Analyst: Passage of REIT bill to change real estate industry

CEBU, Philippines - If Philippine lawmakers were to allow the passage of Real Estate Investment Trust (REIT) or House Bill No. 6379, it could serve as a “game changer” in the real estate industry of the country.

Real estate analyst Eric Soriano said that while the Department of Finance (DOF) is still holding the bill’s passage because of the tax issues, the proposal is seen to reinforce the long-term positive outlook of the Philippine real estate sector.

REIT is a stock corporation established in accordance with the corporation code of the Philippines and the rules and regulations promulgated by the Securities and Exchange Commission (SEC) organized under the laws of a foreign country principally for the purpose of owning income-generating real estate assets and real estate securities.

In a separate interview with Cebuano congressman Ramon H. Durano VI, who is one of the supporters of the bill, he said that REIT legislation introduces another form of holding real estate in the country and by doing so, “we can achieve substantial benefits for the country and the people.”

Durano agreed with Soriano, saying the DOF is still hesitant on the passage of the bill while the government is trying to boost its revenue generation through taxes.

“We envision REITs as a catalyst to attract both local and foreign investment into real estate with its attendant multiplier effect on the rest of the economy fueling growth – a much needed boost for our ailing economy,” Durano said.

The Cebuano congressmen believe that the immediate passage of the REIT into law would allow the development of the capital market, as the public will be encouraged to invest on the real estate management firm through REIT, while 90 percent of the income will be distributed as dividends.

“In these financially precarious times, why would we introduce a bill that would seek tax cuts for large corporations? Let us recall that tax concessions, tax relief, tax rebates or tax subsidies have the same effect as government pump-priming spending during times of recession,” he added.

Thus, for the revitalization of the country’s capital market and the real estate sector and for the enhancement of our economic growth, he said the bill should be immediately considered.

Durano further explained that the introduction of REIT concept in the Philippines allows the democratization of wealth by broadening the ownership base of real estate in the country.

“It is common knowledge that only a few people own majority of the real estate in our country. More so, it takes large amounts of capital to develop raw land into income-generating real estate which makes developed property even more concentrated to fewer individuals and corporations.

By requiring REITs to be listed as stock corporations in the SEC, even small investors can have the opportunity to buy stocks thereby enabling them to invest in large-scale real estate projects such as office buildings, condominiums, malls, hotels, resorts and the like,” Durano stressed.

The REIT structure also gives an additional source of foreign and domestic capital inflow in real estate markets that would otherwise be unavailable. Thus, aside from the democratization of land ownership, REITs could revitalize the real estate market as what happened in countries like Canada, Japan, Singapore and Australia.

Durano added that REIT stocks are attractive because they are affordable - the investor can buy as many or as few shares of stock as his budget can afford. They are liquid since the stocks are tradable in the stock exchange. 

If REIT will have its “debut” this year, Soriano said there will be some adjustments in the real estate industry by 2015, and this could provide a more exciting real estate sector in the Philippines.  (FREEMAN)