Gov't relaunches REIT program for property investments

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The government has relaunched real estate investment trusts or REITs as another platform for the public to make money by investing in property companies. (FILE PHOTO)

Metro Manila (CNN Philippines, January 20) — The government has relaunched real estate investment trusts or REITs, a platform that would let property companies raise fresh funding from the public.

The Securities and Exchange Commission (SEC) led the unveiling of new rules for REITs on Monday, 11 years since the law creating these investment instruments took effect.

REITs work like stocks and are managed and pooled through fund managers, except that these are solely invested in the real property sector. These are typically invested in commercial assets like offices and apartment buildings, hotels, and shopping malls. Investors profit through a share of the income drawn from rental fees and other gains drawn from the establishment's operations.

Authorities have tweaked investment rules to make REITs more attractive and sustainable. From an old requirement to have at least 40 percent of the investment firm owned by the public, the figure has been reduced to 33 percent — a share much lower than original rules which would make it hard for companies to thrive.

REITs are also tax-free following a provision under the Tax Reform for Acceleration and Inclusion Act which took effect beginning January 2018.

"REITs allow Filipinos to invest in the real estate market without owning actual property or the disadvantages of high transaction costs and illiquidity,” SEC Chairman Emilio Aquino said in a statement, adding that developers are also assisted by diversifying their funding profiles.

The REITs will be listed on the Philippine Stock Exchange, and will appear like trading stocks except that these are solely hedged on real estate projects. Accredit REIT fund managers and property managers will be authorized to handle transactions.

It would also be a way to diversify investments in the local capital market, and would also support the property and even infrastructure sectors through additional funding.