By Doris Dumlao
Philippine Daily Inquirer
First Posted 22:22:00 12/20/2009
Filed Under: Economy and Business and Finance, Stock Activity, Real Estate
THE Philippine Stock Exchange expects to attract more foreign investors with the recent passage of the Real Estate Investment Trust (REIT) law.
The law will allow investors to directly buy shares of completed real estate products and benefit from a higher cash dividend share.
“The REIT law will develop the capital markets in the Philippines and provide much needed investment opportunities for institutional and retail investors, to increase the wealth of the population through a lower risk instrument,” said PSE president Francis Lim. “It will also boost the development of real estate in the country by releasing capital for reinvestment into land and buildings, leading to increased productivity and more jobs.”
“It will attract foreign investment into the country and broaden control of a key sector of the economy, putting it into the hands of investors,” Lim added.
REIT, which will be required to be listed on the PSE, will give investors the option to invest directly in the finished product - such as residential and office units, hotels or shopping malls or even infrastructure ventures like toll roads and power plants—and not just the property developer.
This should attract investors because the REIT law requires the distribution of 90 percent of income annually, which means that investors can look forward to earning more from dividends.
“We are extremely grateful to our Congress led by Sen. Edgardo Angara and Congressman Sonny Angara and Pres. Gloria Macapagal-Arroyo for making RA No. 9856 or the REIT law a reality. We are getting a lot of interest from many of our property firms for REIT listings. This landmark law will put the Philippines at par with the rest of the world, which has had REITs for over 20 years,” Lim said.
The Department of Finance, on the other hand, recommended the Presidential veto of the bill on concerns over the potentially adverse impact on the government’s tax collection efforts. But the PSE pushed for the bill to become a law.
“We worked extremely hard on this piece of legislation for the past three years and we were seriously concerned that our time and efforts would go down the drain when we were informed that the DOF recommended presidential veto of the bill. But we think that Congress had already addressed the concerns of the DOF even up to the bicameral conference committee,” Lim said.
Lim said that contrary to fears that the fiscal incentives in the law will undermine the revenues of government, the REIT law could even contribute to government coffers.
“The REIT law promotes transparency for tax reporting purposes. Moreover, the new business opportunities that will be created should translate to a broader tax base for government,” he said. “The perceived tax revenue loss is more imaginary than real.”
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