The Securities and Exchange Commission is rolling out new guidelines aimed at regulating real estate investment contracts to protect investors and promote industry growth.
The guidelines, outlined in the recently issued Memorandum Circular 12, address the planned sale of securities that promise investors a share of profits derived from the rent or sale of real estate projects.
SEC chairman Emilio Aquino underscored in the memorandum the pivotal role of the real estate sector in the economy, citing its impact on job creation and overall economic development. He noted the potential of real estate investments for strong returns through rental income and capital appreciation.
The SEC’s guidelines specifically target rental pool agreements, which involve selling units in projects like condominiums or resorts under the condition that buyers contribute units to a managed rental pool. To ensure investor protection, real estate developers and managers planning to issue these agreements must first register with the SEC.The registration process will scrutinize the financial soundness and operational capabilities of issuers.
Under the new regulations, issuers are required to submit regular interim and audited financial statements to the SEC’s Office of the General Accountant. The guidelines also allow for shelf registration of the securities, enabling issuers to offer them in multiple stages over a period not exceeding three years.
The proactive action of the SEC highlights its commitment to fostering a transparent and secure investment environment in the real estate market. By establishing clear regulatory frameworks and oversight mechanisms, the SEC aims to bolster investor confidence and support sustainable growth across the sector.
