THE PHILIPPINE real estate space continues to be illiquid despite some real estate investment trusts (REITs) listings, UBX President and Chief Executive Officer John Januszczak said.
“There has been some movement in the REIT space, but it still represents a very small fraction of the capital markets. Real estate as an asset class remains highly illiquid,” he said at a property technology forum on Thursday.
Three REITs or companies that own income-producing properties, have listed on the Philippine Stock Exchange so far. REITs allow small and big investors to acquire ownership in big real estate projects.
RL Commercial REIT, Inc., a REIT sponsored by Robinsons Land Corp., is set to list on the stock exchange today (Sept. 14).
MREIT, Inc., the REIT sponsored by Megaworld Corp., is also expected to launch its IPO soon.
Mr. Januszczak named three main challenges facing the real estate sector: the illiquidity of assets, the cost of buying property, and the ratio of income equality.
“On top of the price of the property itself, there are associated costs on top of it,” he said. “(Property) is affordable as an investment vehicle for only a tiny fraction of the population.”
While REITs help address the nature of property assets — in which you either buy the whole asset or not at all — he also proposed converting rights of an asset to a digital token on a blockchain, although he said this idea is still at its infancy.
“The idea behind tokenized real estate is actually a hypothesis. There has been experience in other jurisdictions such as the United Kingdom… and the jury is still out on whether this will actually sell,” he said.
“You actually have to tokenize something. In many markets including the Philippines, this means you have to tokenize an intermediate vehicle. There has to be something between the title — such as a contract, a long-term leasehold, or a perhaps a single-property REIT that can actually be tokenized.”
Opening up this market, he added, would require regulatory support for tokenized asset exchanges or changing the titles themselves to reside on the blockchain as smart contracts. — Jenina P. Ibañez