SOUTH KOREA Law and Practice Contributed by: Junghwan Lee, Dong Seok Woo, Jun Woo Cho and Jee In Kim, Lee & Ko
invest at least 50% in real estate, while private REFs are more flexible. Trust-type REFs (most common) lack legal personality, with title held by the trustee and investors as beneficiaries; corporate-type REFs are incorporated entities with shareholders. REITs REITs are joint-stock companies subject to regulatory approval or filing. Most operate as SPCs outsourc - ing asset management to an AMC and must generally hold at least 70% of assets in real estate. Variants include CR-REITs (for restructuring assets) and Pro - ject-REITs (for development-stage investment). PFVs PFVs are also joint stock SPCs used for specific development projects, with outsourced management and a minimum two-year life. They are widely used due to tax efficiency, structural flexibility and high lev - Trust-type REFs are tax-transparent, with taxation at the investor level. Corporate-type REFs, REITs and PFVs are subject to corporate tax but can reduce it through dividend deduction mechanisms. In terms of costs, REITs tend to be more expensive due to regula - tory requirements, while trust-type REFs are relatively cost-efficient. 5.3 REITs REITs are a commonly used real estate investment vehicle in South Korea, and both public and private forms are available. Public REITs are subject to addi - tional regulatory requirements, including public offer - ing obligations, while private REITs operate under a more flexible regime. REITs are also available to for - eign investors, subject to general foreign investment regulations. REITs are primarily used for long-term holding income- generating assets and for structures intended for pub - lic listing. Compared to other investment vehicles, REITs provide a more standardised and regulated framework, which may enhance investor confidence and facilitate access to a broader investor base. erage capacity. Tax and Costs
As of February 2026, there are approximately 449 REITs under management in Korea, with total assets under management of around KRW118.2 trillion, and 25 REITs listed on the domestic stock exchange. 5.4 Minimum Capital Requirement • REFs: There is no specific statutory minimum capi - tal requirement for the fund itself under the applica - ble laws. The initial capital is typically determined by the investment scale of the project and the requirements of participating institutional investors. • REITs: A general REIT managed by a licensed asset management company must have an initial capital of at least KRW300 million at the time of incorporation. Subsequently, it is required to reach a statutory minimum capital of KRW50 billion within six months of obtaining a business licence or registration. • PFVs: To qualify for the dividend-paid deduction and other tax benefits under the applicable laws, a PFV must have a minimum capital of KRW5 billion. Additionally, at least 5% of the total shares must be held by a financial institution as a procedural requirement. 5.5 Applicable Governance Requirements Governance requirements vary depending on the type of investment vehicle used: • REFs: (a) supervised by the FSC/FSS; (b) managed by a licensed asset manager; typi - cally require at least two investors; (c) public REFs: ≥50% real estate investment; leverage generally up to 2x NAV; and (d) private REFs: more flexible, with leverage typi - cally up to 400% of NAV. • REITs: (a) supervised by MOLIT; (b) ≥70% of assets in real estate; (c) public reits: public offering and shareholder dispersion (eg, ~30% float); (d) generally required to distribute ≥90% of in - come; (e) borrowing up to 2x equity (up to 10x with shareholder approval); and (f) subject to periodic disclosures. • PFVs:
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