REAL ESTATE INVESTMENT IN THE PHILIPPINES

Real estate investment in the Philippines is so young unlike other countries where their investors had relied the way how real estate companies run the said investment in a way that will provide greater advantage to the masses.

Real Estate Investment Trust (REIT) was introduced in the Philippines in 2009 as it was embodied in Republic Act No. 9856 better known as REIT Act of 2009. This is very new to the Philippines but this was already present in the United States since 1800’s and in other countries such as Australia, Canada, Hongkong, Japan and Malaysia wherein their investing public has freely invests real estate investments in publicly traded companies.

REITs were introduced into the Philippines in order to democratize wealth by broadening the participation of Filipinos in the ownership of real estate. Engaging in real estate business requires a lot of capital(I am not talking here on selling real estate for gaining commission basis). Owning REITs helps you become a part of the Real Estate Business without investing out so much capital because buying shares in REIT is owning a fractional share or becoming part-owner of the Real Estate Investment Trust. REITs maybe a great concept but the problem again lies with information dissemination. The Philippine stock exchange has been around for more than 80 years and yet only less than 1 % of the Filipinos invests in stocks. If democratization of wealth is the goal then the Philippine Stock Exchange, its market education department has to do more ways in order to educating the public about stocks and REITs.

Anyway, let me introduce you to REITs and why you should invest in them. This is not a comprehensive guide but just an introductory one. I have personally invested in REITs even it is in a process of being introduced in the country. But following developments, I believe it is a very promising alternative vehicle of investment.
A Real Estate Investment Trust is a stock corporation created for the purpose of owning and managing income-generating real estate such as office buildings, residential condominiums, shopping centers, hotels, warehouses, hospitals, airports and tollways.

The reason why you should invest in REITS is because REITs it has both the characteristics of both a fixed income instrument and a variable income instrument. This gives the investor an advantage, especially the investors who are not so aggressive but are also not so conservative.
Fixed income from REITs is gained through regular dividends. The REIT Act of 2009 requires REITs to distribute 90% of its distributable income to investors.

Variable income comes from Market Volatility. This is just like capital appreciation in stocks. Holders of REIT shares may expect an increase in his REIT share price whenever there is increased demand for it. A decrease demand may of course have the negative effect.

At present, Ayala Land, Robinson’s Land and SM Prime Holdings are seriously considering in offering REITs. For me I have bought shares at Ayala Land because it was foreseen that this company will boom in the coming years. Other real estate companies listed in the Philippine Stock Exchange such as Belle Corporation, Mega World Corporation and Shang Properties are adopting a wait and see situation and are waiting for the big boys to make their first REIT move before making an REIT offer.