By Ben Harding

MADRID (Reuters) - A draft law introducing real estate investment trusts (REITs) in Spain is so complex and restrictive they would be of little use to property companies, Metrovacesa's (MVC.MC: Quote, Profile, Research) legal chief warned on Thursday.

Manuel Liedo told a property conference in Madrid that the bill, which is going through parliament, needed to scrap a series of provisions including limits on companies that are more heavily weighted to property sales rather than rental.

The law which will introduce REITS, or SOCIMIs as they will be known in Spain, should go through in the first half of 2009, said an Economy Ministry official, who asked not to be named.

However Liedo said he was optimistic parliamentary deputies would introduce the changes property firms are pushing for before a deadline on amendments closes in early February, following lobbying from the industry.

"The current formulation is not going to work. It should be adapted, getting rid of these obstacles of limits on investment, distribution of profits and level of debt," he told Reuters on the sidelines of the conference.

Metrovacesa is Spain's biggest property firm. Creditors are taking control of the company this month after its controlling shareholder defaulted on huge debts it amassed just as property markets were souring last year.

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Spain's Socialist government is adopting REITS to galvanise Spain's traditionally undeveloped rental market and boost investment in the flagging sector, where house sales have slumped and prices are diving as the deepest recession for a generation sets in.