This article first appeared in Capital, The Edge Malaysia Weekly on February 23, 2026 - March 1, 2026
REAL estate investment trusts (REITs) listed on Bursa Malaysia face renewed uncertainty as the government reconsiders its support for the industry, with any non-renewal or revision of existing incentives potentially affecting yields and valuations.
As it stands, local REIT counters, with a combined market capitalisation of RM63.89 billion, remain among the stock market’s top performers so far this year.
The Bursa Malaysia REIT Index started the year by extending its momentum, ranking third among sectors, trailing only the property and financial services indices, while continuing to outperform the benchmark FBM KLCI.
Finance Minister II Datuk Seri Amir Hamzah Azizan said earlier, on Feb 5, that the market had largely accepted REITs as a viable and established component of the country’s capital market.
Drawing an analogy, he said just as children need parental support in their early years before gaining independence, the REIT sector — having matured — may no longer require the same level of government backing.
Kenanga Research analyst Chris Tong Zhong Sheng tells The Edge that while he foresees no material risks to sector earnings or distributions, investors’ net returns could be affected if the flat 10% tax is not reinstated.
“The 10% withholding tax concession [expired in December 2025] has not been renewed [so far this year], whereby shareholders will be subject to a tax rate based on their respective tax brackets, which could be higher than the 10% flat rate in the previous concession,” he warns, although he sees a higher likelihood of a renewal from an economic standpoint.
For perspective, the concessionary 10% preferential withholding tax concession on REIT dividends had been in place for a decade, from 2016 to 2025. While the concession had been renewed annually, the government has yet to announce the renewal for this year.
In addition, individual investors are subject to a separate 2% dividend tax on annual dividend income exceeding RM100,000, effectively bringing the total tax rate to 12% for those with sizeable portfolios.
In his Jan 22 note, Tong says in a worst-case scenario in which the concession lapses, dividends would be taxed at investors’ respective income tax rates of up to 24%, potentially leading to a valuation downside of up to 14% for REIT players.
If the concessionary tax treatment is not renewed, REIT distributions would be treated as part of investors’ gross income and taxed according to their marginal tax brackets, says Rakuten Trade equity research vice-president Thong Pak Leng, who holds a “neutral” view on the sector.
“REITs are relatively stable, but the new ruling would make yields less attractive. If the concession is not renewed, the impact on yields could range from 10% to 30%, depending on the REIT holder’s income bracket,” he warns.
So far this year, REIT performance has remained resilient regardless of the policy overhang. The strong showing comes at a time when investors reassess REITs as part of their defensive assets portfolio, which surged alongside solid gains in financial stocks and other commodities.
As at market close on Feb 19, the Bursa Malaysia Property Index had risen 12.54% year to date to 1,198.75 points, while the REIT Index had gained 7.58% YTD to 1,015.46 points. In comparison, the FBM KLCI had advanced just 4.29% to 1,752.11 points.
At the same time, other defensive assets, particularly precious metals such as gold, have repeatedly hit record highs over the past year as markets priced in geopolitical risks and expectations that global interest rates may have peaked.
Spot gold peaked at US$5,417.21 on Jan 28 before undergoing a sharp pullback, but has since rebounded to trade above US$5,000 in recent sessions.
While most analysts and fund managers contacted by The Edge broadly agree that despite competition from other defensive and yield-oriented assets, selected REITs still continue to offer attractive opportunities for income-focused investors.
“REITs remain attractive primarily as an income and lower volatility asset class, supported by a still meaningful spread over risk-free rates,” says Tradeview Research analyst Tan Jia Hui.
She says this is underpinned by a stable overnight policy rate (OPR) environment and relatively anchored government bond yields, keeping REIT yields competitive despite strong gains in equities and gold.
Bloomberg consensus data shows that several REITs still offer more than 5% upside potential over the next 12 months, with Paradigm Real Estate Investment Trust (KL:PARADIGM) presenting the highest potential at more than 30%.
Paradigm REIT, which owns three established retail malls in Selangor and Johor — Paradigm Mall Petaling Jaya, Bukit Tinggi Shopping Centre in Klang, and Paradigm Mall Johor Bahru — received its first analyst coverage from Maybank Investment Bank on Feb 2, with a 12-month target price of RM1.36 versus its Thursday (Feb 19) closing price of RM1.04.
Maybank describes Paradigm REIT as a “compelling income proposition” underpinned by a high occupancy rate, stable payout ratios and distribution fully supported by operating cash flows.
The report also highlighted, however, that in a downside scenario where the tax concession lapses and distributions revert to a marginal tax rate of up to 24%, post-tax yields for affected investors could compress by 50 to 100 basis points.
“Having said that, this remains an investor-level tax issue and does not alter REITs’ underlying distribution income or asset cash flows,” the report says. It adds that for Paradigm REIT, post-tax yields could fall to 5.8% under the downside scenario, compared with the research house’s projected net dividend yield of 6.9% in 2026.
Across the sector, the average current yield stands at 5.29%, with most retail and hospitality REITs offering trailing 12-month yields of above 5%. These include Sunway Real Estate Investment Trust (KL:SUNREIT) at 5.48% and IGB Commercial REIT (KL:IGBCR) at 6.61%.
These yields compare favourably with sovereign benchmarks, as the 10-year Malaysian Government Securities (MGS) yield stood at roughly 3.54%, while the 10-year Government Investment Issues (GII) yielded about 3.53% as at Feb 19.
Tan of Tradeview Research expects REIT yields to “remain largely stable”, supported by a benign macroeconomic backdrop, steady interest rate policy by Bank Negara Malaysia that has kept the OPR unchanged at 2.75% since July 2025, alongside government initiatives that underpin domestic consumption and tourism-related demand on the back of the Visit Malaysia 2026 (VM2026) programme, which aims to attract 47 million tourist arrivals.
This coincides with a strengthening ringgit, which has appreciated about 13% against the greenback over the past 12 months and was trading at RM3.9090 per US dollar as at 5.30pm on Feb 19.
“VM2026 is expected to have a positive and meaningful impact, particularly for hospitality assets such as hotels and resorts, as well as retail malls, through higher footfall, improved occupancy rates and stronger tenant sales,” Tan says.
She also notes that retail and hospitality REITs stand to benefit the most from the tourism recovery and potential positive rental reversions, with IGB REIT (KL:IGBREIT) remaining a preferred name because of the potential future injection of Mid Valley Southkey in Johor Bahru, which could enhance portfolio scale and earnings visibility.
It is worth noting that several REITs have already delivered resilient earnings, with higher distributions and record high net property income (NPI).
KLCCP Stapled Group (KL:KLCC), which comprises KLCC Property Holdings Bhd and KLCC REIT and owns landmark assets such as the Petronas Twin Towers and Suria KLCC — a major tourist and retail destination in Kuala Lumpur — declared a record total dividend of 47 sen per stapled security for FY2025.
The group posted all-time high revenue of RM1.71 billion and net profit of RM1.28 billion for the year, driven partly by strong occupancy rates and rental reversions, as well as fair value gains on investment properties. Bloomberg consensus expects revenue to rise further to nearly RM1.8 billion in FY2026, although net profit is forecast to moderate.
Sunway REIT (KL:SUNREIT), another key beneficiary of tourism-related demand, also declared a record-high income distribution per unit of 14.48 sen for FY2025 after its net property income rose 15.5% for the year. Likewise, the company is now expected to make another record high earnings with revenue to hit RM905.92 million, although net profit is forecast to moderate, according to Bloomberg data.
Kenanga’s Tong says REITs that have retail and hospitality exposure to tourist hotspots, as well as a relatively higher proportion of foreign shoppers and guests — including Pavilion Real Estate Investment Trust (KL:PAVREIT), KLCC and IGBREIT — are likely to benefit. If VM2026 also spurs domestic travel, SUNREIT could be a good beneficiary, he adds.
“We acknowledge that the government is working hard on this initiative [VM2026], and Kenanga is forecasting a 12.8% increase in tourist arrivals this year to 30 million. We believe it will be a positive catalyst for REITs, especially those with strong exposure to retail and hospitality assets in prime areas.”
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