When Republic Act No. 9856 or the Real Estate Investment Trust (REIT) Act of 2009 was passed, it was hailed as an innovative piece of legislation. Under the law, an investor can gain from dealings in real property without actually owning land. This is done by putting up an REIT, or a stock corporation organized for the main purpose of generating income from real estate. 90% of which is distributed to shareholders. Thus, it was seen as a viable investment alternative for small investors which will spur the growth of the real estate market in the Philippines.
However, regulatory roadblocks hindered the full implementation of the REIT Law. For instance, the law requires a high minimum public ownership (MPO) requirement of up to 67% , an escrow equivalent to the amount of tax breaks the REIT enjoys, as well as a 12% VAT for transferring property even if classified as a tax-free exchange.
The Securities and Exchange Commission has since lowered the MPO to 33%, while the passage of the TRAIN Law has removed the imposition of the 12% VAT on property transfers. This 2019, the SEC is set to formulate regulations that will ensure that funds raised by REITs will be reinvested in the country. The SEC aims to issue the revised guidelines by the first half of 2019.