Real Estate Investment Funds in Indonesia. I Made Bagus Tirthayatra Deputy Director, Investment Management Licensing

Transcription

1 Real Estate Investment Funds in Indonesia I Made Bagus Tirthayatra Deputy Director, Investment Management Licensing Asia-Pacifc Valuation Conference 2016 Bali, October 2016

2 Content 2 Indonesian Real Estate Investment Funds (DIRE/REIFs) FSA Regulations on REIFs Comparison with Asia REIFs REIF Incentives Sharia REIFs Investor Protection Performance Measurement Role of Appraisers Stakeholder Response

3 Indonesian Real Estate Investment Funds (DIRE/REIFs) 3 New Policies 1st REIF Enhancing Strengthening Initial REIF regulations: 1. REIF Public Offering 2. Guidelines of REIF Prospectus 3. Guidelines for Investment Manager and Custodian Bank in managing REIF 4. Guidelines of REIF Collective Investment Contract Ciptadana Properti Ritel Indonesia (2012), managed by Ciptadana Asset Management Single portfolio asset: Grand Mall Solo, Central Java-Indonesia. Total asset size Rp 400 billion (40 million USD). Gov t policies to enhance REIF: - 5 th & 11 th Economic Policy Packages - Minister of Finance Regulation number 200 Dec 2015 OJK REIF developmental efforts: - Issued new regulation regarding Syariah REIF - Collaborate with government to reduce REIF taxation issues - Increase stakeholder REIF understanding A. MoF new regulations to address REIF tax issues : 1. SPC included as 1 entity with Collective Investment Contract to avoid double taxation imposed 2. Shorter period of Value Added Tax restitution (1 month) B. Coordinated with local government and Ministry of Home Affairs to give stamp duty incentives for property owner. C. Drafting revision of Government Regulation regarding the reduction of final income tax OJK Rule revisions: increasing Loan to Value ratio from 20% to 45%. REIF investor and market participant awareness and education efforts Syaria REIFs REIF income tax and stamp duty cuts.

4 Indonesian Real Estate Investment Funds (DIRE/REIFs) 4 Asset Transfer to REIF Unit Holder Investment Manager REIF Special Purpose Company cash cash cash Custodian Bank I. Tax to SPC I. VAT 10% (1 month restitution) II. Stamp Duty 5% II. Tax to Property Owner Income Tax 2.5% Asset Property Owner REIF Income Payout Unit Holder Investment Manager REIF Special cash cash Purpose cash Company Lessee/Tenant Custodian Bank Payouts to REIF are tax exempt Final Income Tax 10% on Rent Payments

5 Indonesian Real Estate Investment Funds (DIRE/REIFs) 5 POJK No 19/POJK.04/2016 REIF eligible assets: Indonesian real estate Indonesian real estate-related assets Cash and cash equivalents REIF portfolio limits No less than 50% of REIF NAV in real estate; No less than 80% of REIF NAV in real estate and real estate-related assets, with minimum percentange of real estate assets as specified above; No more than 20% of REIF NAV in cash and cash equivalents When purchasing new assets, REIF can borrow up to 45% of the asset value to finance the purchase

6 FSA Regulations on REIFs 6 POJK No 19/POJK.04/2016 (previously Bapepam Rule IX.M.1) Investment Manager and Custodian Bank Guidance for Management of Real Estate Investment Funds in the form of Collective Investment Contracts Bapepam Rule No. IX.M.2 Contract Guidance for Real Estate Investment Funds in the form of Collective Investment Contracts Bapepam Rule No. IX.C.15 Registration Statement for Public Offering of Real Estate Investment Funds in the form of Collective Investment Contracts 6

7 Comparison of Asia REIT/REIF 7 Malaysia Japan Singapore Thailand Hong Kong Taiwan Indonesia Min Real Estate Investment 75% 75% 70% 75% 100% 75% 50% Foreign Assets OK Prohibited OK Prohibited OK OK (with Central Bank approval) Prohibited Development Prohibited (unless approved by Securities commission) Prohibited Up to 10% of deposited property Restricted to properties of >80% structural completion Prohibited Prohibited Prohibited Gearing Limit 50% of total assets No restrictions 35% of total assets No gearing allowed 45% of total assets 50% of total assets 45% of asset purchase value Payout If payout 90%, undistributed income is tax exempted >90% of taxable income (post depreciation) >90% of taxable income (no depreciation) >90% of net profit >90% of net income >90% of taxable income (post depreciation) >90% of net income Tax Transparency Yes Yes Yes Yes No Yes No Tax Concession for Investors Individual (Resident & Non Resident): 10% Corporate : Resident: 24% Non Resident: 25% No Individual (Resident & Non Resident): no tax Corporate : Resident: 17% Non Resident: 10% Individual (Resident & Non Resident): 10% Corporate : Resident: 20% Non Resident: 10% No Yes, 6% local and withholding tax. Yes. No payout & capital gain taxes for unitholders 7

8 REIF Incentives 8 REIF and SPC accounted for as single entity to avoid taxes on payment of dividends from SPC to REIF VAT on sale of property to REIF restitution reduced to 1 (one) month Income Tax on sale of property to REIF reduced to 2.5% final Stamp Duty reduced Exact rate pending regional government regulations 8

9 Sharia REIFs 9 POJK No 30/POJK.04/2016 Sharia REIFs are prohibited from: Investing in Real Estate Assets which has more than 10% of its land bank utilized for non-sharia activities Earning more than 10% of its revenue non-sharia sources Investment Managers offering Sharia REIFs must Have a Sharia Supervision Board (Dewan Pengawas Syariah), or Have a Sharia Expert Team (Tim Ahli Syariah) with members licensed as Capital Market Sharia Experts with the FSA 9

10 Investor Protection 10 No Excessive RE Asset Trading Minimum holding period of RE Assets of 2 years Minimum resale price 90% of appraised value Bankruptcy Remote Assets of stored seperately and administered by an independent Custodian Bank No Issuance of Debt Securities REIF cannot be securitized/issue debt securities of itself May only use direct loans up to 45% of RE Asset purchase value General Meeting of Unitholders Should the REIF enter into transactions with afiliated parties, parties involved in the establishment and/or management of REIF, REIF must obtain prior consent from investors Disclosure Requirements At registration Valuation Report Real Estate Management Contract Legal Opinion Prospectus Ownership Documents SPC Constitution Documents Ongoing Annual Report, including Valuation Reports Annually-updated Prospectus and Financial Statements Activity Reports Material Valuation Changes Reports 10

11 Peformance Measurement 11 Investors can measure REIF performance through Audited Annual financial statements Real Estate Asset appraisal reports (by FSA-registered Appraisers) Must be published in at least 1 (one) national newspaper or Investment Manager s website no later than 3 (three) months after the end of the REIF s fiscal year In practice, Investment Managers publish NAV s daily Securities valuation reports Performance tables 11

12 Role of Appraisers 12 POJK No 19/POJK.04/2016 Assets transfered into REIFs must first be appraised by an FSA-regsitered Appraiser no earlier than 6 months before the transfer REIF assets must be appraised at least annually by an FSA-registered Appraiser The REIF Appraiser must: Demonstrate objectivity and independence Not be affiliated with: The REIF Investment Manager of the REIF Custodian Bank of the REIF Supporting Professions (accountant, notary, etc) of the REIF Employees of the above parties 12

13 Stakeholder Response 13 Since the implementation of the Tax Reforms.. 1 (one) new REIF has been granted effective from the FSA, AUM IDR 400 Billion 1 (one) new REIF is under development, AUM IDR 2.7 Trillion 13

14 End of Presentation Thank You