Newly-updated REIT framework to democratise the Philippine property market

And bolster the economy for long-term growth

Philippine flag depicted in paint colors on a multi-storey residental building under construction. Mehaniq/Shutterstock

Last Monday, the Philippine Stock Exchange (PSE), Bureau of Internal Revenue (BIR), Department of Finance (DOF), and Securities and Exchange Commission (SEC) announced a new framework concerning the Real Estate Investment Trusts (REITs) in the Philippines, reported Santos Knight Frank.

As a publicly-listed stock corporation, a REIT owns revenue-generating property assets, like offices and malls, as well as alternative assets, such as tourism, hospitals, infrastructure, schools, industrial/logistics, and hotels. REITs are tools devised to boost the owner’s capital by moving their assets to a REIT business.

REIT businesses are also required by the law to allocate 90 percent of their retained profits dividends, which should profit investors.

“We are very encouraged by the news that the Government has released the new set of
rules on REITs that address the concerns of investors and real estate developers,” said chairman and CEO of Santos Knight Frank Rick Santos.

“These rules bring about a significant opportunity to democratize the Philippine property market, allowing the small investor to participate in high-value real estate assets alongside major corporate institutions. REITs have the power to sustain long-term growth for the Philippine economy through investments.”

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Among the amendments agreed upon on the Implementing Rules and Regulations (IRR) of the REIT Act of 2009 included more lenient rules for minimum public ownership, from 40 to 33 percent.

The SEC also obliged that the profits acquired from the sale of securities or shares as a result of asset transfers to REIT should be used to reinvest in the Philippines’ infrastructure or real estate.

Moreover, the BIR has exempted the movement of assets in exchange for shares for control in a REIT from Value Added Taxation, as long as the transfer leads to procurement by the transfer of a minimum of 21 percent of the transferee’s voting capital stocks.

“We anticipate that REITs will drive an increase in acquisition, consolidation, and property
development activities across the Philippines in the coming years,” said Kash Salvador, associate director for investment & capital markets at Santos Knight Frank.

“New capital raised by the developers through REITs will enable expansion of the real estate sector not only in Metro Manila but also in the provinces, and with it generate jobs across many sectors.”