The Philippine Stock Exchange (PSE) welcomes the approval by a House panel of a bill that allows investors a wider participation in the ownership of real estate and related assets.

The Real Estate Investment Trust (REIT) bill joins the growing list of market-friendly legislations, of which some, namely, the Personal and Equity Retirement Account Act and the Credit Information System Act, were already signed into law, according to PSE president and chief executive Francis Lim. 

Lim said the House Economic Affairs Committee's approval of the REIT bill would enable ordinary Filipinos to share in the ownership of income-generating real estate products.

"Under this system, ordinary Filipinos will not only own a part of a mall or hotel but will share annually in the income of these establishments. The REIT system is a win-win for our economy. It will help develop our capital markets and at the same time provide investors with a stable source of dividend income," he explained.

The new measure was drafted to permit the establishment of a corporation for the purpose of owning income-generating real estate and other related assets, whose shares of stock will be made accessible to both small and large investors. The proposed law mandates the listing of these stocks in a stock exchange to enable the general public to subscribe to them.

Consistent with the constitutional mandate of democratizing wealth, the REIT limits the concentration of the ownership of its shares, ensuring that no particular group of people wholly owns and controls the entity.

"Listing the shares of stocks of a REIT presents an opportunity for the growth of the local stock market and gives an alternative investment option to our investors," said Lim. "The investing public is likewise assured of safeguards in the REIT bill since the proposed law puts restrictions on the use of their funds and imposes additional disclosure obligations on REITs."

The House version introduced critical provisions to protect investors such as cap in investments in synthetic products, mandatory disclosure of material information relating to the REIT, mandatory return of investment in case of delisting of the REIT by the stock exchange. Under this version, investors are also guaranteed that on a timely basis, 90 percent of the REIT’s distributable income will be declared and paid out as dividends to shareholders on the 15th day of the fourth month following the end of its fiscal year.

"The steady stream of income is a major selling point for this investment vehicle as financial markets seek a balance between risk aversion and decent profits as the crisis lingers," Lim noted.

The Lower House also decided to expand the membership of the body that will draft the REIT Law’s implementing rules and regulations to include other stakeholders such as the PSE.

The REIT bill was authored by Aurora Representative Juan Edgardo Angara, Northern Samar Representative Paul Daza, Batangas Representative Hermilando Mandanas and Palawan Representative Abraham Kahlil Mitra. The House Committee on Economic Affairs is chaired by Cebu Representative Ramon Durano VI.