MANILA, Philippines - Businessman Reghis M. Romero II of construction conglomerate R-II Builders finds the law on asset-backed securities as key to solving the country’s backlog of 3.6 million housing units under the government’s public-private partnership (PPP) program.
Romero said building all of those 3.6 million housing units, even over a 10-year period via the PPP, would entail such a staggering amount that even the entire construction and property industry would find difficult to finance.
Citing as example the reported P4-billion government expenditure in building 21,800 housing units for the police and the military alone, Romero said that amount would indicate the need for at least P661 billion to construct the backlog of 3.6 million at the same cost.
Reports have it, though, that the government needs P1.7 trillion to address the country’s total housing needs, with informal settlers accounting for around 1.3 million units.
The financial requirement does not cover the cost of physical infrastructure and other socioeconomic facilities needed for an integrated and well-managed community development ranging from environment issues to sources of livelihood.
“That amount (P1.7 trillion), of course, would logically require mobilizing private sector capital, not only from property firms, but even from individuals and other entities with investible funds for housing and related projects.
Otherwise, most of the funds of the construction sector will have to be channeled to housing to the detriment of other equally important areas of investments such infrastructure, tourism, and other property development activities,” explained Romero, past national president of the Chamber of Real Estate and Builders Associations (CREBA) and current chairman of its Council of Leaders.
Founded in 1973 by real estate leader and advocate Manuel M. Serrano and currently headed by Charlie Gorayeb as national president, CREBA is composed of members from the various sectors of the construction and property industry with more than 30 chapters in the Philippines, United States, London and Asia.
“While CREBA is thankful for the business opportunities under the PPP, the challenges that come with it in the face of the housing backlog transcend our entrepreneurial interests and become an issue of corporate citizenship, especially since we regard our umbrella organization as a government partner in nation-building,” Romero said.
“So this is where the Securitization Act of 2004, or Republic Act 9267, comes into play as an effective enabling mechanism for both the government and the private sector to mobilize and raise capital from the people for such enormous housing needs,” Romero pointed out.
RA 9267 enables the pooling of property as collateral for the issuance of securities to be offered to corporate and individual investors and entities. These asset-backed securities (ABS), which are insured and given a credit rating based on the risks involved, then become a financial instrument as another source of additional funds for a project, aside from the usual bank loans.
“In effect, the ABS makes the PPP a truly public-private partnership since it gives even ordinary people and other entities with disposable income the opportunity to invest and share in the profits from a housing project,” Romero stressed.
The Securitization Law enacted on March 19, 2004 came on the heels of a similar investment scheme formulated by Romero for a landmark government housing project, which President Corazon Aquino initiated before the end of her term in 1992.
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