Real estate woes harm banks’ cleanup bid

Vol. XXII, No. 191 [ BusinessWorld Online ]

Friday, May 1, 2009 | MANILA, PHILIPPINES

BY GERARD S. DELA PEÑA, Reporter

BANKS may have a hard time cleaning up their balance sheets this year as a weaker real estate sector would make it difficult for them to dispose of their bad assets, industry officials yesterday said.

Real estate developers have adopted a prudent stance in terms of buying new properties in light of the uncertainties in the global economy, said Ramon Jose E. Aguirre, research manager at property consultancy firm Colliers International, making it hard for banks to sell their soured properties at a premium.

That could compound the problem of the banking sector that is already faced with the threat of a possible rise in loan defaults as difficult economic conditions could weigh down on the borrowers’ capability to pay their dues.

Ty-led Metropolitan Bank & Trust Co. (Metrobank), for instance, has announced yesterday a plan to sell up to P3 billion in idle assets this year out of the estimated P25 billion in real and other properties foreclosed that encumber its balance sheet.

That is lower, however, compared to the P5.8 billion worth of foreclosed assets it sold last year.

"The market is buying less. We have to be cognizant of the fact that the real estate market is on a decline in terms of uptick in new buyers," Fernand Antonio A. Tansingco, Metrobank head of treasury group and corporate planning, told reporters at the sidelines of the bank’s annual stockholders’ meeting on Wednesday.

The outlook for the real estate sector appears dire, said Mr. Aguirre.

"Sales are down, and income of developers is also slowing down. The transactions are slow even in leasing," Mr. Aguirre said in a phone interview.

"Purchasers, developers and decision makers are prudent because they are playing safe to prepare for the worse," he said.

Pressure to clean up

Banks were under pressure to clean up their books as the Basel 2 accord implemented in 2007 made it much costlier for them to keep their idle assets.

Metrobank’s non-performing asset (NPA) ratio stood at 6.3% as of end-2008. Mr. Tansingco said that while the reduction of its NPA ratio would also depend on how fast the bank will be able to grow its assets, the bank’s long-term view is for its ratio to decline to around 5%.

This is also the case for its non-performing loan (NPL) ratio, which stood at 4.5% in 2008 and was projected to decline to about 4% in the long-term.

This decline in its NPL ratio would be aided by the projected 6-8% growth in the bank’s lending for this year, which will be supported by a double-digit growth in its consumer lending business, Mr. Tansingco said.

____________________________________________________________________________________

Senate OK’s rent control bill on second reading

Vol. XXII, No. 191 [ BusinessWorld Online ]

Friday, May 1, 2009 | MANILA, PHILIPPINES

BY BERNARD U. ALLAUIGAN, Reporter

THE SENATE on Wednesday night has approved on second reading a measure that seeks to protect housing tenants from unscrupulous rent increases for three years.

Senator Rodolfo G. Biazon, chairman of the committee on urban planning, housing and resettlement, said the chamber will push for the swift passage of Senate Bill (SB) 3163 which seeks to limit rent increases by not more than 10% for three years or until December 21, 2011 before the adjournment of the second regular session on June 5.

The limit on rent increases will be effective as long as the unit is occupied by the same lessee.

Under SB 3163, all residential units in Metro Manila and other highly urbanized cities where monthly rental does not exceed P10,000 are covered by the proposed measure. It also covers rentals not exceeding P5,000 for rural and other areas. Excluded under the proposal are residential units which are under a rent-to-own scheme.

The Housing and Urban Development Coordinating Council (HUDCC) will be authorized to study if the industry needs to be regulated or deregulated by the time the three-year mechanism lapses. The housing regulator will also determine the duration of the regulation or deregulation, residential units covered and rental limits.

The proposed measure is a substitute to SB 2884 authored by Senate Majority Leader Juan Miguel F. Zubiri and SB 3030 filed by Senator Ramon "Bong" Revilla, Jr.

"It’s a gift that we’re giving the Filipino people for Labor Day. The Senate gives this because we believe that not all benefits are wage benefits. This is considered non-wage benefit especially with the fact that millions of families are renting within Metro Manila and other urbanized cities, and rural areas that will help the workers who are renting their units," said Mr. Zubiri in a statement.

Republic Act 9341 or the Rent Control Act of 2005 which expired last December 31 set a 10% annual limit to such increase.

House Bill 6098 which was approved on second reading on April 15, meanwhile, sets the annual cap on rent increases at a lower 4% for units being rented out for not more than P10,000 per month in Metro Manila and other highly urbanized cities, and not more than P5,000 in other parts of the country.

It also sets a one-year moratorium on rent increases upon effectivity of the proposed law.

On the fourth year, HUDCC will assume the authority to extend this limit on rental increases per year and determine the residential units covered by such limit.

Mr. Zubiri expressed confidence in an earlier interview that the disagreements in the Senate and House versions will be harmonized in the bicameral conference committee deliberations.

_____________________________________________________________________________________

NHA to provide housing loan amnesty

Vol. XXII, No. 191 [ BusinessWorld Online ]

Friday, May 1, 2009 | MANILA, PHILIPPINES

LOW-COST housing beneficiaries with outstanding accounts can start applying for loan restructuring, and penalty condonation starting May 4 in line with a law that seeks to help homebuyers threatened with foreclosure to keep their homes, the National Housing Authority (NHA) yesterday said.

In a press conference, NHA General Manager Federico A. Laxa said the implementation of Republic Act (RA) 9507, or the Socialized and Low-Cost Housing Loan Restructuring Program of 2008 would provide relief to poor households whose penalties had accumulated due to their financial problems.

"The passage of RA 9507 is an avenue that would free our beneficiaries from their financial quagmire and for them to be able to settle their obligations and save their homes," he said.

Jo Hottle, NHA director for corporate planning, said around 100,000 accounts are eligible to avail of the program, which provides discounts on housing arrears and incentives for updated accounts.

The law, signed by President Gloria Macapagal-Arroyo last October, would extend the payment period of housing loans contracted from government financial institutions and housing agencies, and in effect lower borrowers’ monthly amortizations.

It covers socialized and low-cost housing loan accounts not exceeding P2.5 million with any of the government financing institutions and agencies that have at least three months of unpaid monthly amortizations arrears as of March 31.

The program, however, cannot be availed of by beneficiaries without a single payment since the sale of their units, those who have abandoned their units for more than a year from delinquency date, those whose housing units are occupied by a third party, and those whose accounts have been foreclosed and the redemption period has lapsed.

Qualified beneficiaries can avail of the program until September 2010.

Ms. Hottle said under the implementing rules of the law, NHA will condone all penalty and delinquency charges as well as half of accrued and unpaid interest of eligible homeowners.

Restructured accounts will consist of an interest bearing portion which is the total outstanding principal balance and a non-interest bearing portion which will be the uncondoned portion of accrued interest to be repaid in equal monthly amortizations during the term of the loan. The maximum repayment period of the structured loan is 30 years for individual and community association accounts.

Ms. Hottle said the program would mean around P1.4 billion in foregone revenues for NHA. — Alexis Douglas B. Romero

___________________________________________________________________________________

Construction group optimistic on industry prospects for 2009

Vol. XXII, No. 191 [ BusinessWorld Online ]

Friday, May 1, 2009 | MANILA, PHILIPPINES

CONSTRUCTION ACTIVITY this year will likely slow but not contract from 2008 levels, an official of the Philippine Constructors Association, Inc. said on Wednesday.

Government-led projects are driving growth while the construction of middle-income housing has been the primary mover from the private sector so far in the first quarter, the industry group president, Anthony L. Fernandez said.

Property analysts gave mixed reactions, with one concurring while another was more downbeat on demand for middle-income housing.

"It will be below [2008 levels] but it shouldn’t be negative," Mr. Fernandez told reporters at the sidelines of Robert Bosch, Inc.’s anniversary celebration.

Growth in the construction sector slowed to 8.2% in 2008, with activity primarily driven by private-sector projects, data from the National Statistical Coordination Board show.

"As compared to two years ago where activity was private-sector led, now it is from the government. It used to be 60% private sector and 40% government. Now it is reversed," Mr. Fernandez said in Filipino.

The government had announced a P330-billion economic stimulus package for the year to generate jobs amid the economic downturn partly through infrastructure building.

For private sector projects, middle-income housing has remained strong, Mr. Fernandez said.

Commercial construction such as those for new shopping malls, he added, is also active but "is not as strong as the past two years."

Asked to comment, CB Richard Ellis, Inc. Research Director Victor J. Asuncion shared Mr. Fernandez’ outlook, particularly on housing.

"I agree. It’s an end-user market still. Mid-market horizontal and vertical housing is fueling construction activity," he said in a text message yesterday.

Prince Christian R. Cruz, senior economist at Global Property Guide, gave a more cautious projection.

"If the Philippines’ economic growth will [just] slow down, we expect middle-income housing will be unaffected. But if the economy contracts, there will be repercussions to housing demand," Mr. Cruz said in a telephone interview yesterday.

"I think it’s yet to be seen if [this segment] will do well this year," Mr. Cruz said. — Jessica Anne D. Hermosa

____________________________________________________________________________________