The Philippines has the potential to be the world’s next property “blockbuster,” but this sector’s prospects can be maximized only if the country relaxes its real estate investment trust (REIT) law and boosts infrastructure investments.
Mr. Antonio, also the chairman of Century Properties Group, Inc., said the Philippines -- with its young demographics and solid fundamentals -- has been expanding for 66 straight quarters since 2001, paving the way for its economic renaissance after being tagged “the sick man of Asia” in the past several decades.
Changes in Republic Act No. 9856, or the Real Estate Investment Trust Act of 2009, may unlock the value of the real estate sector, Philippine Stock Exchange Chief Operating Officer Roel A. Refran mentioned.
Nearly six years since the REIT law lapsed into law in December 2009, none of the major developers have come forward with their respective offerings because of contentious issues on ownership and taxation of asset transfers.
“It’s like we have sent invitations to a party, but no one came,” APREA Chief Executive Officer Peter Verwer said. But for Mr. Refran, the “party’s not yet over.”
“There is no one-size-fits-all model. We have an advantage that we can pick up from various jurisdictions, customize them and learn from that experience. The policy decision we have to buy into is that enabling real estate development -- whether through underlying assets or REITs -- has a positive impact on GDP (gross domestic product) growth,” Mr. Refran said.
The Securities and Exchange Commission intends to revive its dialogue with the industry to make REITs a “real alternative funding source,” Commissioner Ephyro Luis B. Amatong said.
While the financial system is awash with cash, Mr. Amatong said real estate firms are facing funding pressure with the Bangko Sentral ng Pilipinas (BSP) implementing the single borrower’s limit and putting a cap on bank exposure to real estate. “These... regulations mitigate risks with the ups and downs of the industry, creating pressure for the industry to find other sources of financing aside from bank borrowing.”
To sustain its economic run, and along with it real estate’s rosy outlook, it is crucial for the Philippines to increase investments in infrastructure -- an area where the country has under-invested in past decades. “We are like an eight-year old... who started in the business. We’re now 15-16 years old, but we’re wearing clothes of an eight-year old. We have outgrown the clothes we are wearing so we should now upgrade our infrastructure,” Mr. Antonio said.
Better access will enable the Philippines to realize the potential of tourism, which can be the country’s third leg after business process outsourcing (BPO) and overseas remittances, he said. “Tourism is one of the low-hanging fruits in the economy today. However, in order to attract tourists to this country... I think we have to improve our access.”
CBRE Philippines Chairman Rick M. Santos remains bullish on the BPO sector, saying its demand for space could hit 850,000 square meters (sq.m.) by 2018 from 600,000 sq.m. currently.
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