House committee approves REIT bill

by fernan marasigan/b.mirror/4.22.09

SUBJECT to amendments, the House ways and means committee approved on Tuesday a bill that would provide for a regulatory framework for real- estate investment trust (REIT).

The committee, headed by Lakas Rep. Exequiel Javier of Antique, approved the substitute bill to House Bills 148, 3566 and 4182, or “An Act Providing the Legal Framework for Real Estate Investment Trust,” following assurance from Philippine Stock Exchange president and chief executive officer Francis Lim that safety nets or safeguards are in place to avoid concentration of properties in the hands of a few, particularly the rich.

He was referring to the similar measure recently approved by the House economic affairs committee and was submitted to the Javier committee.

Laban Rep. Juan Edgardo Angara of Aurora said the approved bills would undergo thorough scrutiny by the committee. “They are still subject to amendments,” Angara said in an interview at the sidelines of the hearing.

“Ang worry kasi ng ways and means committee, especially ni chairman [Javier], is iyong leakage sa revenue at saka iyong law might be taken advantage of by the rich kasi iyong structure ng real estate sa Philippines is that they are owned by a small percentage of the population tapos karamihan family-owned. If you look at our top companies. . . family-owned corporations iyan na lumaki na so ’yung concern is to have a law which is sufficiently attractive to attract investors but also will not be a tax shelter for rich corporations and rich families so iyon ang balance doon,” Angara said. He also cited the proposal of Javier on the limit of ownership.

“For example, five individuals cannot own more than 50 percent of the companies, hindi niya ido-dominate iyong ownership. Kung owned by the son or family members, considered as one lang iyon in terms of the five persons para hindi limitado lang sa kanila ang ownership,” he said.

Javier, for his part, said the committee will craft its own proposed amendments on the approved bills.

During a hearing last week, Javier also questioned the proposal for the 30-percent minimum public ownership. By adopting this, the REIT will not be democratizing ownership, supposedly one of the salient features of the measure.

The bill should provide that after five years, at least an additional 5 percent should go to public until it reaches more than 50 percent.

“Otherwise, it will just be used as a tax shelter for wealthy families,” Javier said.

The REIT bill seeks to attract foreign investment, develop the capital market and provide an alternative investment instrument that has a steady income stream and has proven to have a higher interest yield than other forms of securities so that even local investors will be attracted.

Angara said the measure will also help the government put up infrastructure and democratize land ownership by corporatizing land, convert it to income-generating real estate, list in stock exchange as REIT and invite local investors to buy the stocks allowing them to be coowners of the real-estate.

Its main purpose, Angara said is to provide small and large investors alike with the opportunity to participate directly in the ownership and financing of large-scale real-estate projects at affordable rates of investment, without the disadvantages of illiquidity, high transaction and management costs, as compared to traditional private real estate ownership.

.