The Possible Future of REIT in the Philippines
A REIT or Real-Estate Investment Trust is an independently registered company, acting as a trust, that owns an income-producing real estate asset. This asset provides returns to the investors, leading to dividends and capital gains as a benefit to shareholders of the REIT company. REITs have a capital structure similar to that of a mutual fund while having a legal form of a trust. It has relaxed taxation liabilities, making it an attractive investment.
After the Real Investment Trust Act (REITA) became a law in 2009, the critics and financial analysts considered this a huge step to catch up with the rest of the world. This investment scheme has the potential to develop capital markets and unlock real estate values. Reckoned as an extremely lucrative investment product, the REIT market was valued about $68.33 billion in Asian capital markets and at $604 billion globally back in 2008, the time when the Philippines’ Congress was still discussing the passage and future of the REITA.
The REIT industry across the world has continued growing since the passing of REIT law in the Philippines. In June 2014, the industry was estimated to be valued at about $140 billion in Asia and $1.4 trillion cumulatively in all parts of the world.
Sadly, the Philippines’ REIT industry has not made great strides. To date, several blue-chip real-estate companies have shown their interest and even established REIT management companies, but those have been put on hold due to a couple of obstacles.
The Securities and Exchange Commission (SEC) of the Philippines is now taking significant measures to jumpstart the REIT industry once again and relax stringent regulatory conditions. In this regard, it had put a proposal to the Department of Finance (DoF) to reduce the minimum public float requirement for REITs from 67% to 30%. It would help to attract potential investors and REIT issuers. SEC has also requested DoF to review and reduce corporate taxes on capital markets including stock transaction tax and initial public offering (IPO) tax.
This development on REITs will constitute a more robust source of capital for real estate projects; thus small and medium-sized construction companies will continue to be in high demand. We, at CreditBPO, help SMEs like you to improve credit rating with actionable recommendations that will ensure you get the right business loan for your company’s expansion. Making the right business decision requires the right information. That’s why we partner with you to generate an accurate and comprehensive credit profile of your business and your competition in just 24 hours. Knowing where you stand in your industry, your credit score, and understanding how banks assess your loan application will let you take advantage of business opportunities that come your way.