MAS Relaxed S-REITs Guidelines

The Monetary Authority of Singapore (MAS) has relaxed the distribution policy and gearing ratio for Singapore REITs.

Due to Covid 19 pandemic, MAS allowed REITs to enjoy tax benefits as long as they declare 90% of their taxable income within a year, instead of 90 days previously.

Secondly, the gearing limit of REITs has been increased to 50%, instead of 45% previously.

We believe this move is to hint Singapore REITs to maintain their dividend policy and not to preserve so much cash at this moment. The first guideline provides REITs with a longer time frame to decide on their dividend pay-out while the second guideline allows REITs to have higher room to maneuver in case their property value drops and hitting the gearing limit.

This move has shown us what MAS thinks.

1) A lot of Singapore investors relies on dividend income to sustain their daily lifestyle and MAS wants to prevent the situation of HSBC cutting dividend from happening in Singapore.

2) MAS expects a fall in property prices in the near future.

3) Singapore wants to maintain and enhance its status as a REITs listing hub. If Singapore REITs continue to maintain their distribution policy during this difficult situation, dividend seeking investors will flock to Singapore after this period. By that time, Singapore's status as a wealth management hub will be stronger ever.

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