PSE wants REITs under government's IPP

By Honey Madrilejos-Reyes

Reporter

THE Philippine Stock Exchange (PSE) plans to enroll the real-estate investments trusts (REITs) industry under the government’s investment priorities plan (IPP). The IPP is a rolling annual plan of priority industries and service areas, which are being encouraged through the grant of fiscal and nonfiscal incentives. In an interview Monday, PSE president Francis Lim said he is currently leading a study on how to go about the plan and once the details are finalized, he will confer with the Board of Investments (BOI) on the proposal. “I thought of this because I know it will take some time for Congress to create an enabling law for the establishment of the REITs, especially with the forthcoming elections. In the meantime that they [legislators] are studying the rules on REITs, why not apply it with the BOI and allow it to become an accredited company entitled to income tax holidays of five to six years,” Lim explained. The PSE is actively pursuing the establishment of REITs in the Philippines to give the investing public more avenues to grow their resources. One of the come-ons of REITs is its special tax privilege. “Investing in REITs can be profitable because of the mandatory dividend declaration of as much as 90 percent. But to be able to do that, it should receive special tax considerations like exemption from income and corporate taxes,” Lim explained. REITs are mutual funds that invest in real estate through actual property and/or mortgage portfolios. These types of investment vehicles offer investors the opportunity to invest in real estate through a fund that is professionally managed. Pooling investor funds together for REITs also allows investors to invest in larger scale properties such as hotels and office buildings that would be financially impossible for some to do on their own. Like investing in real estate, REITs may also provide investors with an income stream from rents and the high possibility of long-term appreciation if the real-estate market goes up. REITs is currently in placed in countries like Hong Kong, Singapore and the US. Once the industry is established here, major property developers like Ayala Land, SM Prime Holdings, Robinsons Land Corp. and Megaworld, can pool their respective assets under one entity and have this entity listed separately at the stock exchange. These assets can be shopping malls, residential and office buildings, resorts and even parking lots. Lawmakers, for their part, are convinced of the huge potential of the REITs as a new investment instrument. Reelectionist Sen. Edgardo J. Angara said he was willing to sponsor the bill because “investors would have a new avenue to grow their investments apart from doing transactions in banks, investing in bonds, and the stock market”. Angara admitted, though, the drafting of the enabling law would take some time to complete. The Lower House, for its part, deemed the REITs as an investment instrument that would allow even the small investors to participate into. “This is something that is going to help boost the economy. We are in a better condition now and it would be very good to pass a bill on the REITs,” said deputy majority leader Rep. Abraham Mitra. Meanwhile, industry players stressed the importance of having a law put in place first before considering participation in REITs. “It is still a long way to go. The instrument has to be created through legislation. But it is something worth looking at,” said Ayala Land president Jaime Ayala in a previous interview. On the other hand, Federico C. Cuervo, president of Cuervo Appraisers Inc., said REITs has future in the Philippines given the stability of the real-estate sector. “REITs would grow systematically here. It makes politics irrelevant. Real estate is a very stable investment so investors are assured of capital gains,” he noted.

 

http://www.businessmirror.com.ph/02202007/companies03.html