Hong Kong needs to introduce tax incentives and relax geographical investment restrictions if it wants to catch up with Singapore in the development of its real estate investment trust (reit) market, according to Standard & Poor's Equity Research. 'Although the launch of the first reit in Hong Kong has been delayed due to the court challenge, we believe there is still a future for reits given the many compelling reasons for its formation,' said Winston Siay, associate director of the agency. A reit is a fund which invests in a pool of rental property such as car parks, offices, or shops. The products have been popular in the US and Australia for decades but have only been developed in Japan and Singapore in recent years. Singapore, which has launched several reits in the past few years, exempts investors from corporate and dividend taxes and has no geographic restriction, allowing investment in reits in the US and Australia. Mr Siay said Hong Kong should consider doing the same. 'Some of the reits in Singapore invest purely in overseas properties. There is no reason for Hong Kong not to be able to follow such a worldwide trend,' Mr Siay said. A Securities and Futures Commission spokesman said a consultation paper would be released this month on lifting the ban on Hong Kong's 1,993 authorised funds being allowed to buy shares in reits anywhere in the world. Hong Kong introduced regulations governing reits in August 2003, but the inaugural fund, the Link Reit launched by the Housing Authority, was put on hold in December last year as a result of legal action instigated by a public housing tenant. Lorraine Tan, director of research of Standards & Poor's Equity Research, believed the government would go ahead with the Link Reit when the legal battle was resolved. 'Singapore has spent three years promoting its reit market. Hong Kong is not that far behind. I believe the reits could take off in coming years,' she said.