Time for REIT law to take off, says SKF

MANILA, Philippines — Real estate service provider Santos Knight Frank said it is time for the Real Estate Investment Trust (REIT) law to take off in the country this year.

Kash Salvador, associate director for investment and capital markets at Santos Knight Frank (SKF) said in a briefing it’s about time the country makes use of the REIT Act which lapsed into law in 2009.

The law allows the creation of REIT corporations or companies which use pooled funds of investors to purchase and manage income-generating real estate assets such as malls, offices, warehouses and other infrastructure.

Through the law, the goal is to promote the development of the capital market.

While the REIT Act became law in 2009, Salvador said property developers were hesitant to participate because of concerns on the minimum public ownership and value-added tax (VAT) on property transfers.

“If these two things were addressed, I think they will be excited, definitely they are interested,” he said.

Government agencies have recently taken steps to address the issues in the REIT law.

In particular, the Bureau of Internal Revenue has clarified that under the Tax Reform for Acceleration and Inclusion Law, the initial transfer of assets to REITs are exempt from VAT.

The Securities and Exchange Commission, for its part, has agreed to reduce the REITs’ minimum public ownership to 33 percent.

SKF chairman and chief executive officer Rick Santos said the company is excited for the prospects of REITs in the Philippines.

“REITs have the power to democratize the Philippine property market allowing the small individual investor on the street to invest in high value real estate assets along with the big players,” he said.

He said there has been an influx of queries from companies seeking REIT advice.

“Once the new rules are released, REITs will become a strong avenue of capitalization by developers amid rising interest rates. REITs have immense potential to fuel construction activities across the country and generate jobs along the way,” he said.

Earlier, property developers such as Megaworld Corp., DoubleDragon Properties Corp. and Robinsons Land Corp. have expressed interest in REITs.

Meanwhile, Santos said the company sees eight trends which will shape the country’s real estate sector this year.

He said the Philippines’ neighbors are expected to continue to invest in the Philippines this year, with more capital expected to come from China to go to the infrastructure, manufacturing, office, residential and hospitality sectors.

For the office sector, SKF sees continued growth in rent as demand remains strong.

Santos said co-working is likewise expected to grow this year and spread to locations outside of Metro Manila.

Co-living spaces are also on the rise as individuals are opting to live closer to their place of work given congestion on roads.

Santos said gentrification of areas outside business districts are also seen to offer growth opportunity for the real estate industry, particularly for co-living and new township developments.

With the Philippines hosting the Southeast Asian Games this year and following the launch of the second terminal of the Mactan Cebu International Airport, as well as the new Panglao Island airport, SKF expects the tourism and hospitality sectors to also see growth this year.

As for retail, malls are expected to add 250,000-square meters of space this year, with a large part likely to be used for food and beverage outlets.

Lastly, SKF expects developers to get into industrial and logistics with last-mile delivery hubs, inner-city distribution centers, cold storage and warehouse facilities seen to be in demand this year.