REITs vs time deposits: which one fits your money?

Time deposits and REITs both pay you to hold them, and both attract people who want income without trading stocks every day. They behave very differently when rates and prices move, and 2026 is that kind of year.

The short answer

A time deposit protects your principal and pays a fixed rate, while a REIT pays higher dividends but its price can fall.

Choose a time deposit for money you need back on a known date. Choose a REIT for money you can leave for five years or more and do not need to sell in a bad month.

Time deposits in one minute

A time deposit locks your money with a bank for a fixed term at a fixed interest rate.

• Return: fixed and known on day one
• Risk: low. PDIC insures deposits up to ₱1 million per depositor, per bank.
• Tax: 20% final tax on interest, deducted by the bank
• Access: locked until maturity. Breaking it early usually costs part or all of the interest.

Long-term time deposits used to be tax-free if held five years or more. That ended on July 1, 2025, when Republic Act No. 12214 set a 20% final tax on interest from all time deposits, including long-term ones.

REITs in one minute

A REIT is a company that owns income-producing property, like offices and malls, and must pay out most of its income as dividends.

You buy REIT shares on the Philippine Stock Exchange (PSE). Under the REIT Act of 2009, a REIT must distribute at least 90% of its distributable income as dividends every year.

• Return: dividends, plus or minus changes in the share price
• Risk: medium. The price can fall, and dividends shrink if rental income drops.
• Tax: cash dividends have a 10% final tax under the REIT Act
• Access: sell any trading day, at whatever the market price is

Listed Philippine REITs include AREIT, MREIT, RCR, DDMPR, FILRT, and CREIT. The PSE website has them all, with their disclosures.

What changes when rates go up

When the BSP raises rates, time deposits start paying more, and REIT prices usually come under pressure.

The BSP has raised its policy rate three times in 2026, to 5%, to fight inflation that reached 6.1% in August. Higher rates make safe deposits more attractive, so some investors sell REITs to buy them, which pushes REIT prices down.

That cuts both ways. A falling price hurts if you need to sell, but it also means a higher dividend yield for anyone buying now.

The after-tax comparison

Here is an illustration with round numbers, not current market rates.

Time deposit at 5%, ₱100,000: ₱5,000 in interest, minus the 20% tax, leaves ₱4,000. You get your ₱100,000 back in full at maturity.

REIT with a 6% dividend yield, ₱100,000: ₱6,000 in dividends, minus the 10% tax, leaves ₱5,400. Your ₱100,000 is now worth whatever the shares trade for. If the price drops 10%, you are down to ₱90,000 and the year is a loss even after dividends. If it rises 10%, you are well ahead.

With inflation above 6%, the 4% you keep from the time deposit loses buying power. We compare every safe option against inflation in Inflation at 7%: is your savings actually growing?

The risks people miss

Time deposits

• Inflation. If prices rise faster than your after-tax interest, your money buys less at maturity.
• Breaking early. The penalty can wipe out most of what you earned.

REITs

• Interest rates. Prices tend to fall when deposit rates rise.
• Vacancies. Empty offices mean less rent and smaller dividends.
• Concentration. Some REITs own a handful of buildings from one developer. Read what it owns before you buy.

Which one should you choose?

Match the product to when you need the money.

Pick a time deposit if:

• You need the exact amount back on a specific date, like tuition next June
• You cannot stomach seeing your balance go down
• It is extra savings, beyond your emergency fund, that you will need within a year or two

Pick a REIT if:

• You are investing for five years or more
• You want income that can grow over time
• You can hold through a year where prices fall without selling

Use both if you have short-term and long-term goals.

Whatever you choose, build your emergency fund first. Neither belongs in it. See How big should your emergency fund be?

How to buy a REIT

You need an account with a PSE-accredited stockbroker, and many let you open one online.

1. Open and verify a broker account.
2. Fund it from your bank.
3. Search for the REIT's ticker, check the price and the board lot, and place an order.
4. Dividends arrive in your broker or bank account, net of the 10% tax.

PesoHero will track your REITs, time deposits, and MP2 together, so you see your whole net worth in one place. Join the waitlist to hear when it launches.

Sources

• Republic Act No. 9856, the Real Estate Investment Trust Act of 2009 (Lawphil)
• Rappler: What RA 12214 changes for interest income
• PDIC: Maximum Deposit Insurance Coverage of ₱1 million
• Philstar: BSP policy rates hiked by 25 bps
• Philippine Stock Exchange

This is general information, not investment advice. Past dividends do not guarantee future ones.