the sector. We would also like to see the REIT topic coming back onto the agenda and, in addition, the question of incentivising the green modernization of existing building stock in Germany has to be answered."

Volckens, a high-profile lawyer appointed to his current post in August 2008, represents the German Property Federation (ZIA) umbrella body in the BDI, and is also German representative for the Washington-based REIT association NAREIT. The interest expenses cap has been a thorn in the side of the German real estate sector since it was first mooted almost three years ago. Fundamentally, it limits the offset of interest rate expenses to 30% of EBITDA and is crippling to foreign as well as domestic investors.

He sees the main legislative changes needed for German Real Estate Investment Trusts (G-REITs) as including an extension of the exit tax window to support companies with pre-REIT status, and to allow residential portfolios to qualify for REIT portfolios – as in most other jurisdictions in Europe.

These companies, which include Munich's Prime Office and others, have assembled portfolios in deals that built in the exit tax privilege for the seller, around 16% on capital gains instead of the full corporation tax of just over 32% nominal. Their profitability going forward will however be pressured if they are required to retroactively indemnify sellers. Under current German law, a pre-REIT has three years, plus a one-year addition, to convert to a full REIT in a stock market listing. But recent market turmoil means that for firms that assembled portfolios in 2007, time is running out.

"Companies that acquired assets in 2007 are already in discussions with their auditors regarding accounting for potential damage payments," Volckens says. "I believe we have good arguments and the legislator can finally be convinced."