Business trust vs REIT

A business trust is an enterprise set up to for the control and management of assets with stable income stream like utilities and infrastructure. It is created by a trust deed under which the trustees hold the legal ownership of the trust assets and manages the assets for the benefit of the beneficiaries of the trust. A Reit is a collective investment scheme that invests in real estate assets directly, either through properties or mortgages to generate income for its unitholders. Unlike a business trust where the assets are come under the responsibility of the trustee-manager, a Reit is governed by Code of Collective Investment Schemes, which stipulates separate roles for the trustee and asset manager. While business trusts are subject to income tax, Reits enjoy tax exemption but in return, must distribute at least 90% of its income to unitholders. Another key difference between a business trust and a Reit is in its gearing limit. Business trusts have no gearing limits whereas Reits are unable to borrow beyond 35% of its assets or 60% if its debts are rated.