REIT IRR revisions seen to boost PH infra program

By Joann Villanueva

January 20, 2020, 8:11 pm

MANILA -- Investments in Real Estate Investment Trust (REIT) are expected to increase substantially following the amendments to rules and regulations which will protect small investors and boost the Duterte administration’s infrastructure program.

One of the amendments to the implementing rules and regulations (IRR) of the Republic Act (RA) 9856, or REIT Act of 2009, include the lowering of public ownership from 40 percent in the first year of listing with the Philippine Stock Exchange (PSE) up to 67 percent within three years, to just 33 percent of minimum public float of the at least 1,000 public shareholders who own at least 50 shares of any class of shares.

Companies are now also required to reinvest their REIT earnings to the local real estate sector to help the government’s infrastructure program.

Transfer of property in exchange for shares for control in REIT has been exempted from the 12 percent value added tax (VAT) following the institution of the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

During the ceremonial signing ceremony for the new REIT regulations at the Department of Finance (DOF) Monday, Finance Secretary Carlos Dominguez III said these amendments will help increase financial inclusion of more Filipinos since this is a “sure venue” for them to invest in the real estate sector while boosting the capital market.

He said they have also put in place a measure that would ensure that tax incentives will not be prone to abuse.

“Today, we deliver to our economy a powerful financial instrument to fund property development and drive the economy forward. We democratize wealth by opening access for thousands of small investors wanting to be shareholders in secure and profitable real estate projects,” he added.

Dominguez said the signing of the new regulations for REIT is a proof that the current government “is not only pro-poor and pro-middle class” as it aims “to provide a business-friendly environment for investors as we are aware that this will translate to more economic gains for all law-abiding Filipinos.”

“This will open up attractive investment opportunities and broaden access to the capital market. This will allow big players in the real estate business to raise more capital to further invest in our country, a win-win situation for all,” he said.

Securities and Exchange Commission (SEC) chairman Emilio Aquino, during the same briefing, said the new regulation allows more Filipinos to have stakes in the domestic real estate market “without owning actual property or the disadvantages of high transaction costs and illiquidity.”

“They also help investors achieve better returns or volatility outcomes by allowing property developers to diversify their portfolios,” he said.

Philippine Stock Exchange (PSE) president and chief executive officer (CEO) Ramon Monzon said REITs will help the local capital market “become more competitive in the region.”

“Potential issuers and investors, both retail and institutional, have been looking forward to the introduction of REITs in the country given the benefits of both listing and investing in this new asset class,” he added. (PNA)