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SSS Increases Focus on REIT Investments

With improving market conditions and policy easing expected by year’s end, the state-run Social Security System (SSS) is increasing its investments in real estate investment trusts (REITs).

The management of the pension fund released a statement expressing optimism about increased income returns from its increased real estate investment trust (REIT) holdings for 2024.

SSS has already invested P6 billion in almost all of the REITs that are now available in the Philippines, while it did not indicate the extra amount that is anticipated for REIT investments.

A real estate investment trust (REIT) is a stock company that allows the general public to invest in and trade income-producing real estate assets. Dividends are paid to investors by this investment vehicle, which generates returns from the rental income of the underlying real estate properties.

SSS President and CEO Rolando Macasaet stated that of the P6 billion invested, more than 75% were bought this year and have already produced an 8% return.

Returns from REITs are anticipated to strengthen the pension fund’s investment holdings. Macasaet emphasized that favorable market circumstances and expected rate decreases in the second part of the year are reasons for confidence regarding REITs.

Although some anticipate a rate reduction as early as the third quarter, the Bangko Sentral ng Pilipinas is generally projected to ease policy rates by the fourth quarter.

Since 90 percent of the lease revenue is required to be dispersed, Ernesto Francisco, the acting head of SSS’s investment section, stressed that REITs are appropriate investment vehicles for pension funds such as SSS. Additionally, he noted that because REIT participants are required to reinvest within a year, the industry aids in economic development.

SSS’s investment income is expected to be significantly boosted by REITs in 2024 since they provide attractive dividend yields that are higher than current benchmark rates.

Francisco declared, “We will invest more in REITs if their cash flow is more diverse and robust.” “We believe the Philippine real estate investment trust (REIT) industry has a bright future and has the potential to play a significant role in the capital market.”

At the moment, SSS allocates 5% of its equity funds to REITs.

The administration is pushing for the Real Property Valuation and Assessment Reform Act to be passed in order to profit from the industry. The purpose of this law is to apply digital tools and globally recognized standards for real estate appraisal in the Philippines. Additionally, it will strengthen local government entities’ ability to raise local income from real estate.

The Securities and Exchange Commission and the Bureau of Internal Revenue loosened the laws governing REIT ownership and taxation, leading to the first REIT listing in the Philippines in 2020. They also introduced changes to the rules that would go into effect.

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