I INTRODUCTION TO THE LEGAL FRAMEWORK
i Ownership of real estate
The Italian Civil Code provides for a limited number of rights in rem over real estate, and the parties may not contractually create additional rights in rem.
The main right is ownership, which grants its holder the full right to use and dispose of the property. All other rights in rem are limited in scope and grant to their holders only one or more of the attributions of the full property right. Other common rights in rem are:
- surface right, granting its holder the right to build and maintain a building over the property of a third party;
- right of usufruct, granting its holder the right of use of and the benefits over a third-party property; and
- easements, which impose a burden, or a limitation of the rights, over a property for the benefit of another property (e.g., a right of way, water right, right of view or a limitation in the building capacity).
Other less common rights in rem are the uso and abitazione (both lesser forms of the right of usufruct) and the enfiteusi, which has many similarities to the full property right. Rights in rem are registered in the land registers and are enforceable against third parties.
The parties are free to establish contractual rights over real estate (e.g., lease agreements, pre-emption rights or rights of first refusal). Contractual rights are effective between the parties, but their enforceability towards third parties is limited.
ii System of registration
Under Italian law, real estate assets must be registered with the cadastral register and rights related to real estate must be recorded in the land registers.
The cadastral register is kept by the real estate tax agency. Registration in the cadastral register is required for tax purposes but does not attest ownership. The cadastral register classifies real estate assets by municipality, and shows for each property the relevant cadastral data and the cadastral income that forms the basis for the application of real estate taxes.
All contracts for the transfer of the ownership and other rights in rem over real estate, certain long-term leases (exceeding nine years) and guarantees over real estate assets must be registered with the land registries. The registration ensures the enforceability, and gives to the right holder priority with regard to third parties. The absence of the registration does not impair the validity of the transfer but renders it unenforceable against any third party that has previously registered a conflicting right over the property.
The Italian system does not provide for any form of state guarantee of title to real estate; however, the notary public entrusted with the sale will perform the routine title checks and the land registration system ensures that title to real estate will be properly registered.
II OVERVIEW OF REAL ESTATE ACTIVITY
In 2017, Italy witnessed a sharp increase in the real estate activity compared with previous years, with a significant growth in volumes and the overall number of sizeable transactions (a 20 per cent increase on 2016).
The main driving force behind this turnaround has been the consolidation of the interest of foreign investors, who have significantly increased their presence on the Italian market and are showing a growing appetite, especially for office and commercial real estate.
Foreign investors have made an impressive comeback on the Italian market since 2013, and in 2016 they accounted for over 80 per cent of the institutional real estate market – a percentage not seen since 2007. The main foreign investors have been large international property funds, sovereign investors, insurance companies and family offices.
Investments are concentrating in the more liquid markets of Milan and Rome, with Milan attracting a significant portion of the total investments made in Italy flowed in 2016, which totalled almost €10 billion. The strong competition for core assets in prime locations has led to a decrease in prime yields, and investors are gradually moving up in the risk scale and looking at more opportunistic investments or secondary locations.
III FOREIGN INVESTMENT
Italian law does not impose any significant restriction on foreign ownership of real estate. EU nationals may purchase real estate as freely as domestic citizens. Purchase of real estate by non-EU or non-EFTA nationals is subject to a reciprocity principle (the foreign national is subject to the same restrictions that are applied to Italian nationals by its own country).
IV STRUCTURING THE INVESTMENT
Several possible investment structures exist with which to invest in Italian real estate, some of which are outlined below.
i Corporate vehicles
Rental income and capital gains on assets sales are taxed at the ordinary corporate tax rates: corporate income tax (IRES) at 24 per cent and regional tax (IRAP) at 3.9 per cent. Special rules apply to the deduction of interests (30 per cent earnings before interest, taxes, depreciation and amortisation (EBITDA) limitation on interest deductions, subject to exemption for debt that is secured by mortgage).
Partnerships in Italy are transparent for tax purposes, and income deriving from real estate investments is directly taxed in the hands of the partners irrespective of its distribution. The 30 per cent EBITDA limitation on interest deduction does not apply to Italian partnerships.
iii Real estate investment funds (REIFs)
REIFs are not subject to IRES and IRAP but only to local property taxes. The tax regime applicable to investors in Italian REIFs varies depending on the nature of the fund: investors in institutional funds are generally subject to a 26 per cent withholding tax on income distributed by the fund, while for non-institutional funds, the fund’s income is directly attributed to the investors holding 5 per cent or more of the fund’s units, irrespective of its distribution.
iv Listed real estate investment companies
Italy has recently modified its REITS regime to promote the listing of new real estate investment companies (SIIQs). Under the new rules, to qualify as a SIIQ the company must be listed on a stock exchange, no shareholder may hold (directly or indirectly) more than 60 per cent of voting and profit rights, and at least 25 per cent of shares must be owned by shareholders, each individually holding (directly or indirectly) no more than 2 per cent of voting and profit rights. To maintain the SIIQ status, each year the company shall distribute at least 70 per cent of its profits deriving from leases and investments in at least 95 per cent-owned real estate subsidiaries. Italian SIIQs benefit from total tax exemption on income deriving from leasing activity and capital gains on the sale of leased assets and from investments in 95 per cent-owned real estate subsidiaries and Italian real estate funds (exemption from both IRES and IRAP).
In addition the new law has introduced provisions aimed at facilitating the transfer of assets from real estate funds to SIIQs:
- a no capital gains or losses in the hands of the investors on exchanging real estate funds units for SIIQ shares (rollover regime);
- b application of a favourable indirect tax regime (i.e., exemption from VAT or registration, mortgage and cadastral taxes) on (1) contributions of a plurality of leased assets from a real estate fund to a SIIQ; and (2) transfer of a plurality of leased assets from a real estate fund to a SIIQ in the context of the liquidation of the real estate fund.
V REAL ESTATE OWNERSHIP
i Zoning and planning
Under Italian law, buildings must comply with local planning regulations. Furthermore, pursuant to Legislative Decree No. 380/2001 (as amended), the construction of new buildings and the carrying out of significant works on existing buildings are subject to an authorisation issued by the local municipality (i.e., declaration of beginning of activity or building permit, depending on the kind of works to be carried out).
Any work carried out without the relevant authorisation, as well as any work carried out that is not in compliance with the authorisation issued, is subject to a specific sanction that may result, inter alia, in:
- fines being imposed on the building’s owner;
- orders to carry out alterations on the building;
- the demolition of the building (or part of it); or
- the non-transferability of the building.
Properties located in Italy need to be granted a fitness-for-use certificate by the local municipalities. The fitness-for-use certifies the health and safety, hygiene and energy-saving conditions of the building and its installations.
Fitness-for-use certificates are governed by Presidential Decree No. 380/2001 and regulations issued at the local level.
A fitness-for-use certificate must be applied for after the completion of a new building being built, an existing building being totally or partially reconstructed or new portions of an existing building being built, or the health and safety, hygiene and energy-saving conditions of the premises being modified.
Normally, fitness-for-use certificates are not issued in the absence of:
- the application seeking registration of the building with the cadastral office;
- a declaration attesting that the works have been completed in compliance with the approved projects;
- a declaration attesting the compliance of the installations with the applicable legal requirements;
- a declaration attesting to the compliance of the building with the regulations on the removal of architectural barriers;
- the energy-saving certificate; and
- the static stability test.
Fitness-for-use certificates can be issued formally and also by way of silent approval. More specifically, if the municipality does not issue the certificate within a fixed time (i.e., 30 or 60 days) from the application, the certificate is deemed granted provided that the applicant has completed all the required documents. In a case of non-compliance, the owner of the building may be liable to monetary sanctions, and may be obliged to perform the construction or refurbishment works necessary to make the building fit for use. In addition, the tenant may be prevented from using the premises until the building is fit for use. A building may be lawfully transferred even in the absence of a valid fitness-for-use certificate (unlike the case where the building permit is missing).
Fire prevention certificate
Depending on their characteristics, real estate assets may require a fire prevention certificate. The person bound to obtain such a certificate is either the owner, if the fire prevention certificate is required because of the structural characteristics of the property and of its common parties; or the tenant, if the fire prevention certificate is required in light of the activity carried out at the property. Lack of the fire prevention certificate may result in monetary and criminal sanctions, as well as in the obligation to undertake the works necessary to obtain the certificate. Furthermore, the competent authority could restrict the use of the premises until the certificate has been granted.
The transfer of real estate assets may in principle be subject to the following indirect taxes: VAT, registration tax, mortgage tax and cadastral tax.
The application of these indirect taxes depends on several conditions. Generally speaking, where the seller is an individual or an entity not carrying out a business activity relevant for VAT purposes, the sale of real estate properties is not subject to VAT but to registration, mortgage and cadastral taxes (the rate of which may vary from €200 to 15 per cent of the value of the property). In contrast, if the seller is an individual or an entity carrying on a business activity relevant for VAT purposes, the sale is subject to VAT (generally at 22 per cent, although a 4 per cent or 10 per cent rate is applicable under certain circumstances) and to registration, mortgage and cadastral taxes at the fixed rate of €200 each.
A more favourable regime is provided in the case of contribution of real estate assets to real estate investment funds, if certain conditions are met. In particular, the favourable tax regime applies if the contribution includes multiple real estate assets and if the assets being contributed are mainly leased to third parties at the time of contribution.
iii Finance and security
Real estate financing is usually granted as a mutuo fondiario under Article 38 et seq. of the Italian Banking Act,2 which provides for a special regime applicable to medium and long-term loans (i.e., loans lasting for at least 18 months and one day) granted by Italian banks or Italian branches of EU passported banks and secured by a first-rank mortgage over the property.
In addition, to qualify for the mutuo fondiario regime, the loan-to-value ratio of the loan (i.e., the ratio between the amount of the loan and the value of property subject to the first-ranking mortgage in favour of the lenders) must not exceed 80 per cent.3
From the lender’s perspective, the advantage of structuring a financing as a mutuo fondiario is the higher degree of protection from the risk of insolvency of the borrower, as payments effected by the borrower under a mutuo fondiario are not subject to clawback actions under Article 67 of the Italian Insolvency Law,4 and mortgages granted to secure a mutuo fondiario are not subject to clawback actions if registered in the relevant cadastral register at least 10 days before the declaration of insolvency of the mortgagor (while mortgages granted in respect of loans not subject to the mutuo fondiario regime are subject to a six-month – or one-year, depending on the circumstances – clawback period). From the borrower’s perspective, the main advantage of the mutuo fondiario is that, in the event of a delay in loan payments, the rights of the relevant lenders to accelerate the loan is subject to certain restrictions (i.e., in broad terms, the lender will be entitled to accelerate the loan if a payment delay occurs at least seven times).
If the loan does not qualify under the mutuo fondiario regime, it will be subject to the general provisions of the Italian Banking Law and the Civil Code concerning financing and related security.
The typical security package securing Italian real estate financing includes, in addition to the mortgage:
- the assignment by way of security (or pledge) of the receivables arising from lease agreements entered into in relation to the property and related guarantees securing the lessee’s obligations under the relevant lease agreements;
- the pledge over the bank accounts of the borrower (most notably the accounts where the lease receivables of the borrower are to be paid);
- the assignment by way of security (or pledge) of the receivables arising from the interest-hedging agreements entered into in respect of the loan;
- the loss payee clause issued by the relevant insurer in respect of the property; and
- depending on the characteristics of the borrower, a pledge over share capital of the borrower or some form of parent company guarantee.
iv Alternative lending
Since 2012 several legislative measures have been enacted to promote alternative lending activity in Italy. These measures have contributed to enhancing the lending market to include players other than banks as lenders. In particular, the direct lending market has been opened to Italian and EU alternative investment funds (AIFs) and securitisation vehicles.
Direct lending by AIFs
Following the implementation in Italy of the Alternative Investment Fund Management Directive, receivables are eligible assets for investment by AIFs, including ‘receivables arising from financings granted out of the assets of the AIF’.
Decree-Law No. 18 of 14 February 2016 amended the Italian Finance Act to introduce the following changes:
- Italian AIFs are now authorised to grant loans to borrowers (other than the retail public); and
- EU AIFs are authorised to invest in receivables in Italy and to grant loans, subject to conditions – a specific implementing regulation needs to be issued by the Bank of Italy.
The following apply to direct lending for EU AIFs:
- home regulator authorisation is required;
- b the EU AIF may start operations only after 60 days from the notification to the Bank of Italy;
- to operate in Italy, the EU AIF must have a closed-ended form and its operating model must be comparable to that of Italian AIFs;
- risk management, concentration and leverage requirements of the home Member State must be equivalent to those applicable in Italy; and
- regulatory duties in Italy include notification to the Central Credit Register and application of Italian transparency provisions.
Direct lending by securitisation vehicles
Decree-Law No. 91 of 24 June 2014 (known as the Competitiveness Decree) has allowed Italian securitisation vehicles to grant loans to borrowers other than individuals and microenterprises. The relevant Bank of Italy implementing regulations were enacted in March 2016 and provide the following legal framework for direct lending by Italian securitisation vehicles:
- the borrower must be selected by a bank or a financial intermediary;
- the notes issued by the special purpose vehicle can only be underwritten by ‘qualified investors’; and
- the bank or financial intermediary that has selected the borrower must retain a significant economic interest in the transaction (i.e., at least 5 per cent) and must comply with the cash reserve ratio requirements.
VI LEASES OF BUSINESS PREMISES
Commercial lease agreements (i.e., agreements for industrial, commercial, leisure, service, professional, and other similar activities) are governed by the provisions of Law No. 392 of 27 July 1978 (the Lease Act) and by Article 1571 et seq. of the Civil Code.
The provisions of the Lease Act significantly reduce the ability of the parties to shape the terms of the lease agreements, which are substantially predefined by law in several material respects. Any provisions limiting the contractual terms set by law or introducing terms favouring the landlord in violation of the Lease Act are null and void. However, the recent ‘Unlock Italy’ Decree (converted by Law No. 164, 11 November 2014) has liberalised Italian lease law with respect to major commercial lease agreements (see Section VI.viii, below).
i Duration and renewal of lease agreements
Pursuant to Articles 27 and 28 of the Lease Act, commercial lease agreements have a minimum compulsory duration of six years (nine years for properties for hotel use) and, upon the first expiry, are automatically renewed for a further six years (nine years for properties for hotel use), unless terminated by either party with 12 months’ prior written notice (18 months’ notice for properties for hotel use).
Articles 27 and 28 set the minimum duration applicable to commercial lease agreements and, therefore, the parties are free to agree upon longer lease terms (up to a maximum limit of 30 years as provided for by Article 1573 of the Civil Code).
The right of the landlord to terminate the lease agreement upon expiry of the first six years (nine years for properties for hotel use) term is limited to very specific circumstances expressly set out by Article 29 of the Lease Act (e.g., conversion of the commercial premises to use as a dwelling for the landlord or his or her family, use for the running of the landlord’s business, demolition or total refurbishment of the premises).
After the expiry of the second six-year term (nine years for properties for hotel use), the lease agreement is automatically renewed for six (or nine) years, unless terminated by either party with 12 months’ prior written notice (18 months’ notice for properties for hotel use). In the latter case, there is no further restriction on the landlord’s right to terminate the agreement.
Where a lease agreement is renewed automatically pursuant to Articles 27 and 28 of the Lease Act, the terms of the lease agreement (rent included) remain unchanged. In this respect, a provision whereby the rent is automatically increased upon any automatic renewal of the lease agreement would be considered null and void for violation of Articles 32 and 79 of the Lease Act (see Section VI.ii, below). On the other hand, upon final expiry or valid early termination of the lease agreement, the parties are free to renegotiate a new lease agreement upon new terms and conditions very different from those formerly in force, including the provision for a higher rent.
ii Rent and rent adjustment
The parties to a commercial lease agreement can freely determine the amount of the initial rent.
Article 32 of the Lease Act provides that the parties to a lease agreement can agree upon the annual rent increase or adjustment on the basis of the percentage variation of the consumer price index for families of workers and employees as calculated by the Italian Central Statistics Institute for the preceding year (the ISTAT rate).
Pursuant to Article 32, such an increase or adjustment cannot exceed 75 per cent of the annual variation of the ISTAT rate, except for lease agreements with a duration exceeding the minimum duration provided by the Lease Act (i.e., six plus six years, or nine plus nine years for properties for hotel use). Accordingly, a contractual clause providing for an increase in the rent of an amount higher than 75 per cent of the annual variation of the ISTAT rate would be deemed null and void by an Italian court, and the tenant would be entitled to claim restitution for any excess sum paid. Lease agreements having a duration exceeding the minimum duration set out by the Lease Act may provide for a rent adjustment up to the entire variation of the ISTAT rate.
According to the prevailing case law, the parties may also provide for rent increases on grounds other than inflation adjustment based on the ISTAT rate, if such increases are linked to objective and non-discretionary criteria and, in particular, if the rent adjustment criteria are objective and predetermined in the lease agreement (and are therefore not left to the discretion of the lessor) and the provision does not represent a means to circumvent the statutory limitations on inflation adjustment.
Pursuant to Article 11 of the Lease Act, the rental deposit to be paid by the tenant cannot be higher than three months’ rent. By the end of each contractual year, the landlord has to refund the tenant with the legal interest (i.e., the interest periodically fixed by law) accruing on the rental deposit.
iii Early termination by the tenant for material circumstances
Article 27 of the Lease Act provides that, notwithstanding any provision in the lease agreement to the contrary, the tenant to a commercial lease agreement has a statutory right to a six-month prior-notice termination due to material circumstances. Pursuant to Article 79 of the Lease Act, this provision cannot be amended, nor can its application be excluded by the parties.
According to Article 36 of the Lease Act, the tenant can sublet the premises or assign the lease agreement, even without the landlord’s consent – by giving the landlord registered notice to this end – provided that the business operated by the tenant in the premises is jointly leased or transferred (as the case might be). The landlord may oppose the sublease or assignment within 30 days of receipt of the tenant’s communication, but only for material reasons.
v Sale of the leased premises
Article 7 of the Lease Act states that any clause providing the termination of the lease agreement in the case of sale of the property is null and void (emptio non tollit locatum). Sales of property interests do not affect, as such, the lease agreement.
vi Maintenance works and relevant costs
Pursuant to Articles 1576 and 1609 of the Civil Code, the landlord is responsible for the necessary costs of maintaining the premises, including any repairing and fitting costs. Such costs do not include the ordinary minor maintenance costs relating to deteriorations due to the use of the leased premises by the tenant, which are borne by the tenant. In addition, pursuant to Article 9 of the Lease Act, the tenant shall bear some additional charges arising from the supply of common utilities or common services (e.g., cleaning, ordinary maintenance of the elevator, cleaning of cesspools, supply of water, electricity, heating and air conditioning). Pursuant to the ministerial report to the Lease Act, any other cost (i.e., expenses of the common parts, such as the manager’s salary) must be borne by the landlord. Italian case law has, however, clarified that the above-mentioned provisions can be amended by the parties, and a different allocation of maintenance expenses can be agreed.
If the let premises need repair works, Article 1584 of the Civil Code provides that, if the period during which the repair works are carried out exceeds one-sixth of the duration of the lease agreement and, in any case, lasts for more than 20 days, the tenant is entitled to a reduction of the rent in proportion to the duration of the entire period of repairs and the effect on enjoyment of the premises.
Other indemnities are provided for by Articles 1592 and 1593 of the Civil Code, concerning, respectively, improvements and additions to the leased premises.
According to Article 1592 of the Civil Code, should improvements be made by the tenant with the landlord’s consent, the latter must indemnify the tenant in an amount equal to the lesser of the total amount expended and the actual value of the improvements at the time of the yielding up of the leased premises to the landlord at the end of the lease.
Pursuant to Article 1593 of the Civil Code, at the termination of the lease, the tenant may remove the additions made to the leased premises, provided that removal can be effected without causing damage to the property and unless the landlord prefers to retain them; in this latter case, the landlord must indemnify the tenant in an amount equal to the lesser of the total expenditure and the value of the additions at the time of the yielding up.
The parties may amend the provisions of Articles 1584, 1592 and 1593 of the Civil Code, providing that no indemnity or compensation is due to the tenant in the case of, respectively, repairs, improvements or additions to the leased premises.
vii Lease agreements for activities involving direct customer contact
The following provisions apply to commercial lease agreements for activities involving direct contact with customers or consumers, such as retail units, supermarkets and commercial galleries.
Article 34 of the Lease Act provides that, upon termination of the lease agreement, the landlord must compensate the tenant for the loss of the relevant commercial goodwill in connection with the leased premises. Such compensation shall be equal to 18 months’ rent, calculated pro rata on the basis of the last rent paid. No goodwill indemnity shall be paid, however, if the termination of the lease agreement is due to the tenant’s default (e.g., tenant’s breach of contract, its decision not to renew it at the expiration date, or its withdrawal).
The amount of the goodwill indemnity is doubled if a business activity of the same kind is established in the premises within one year from the relevant termination date.
Any clause of a lease agreement excluding the tenant’s right to the goodwill indemnity is null and void. The tenant, however, is free to waive the indemnity at the expiration of the lease.
Right of pre-emption
Pursuant to Article 38 of the Lease Act, the tenant has a pre-emption right in the event of sale of the let premises.
If the landlord intends to sell the let premises, it must give the tenant prior written notice setting out the price and the terms of the sale, and invite the tenant to exercise its pre-emption right. The tenant may exercise such a right within 60 days of receipt of the notice, offering the same terms as set out in the notice delivered by the landlord.
Should the landlord fail to notify the tenant of its intention to sell the let premises, the tenant, within six months from the registration of the deed of transfer executed by the landlord and a third-party buyer of the let premises, will be entitled to apply to the court and seek an order that declares such a sale (and any subsequent sale of the let premises by the buyer) null and void.
According to the Italian Supreme Court, the limitation of the right of the landlord to dispose of the real estate unit provided for by Article 38 of the Lease Act applies only where the let premises to be sold exactly match the leased property.
In this respect, the Supreme Court has consistently stated that the tenant’s pre-emption right is excluded in the case of sale as a whole of the building of which the let property represents a portion, the whole building being different (from both an economic and legal standpoint) from the relevant let portions; and sale as a whole of different real estate properties (one or more of which is subject to one or more lease agreements) that are functionally and structurally connected to each other so as to be different from the single portions thereof.
Pursuant to Article 40 of the Lease Act, unless the termination of the lease agreement is due to the tenant’s default (e.g., tenant’s breach of contract, its decision not to renew it at the expiration date or its withdrawal), the tenant has a pre-emption right at the expiry of the six-year period (renewed for a supplementary six-year period) in the event the landlord intends to enter into a new lease with third parties. In particular, the landlord must give the tenant prior written notice (at least 60 days before the expiration of the lease agreement) setting out the terms and conditions of the offer.
The tenant may exercise such a right within 30 days from receipt of the notice, offering the same terms as set out in the notice delivered by the landlord. If the tenant has not exercised its pre-emption right upon termination of the lease, and a new lease agreement is entered into by the landlord, and subsequently terminated within one year of the inception, the original tenant may still exercise its pre-emption right.
viii The recent liberalisation of Italian lease law
The recent Unlock Italy Decree (converted by Law No. 164, 11 November 2014) has liberalised Italian lease law with respect to major commercial lease agreements.
Pursuant to the new law, the parties to commercial lease agreements with annual rent exceeding €250,000 are now free to opt out from the provisions of the Lease Act.
The new law provides that ‘the parties to leases agreements for non-residential purposes, and in relation to hotel use, are entitled to agree terms and conditions derogating from the provisions of this law [i.e., the Lease Act], provided that the annual rent of the lease exceeds €250,000 and provided that the lease does not relate to premises declared of historic interest by a decision issued by regions or municipalities’.
The reform is having a significant impact on Italian lease practice. Key aspects of lease agreements (such as minimum duration, automatic renewal, tenants’ pre-emption rights, tenants’ break rights for ‘serious reasons’ and the landlord’s obligation to pay a goodwill indemnity in the event of the termination of the lease) that were previously regulated by mandatory provisions of the Lease Act can now be freely negotiated between the parties.
ix Land Registry registration and related taxes
According to Article 2643, of the Civil Code, a lease agreement relating to immovable assets with a term exceeding nine years must be registered with the Land Registry. Registration is necessary to ensure that the lease agreements and the tenant’s rights are valid and enforceable against any subsequent purchaser of the let properties. To this end, the lease agreement must be written in Italian, legalised by a notary public and a flat registration tax must be paid.
VII DEVELOPMENTS IN PRACTICE
i Recent legal reforms
In 2014 and 2015 Italy introduced market-friendly reforms aimed at modernising the Italian real estate market and attracting foreign investors. These include:
- the liberalisation of Italian lease law, with the option for the parties to commercial lease agreements to freely negotiate contractual terms (see Section VI.viii, above);
- a reform to the tax regime applicable to SIIQs, aligning their tax treatment to the favourable tax treatment applicable to Italian REIFs, thus making it tax neutral to opt for either instrument (see Section IV.iv, above); and
- liberalisation of the lending market, with the promotion of non-banking lending instruments (e.g., liberalisation of the corporate bond regime) and alternative lenders (credit funds, insurance companies and securitisation vehicles) (see Section V.iii, above).
ii Sale of government real estate
The government has signalled that it intends to take a more active role in the management of its large real estate holdings, and has approved framework legislation opening up the possibility of disposal or valorisation of part of its real estate portfolio. Possible initiatives include the setting up of an asset management company that will catalyse public and private resources for the valorisation of state-owned properties to be redeveloped, and a disposal process aimed at reducing Italian public debt.
VIII OUTLOOK AND CONCLUSIONS
There was a significant increase in real estate activity in 2017, mainly driven by the continuing interest of foreign institutional investors in the Italian real estate market. This positive trend is expected to continue in 2018, with volumes driven by the arrival of significant property portfolios on the market from maturing funds, divesting pension funds, banks and other institutional and private investors.