We recently heard the news that the BIR issued the much-awaited revised guidelines on the Real Estate Investment Trust (“REIT”) Act .

But what exactly is a REIT?

A REIT is basically a company that owns, operates, and finances real estate that generates income. This income is then distributed as dividends to its shareholders.

For common folks like us, a REIT provides us an opportunity to “own” a portion of real estate that generates dividends by becoming an owner of the REIT.

There are different types of REITs. Some REITs specialize in a specific real estate sector, others are more diversified. Some REITs lend money to real estate owners through mortgages or through acquisition of mortgaged-back securities, which is really just a bundle of home loans bought from banks that issued them.

Equity REITs are those REITs that buy, own, and manage properties. They primarily earn through rents on the properties they own.

Mortgage REITs earns from interest on loans it extends to landowners.

Then there are Hybrid REITs, which is a combination of the Equity and Mortgage REITs.

Other REITs are those that are private, publicly traded, or public non-traded.

We had our law enabling REITs in 2009 when Congress passed Republic Act No. 9856, otherwise known as The Real Estate Investment Trust Act of 2009, but we still don’t have any REITs in the country just yet because of some contentious issues on the formation of REITs including the imposition of value-added tax  (“VAT”) and minimum public ownership requirement, which discouraged prospective REIT proponents.

The new BIR rules on REIT now exempt transfer of real or personal property from VAT and reduce the minimum public ownership requirements from 40 percent to 33 percent.

With these amendments in place, will we finally have the first REIT of the Philippines this year?

Ayala Land, Inc. seems to be bent on doing so, with plans of placing its prime Makati Business District office assets under a REIT valued at $500 million.