By Honey Madrilejos-Reyes
Reporter
CONGRESS would try to pass by the end of 2007 an enabling law that would govern the establishment of the real- estate investment trust (REIT), a first for the Philippine capital market.
At the sidelines of the First Philippine REIT Forum on Friday, Sen. Edgardo J. Angara, chairman of the committee on banks, financial institutions and currencies in the upper house, said he was willing to sponsor the bill as he was convinced that REITs would provide a new avenue for investments.
Once in place, investors would have an instrument 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.
“There are only four calendar months left for the current Congress, hence, our time will be limited,” he said. “In the meantime, the proponents of the REIT should intensify studies and observe the best practices of REIT in other countries.”
An REIT, which is now being offered in various parts of the world, is a security that sells like a stock on the major exchanges and invests in real-estate directly, either through income-producing properties or mortgages. It combines the capital of many investors and enables small investors to participate in real-estate investments.
In the Philippines, for instance, major property developers like Ayala Land, SM Prime Holdings, Robinsons Land and Megaworld, can identify their respective assets and pool them under an entity and have it listed separately at the bourse.
These assets can be shopping malls, residential and office buildings, parking lots and buildings and resorts.
A member of the Lower House deems REITs a suitable instrument for small investors.
“This is something that is going to help boost the economy,” said deputy majority leader Rep. Abraham Mitra. “We are in a better condition now and it would be very good to pass a bill on REIT.”
Mitra said he would likewise initiate the sponsorship of the bill before the current Congress ends its session.
Industry players stress the importance of having a law put in place first before considering participation in REIT.
“It still has 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.
Federico C. Cuervo, president of Cuervo Appraisers Inc., earlier said REITs have a future in the Philippines given the stability of the real- estate sector.
“REIT would grow systematically here. It makes politics irrelevant. Real estate is a very stable investment so investors are assured of capital gains,” he noted.
Philippine Stock Exchange president Francis Ed. Lim said in an earlier interview the bourse is now drafting the rules on REIT, even as it recognizes the unlikely passing of the law this year. Part of the rules would be the granting of tax relief.
“Investing in REIT 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,” said Lim.
Business Mirror
October 9, 2006
http://www.businessmirror.com.ph/comp01.php
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