Tax reform may revive PH Real Estate investment trusts (REIT) industry

Real Estate investment trusts (REIT) may get a new lease on life as the government evaluates the adoption of a comprehensive tax reform program, an official of the Securities and Exchange Commission said. The Real Estate Investment Trust Act lapsed into law in December 2009 with none of the major property developers coming forward with their prospective offerings.

“Tax reform is in the air. It’s usually in the context of income tax, but you know, tax rin ito (REIT is also tax and it could be part of the reform),” Commissioner Ephyro Luis B. Amatong told reporters last Oct. 22, referring to the changes in the REIT Law.

The Aquino government had imposed stringent REIT rules to limit revenue losses caused by laws that grant generous tax perks. Taxation on asset transfers and issues on ownership have prompted property giants such as Ayala Land, Inc., SM Prime Holdings, Inc. and Robinsons Land Corp. to shelve proposed REIT listings.

Asked if there is still time to introduce changes to the law before the election, Mr. Amatong said: “Even if it’s not, it might be useful to start the conversation now so that when the next administration or the new Congress comes into office, mayroon nang pinag-uuspaan (discussions may resume). We hit the ground running.”

While the Philippines’ REIT Law has been in place since 2009, Indonesia and Thailand have forged ahead and saw their first REIT listings in 2013 and 2014, respectively, according to data from the Philippine Stock Exchange (PSE).

REIT listings have increased to 145 with a total market capitalization of $134.5 billion, from 118 listings valued at $65.1 billion in 2009, according to data from the exchange, citing property consultancy firm CBRE.

“It’s a wake-up call for our regulators. We need to reconsider how we can make it work,” PSE Chief Operating Officer Roel A. Refran said in an interview.

The government wants to revive talks with the real estate industry to achieve a compromise that may allow the country’s REIT market to finally take off six years after the law was passed.

“It’s difficult putting your best foot forward. There’s really a process. There’s room to evolve,” Mr. Amatong said.

Financial regulators are taking a precaution in the aftermath of the Asian financial crisis that hit the real estate industry, the commissioner said.

“We don’t want that to happen again but at the same time we don’t want to unnecessarily pull back the growth of the real estate industry,” Mr. Amatong said.

-- Business World