REIT investments are fostering economic recovery and invigorating the capital market in the nation
The high cost of entry into real estate assets relative to the GDP per capita has posed a challenge for the average Filipino aspiring to own property. However, the introduction of Real Estate Investment Trusts (REITs) addresses this issue, providing a more accessible avenue for investment.
A REIT is a publicly-listed corporation that owns and manages income-generating real estate, encompassing various properties like office buildings, residential complexes, and infrastructure projects. Ayala Land made history in 2020 by launching the Philippines’ first REIT on the Philippine Stock Exchange (PSE), with seven others following suit.
REITs offer hassle-free investing, allowing participation in the real estate market without the challenges of traditional ownership. They provide capital appreciation, moving in tandem with inflation, and offer cash flow through dividends, distributing at least 90% of annual income to shareholders. The liquidity of REITs is a notable advantage, enabling swift transactions compared to the prolonged processes associated with traditional real estate. Embracing REITs opens up a more accessible and less daunting entry point into real estate investment, revolutionising the landscape for Filipino investors.
According to the Philippine Department of Finance, Finance Secretary Benjamin E Diokno urged the private sector to boost economic development by promoting Real Estate Investment Trust (REIT) offerings during the 5th REIT Philippines Investor Summit at Okada Manila on September 19, 2023. Diokno emphasised the need for more diverse REIT offerings, particularly involving assets from renewable energy sources, to support the monumental task of revitalising the economy. REITs are stock corporations allowing the public to invest in income-generating real estate assets, providing returns through dividends.
The Philippines witnessed its inaugural REIT listing in 2020, following relaxed ownership and tax requirements by the Securities and Exchange Commission (SEC) and Bureau of Internal Revenue (BIR). Amendments necessitate sponsors to reinvest proceeds locally, ensuring circulation within the domestic economy and safeguarding small investors. REIT offerings align with the government’s financial inclusion agenda, enabling everyday Filipinos to engage in secure real estate investments without property management responsibilities.
Diokno highlighted REITs as crucial for driving property development. He expressed confidence in REIT investments fostering economic recovery, infrastructure modernisation, and invigorating the Philippine capital market. The government is actively supporting the Real Property Valuation and Assessment Reform Act in the Senate to enhance property valuation standards and empower local government units for increased revenue generation.