A Treasury paper published this week says that the government is to start industry wide consultations on Real Estate Investment Trusts (Reits). The aim is to introduce Reits by 2006

Reits allow ordinary savers as well as institutional investors to invest in property easily without actually owning the property. Sometimes known as Property Investment Funds in other countries, they have proven popular in the US for over 40 years.

Reits work as stock exchange-quoted companies that own the properties and investors then buy shares in the company. Smaller scale investors can have access to commercial property returns without significant capital outlays or tax inefficiency by using Reits.

Some industry consultations have already taken place over the last year so this week's announcement is take as a sign the Chancellor is positive about the move.

The interesting feature of Reits is that they will be free of corporation tax. Leading property companies on the stock market are eager to convert to Reits because of the tax efficiencies.

If the government goes ahead with their introduction, almost all listed property companies - and some private ones - are expected to become Reits.

Reits separate the ownership and management of property from the activities that take place on that property for tax purposes by creating a "ringfence" around the property-letting business.

The government said Reits would:

• Give a greater, and more liquid, choice to property investors
• Allow smaller scale investors access to commercial property returns without significant capital outlays or tax inefficiency
• Improve stability in the property investment market
• Let companies release property assets from balance sheets into the hands of professionally managed companies
• Improve the housing market through greater professionalism in the private- and social-rented sectors
• Boost demand for new houses.

While the industry welcomed the government's aims and second round of consultation, there was confusion about the lack of information about how much the government would charge existing property companies to convert to Reits.

The main sticking points in the new round of consultations are likely to be the price that the government will charge companies to convert to the new structure and the amount of money that the newly structured vehicles will be able to borrow.