Longer foreign land lease to benefit REIT market

MANILA, Philippines — The move to extend the lease term allowed for foreign investors to 99 years is seen to benefit the country’s real estate investment trust (REIT) market as it will allow the expansion and diversification of property portfolios.

In an email to The Star, Santos Knight Frank director of consultancy Lovelle Taleon cited the recently approved  House Bill 10755, which amends Republic Act 7652, or the Investors’ Lease Act of 1993, as one measure that will positively impact the REIT market.

Taleon said that  bill would extend the lease term for foreign investors to up to 99 years, allowing private land to be leased to them, with the option to sublet the property.

“This move is expected to positively impact the REIT market by enabling the expansion and diversification of property portfolios,” Taleon said.

“With longer lease terms, REITs can attract more stable, long-term investments, potentially driving growth in the sector and improving overall market liquidity,” she said.

Aside from House Bill 10755, the Senate also recently approved its own version of the measure through Senate Bill  2898.

Colliers Philippines director for research Joey Roi Bondoc said the approval of the measures presents tremendous opportunities for the property sector, especially for industrial and leisure segments.

“With the proposed amendments, we see the Philippines attracting more foreign hospitality and manufacturing players. Extending land lease is crucial as these foreign players bring a lot of capital to the Philippines and extension of lease term is a step in the right direction as they establish profitability and expand footprint across the Philippines.  This is important especially as we want to attract more investors going out of China and Taiwan,” Bondoc said.

He said the enactment of the two measures will ultimately benefit Filipino consumers and investors as more leisure and industrial players should result in improved products and services for the domestic market.

“Overall, it will redound to a more competitive market benefiting local consumers. Local players should eventually benefit given the best and globally recognized practices to be brought by foreign players to the Philippines,” Bondoc said.

With the longer land lease period, Bondoc said more Philippine developers could partner with foreign hospitality brands and develop more accommodation facilities and convention centers across the country and maximize the Philippines’ improving infrastructure backbone.

“This is important as the government has been aggressive in rehabilitating and modernizing airports across the country. These efforts are essential especially with the Philippine government setting a lofty goal of attracting 12 million international visitors in 2028,” he said.

With more hospitality players in the country, Colliers also sees the emergence of more tourist destinations especially in the countryside – outside of the already popular  Cebu, Bacolod, Iloilo, Davao, Bohol and Palawan.

“The bill’s enactment should result in the creation of massive townships offering leisure-oriented and resort-themed projects. This should entice more foreign hospitality players to invest in the Philippines and look at other economic centers outside of Metro Manila.  Moreover, the extension of lease term, complemented by more attractive fiscal and non-fiscal perks, should entice more industrial players to invest in the Philippines especially in the agro-industrial segment,” Bondoc said.

Aside from the hospitality sector, Bondoc said Philippine developers with expansive industrial footprint should also take advantage of the entry and expansion of manufacturing locators by enticing them to put up facilities within their industrial parks and occupy warehouses and cold chain facilities.

“With more investments in the country given the land lease term extension, Colliers sees the creation of more industrial zones outside of the established hubs – Central Luzon and the Cavite-Laguna-Batangas (CALABA) corridor,” Bondoc said.

He explained that longer land leases should result in more manufacturers investing massive foreign capital in the Philippines.

“This will have a positive spillover effect on other support industries which should hasten the country’s ability to achieve inclusive growth. This will also have positive impact on the industrial sector in general. With more foreign manufacturers, we see property firms expanding their industrial parks and warehouses as they capture demand from these foreign locators.

Additionally, Colliers said this should also result in a more robust industrial sector in the Philippines and enable the country to attract multi-billion manufacturing FDIs, similar to what its ASEAN peers such as Vietnam, Indonesia, and Thailand attract.

“This should help position the Philippines as a manufacturing hub in Southeast Asia,” Bondoc said.

Furthermore, the Colliers official said the approval of the proposed measures should also help unlock land and property values, especially in major growth areas outside Metro Manila, including Central Luzon, CALABA Region, Western Visayas, Central Visayas, Davao region, and Northern Mindanao.