Posted on June 09, 2013 10:49:32 PM [ BusinessWorld Online ]
CONTENTIOUS real estate investment trust (REIT) rules will be revisited in the hope of jumpstarting a dormant industry.
Minimum public float and taxation issues, Philippine Stock Exchange (PSE) President Hans B. Sicat said last Friday, will be raised anew when the Capital Markets Development Council (CMDC) next meets.
The PSE, along with the Bankers’ Association of the Philippines (BAP), Financial Executives Institute of the Philippines and the Investment House Association of the Philippines are part of the public-private council, which also includes the Department of Finance, Bangko Sentral ng Pilipinas and the Securities and Exchange Commission (SEC).
"A year and a half after the REIT Act [rules were issued] ... not one company that was originally planning to list a REIT product has done so as the rules have been disadvantageous for them," Mr. Sicat noted.
Republic Act (RA) 98501 was passed into law in 2009 but the rules governing the establishment of stock corporations that will pool investor funds and manage real estate assets were only issued in 2011.
Stringent requirements such as a 40% minimum public ownership, to be increased to 67% within three years from listing, and the imposition of the 12% value-added tax on initial property transfers have been criticized by real estate firms that had earlier welcomed the law.
"You do not have to amend the law, you can do it quickly if you just amend the IRR (implementing rules and regulations)," Mr. Sicat said.
"Now that the Philippines has reached investment grade status and from the fiscal side, collections are up… we are bringing the issue of taxation and minimum public float back up to the discussion level at the CMDC," he said, referring to the government’s insistence on protecting its revenue streams.
Earlier this year, SEC Chairperson Teresita J. Herbosa said the corporate regulator would be asking the incoming 16th Congress to amend the REIT Act.
"One of the areas we hope to amend is the need for a REIT manager independent from the property developer," Ms. Herbosa said in February, noting that "property developers are not interested in giving up control…"
The REIT Act requires an independent manager for the investment vehicle to oversee and maintain the value of the property -- a provision not present in the counterpart laws of other countries, she noted.
Ms. Herbosa also said amendments to the REIT Act could include the minimum public float, which she called "a little too high compared to other countries."