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Laxman Pai, Opalesque Asia: A survey found that 51% of real estate investors were considering investing in opportunity zone funds (OZFs) in 2019, while a further 12% are interested in the longer term.
A less widely publicized part of the 2017 Tax Cuts and Jobs Act in the US was the creation of 8,700 "opportunity zones" - distressed areas in which capital gains tax on regeneration projects can be deferred.
Although raising real estate funds to focus on 'opportunity zone' is a nascent sector, it is attracting a lot of interest from investors, pointed out a Preqin survey.
"OZFs are seen as a way to generate high returns - investors are primarily targeting diversified value added and opportunistic funds rather than lower-risk core vehicles," said the Preqin survey report.
Fund managers are moving into the space to serve this appetite, and there are now 62 OZFs in market seeking a total of $16bn from investors.
"Opportunity zone funds are an emerging trend in US real estate at the moment, promising significant tax advantages for regeneration projects. The benefits are clear - investors can expect to reduce their tax burden on any distributions they receive, boosting returns," said Tom Carr, Head of Real Estate.
"However, investors should beware a rush into this nascent industry: for tax incentives to be worthwhile, the underlying investments still need to perform well. OZFs by their nature are focusing on assets in distress...................... To view our full article Click here
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