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New source of funding real estate eyed

Published on Thursday, 29 November 2012 00:00
Malaya Business News Online - Philippine Business News | Online News Philippines
The Philippines is ripe for an institutionalized secondary market of securitized real estate receivables as the real estate industry is experiencing one of its boom periods in history.
For Jesus B. Atencio, president of 8990 Housing Development Corp., a big opportunity is offered by securitizing developers’ collectibles in what the financial industry calls as  “asset-backed securities” to enable developers to tap additional source of funding.
State agency National Home Mortgage Finance Corp., (NHMFC) has delved into this type of securitization  in two instances through  Bahay Bonds, which is a mortgage-backed security using collectibles acquired by the agency.
Bahay Bonds aims to raise for the NHMFC P300 million to P604 million in fund it intends to use for housing loan services to beneficiaries.
The Bahay Bonds are now listed at the Philippine Dealing and Exchange Corp.
Atencio said it could be a good source of funding for developers.
“If we could do this four times a year, we will be able to generate more funds for use on projects in a year,” said Atencio.
“In the US, they are able to do this eight times a year,” he added.
The asset-backed securities or commonly called ABS have, however,  been one of the causes of the US financial implosion in 2007 and 2008.
A construction industry expert meanwhile said developers ought to look into the opportunities of addressing demand in the lower-end segment of the property industry.
Anthony Dean Borg, country manager for construction consultancy firm BCI Asia, said the biggest opportunity in the residential market lies in the lower-income segment where demand has been limitedly addressed.
“I don’t worry about the supply in the high-end segment since many developments you can find address this particular market. But there is a greater demand in the lower-end segment of the market, which bodes well for the property and the construction sector as well,” said Borg in a Malaya interview.
A recent
CB Richard Ellis report said the property market “is expected to experience increased real estate demand across all segments, spurred in large part by the BPO sector.”
“Multiple credit rating upgrades, the support of the government and positive outlook are encouraging more businesses to expand and relocate in the country creating demand in luxury destinations and leisure properties,” CBRE.
CBRE, however, said while demand for the high-end market will be sustained in 2013, developers will focus more on mid-income residential market segment, within the P45,000 to P80,000 per square meter range, reflecting the demand created from the growing population of families and young professionals and supported by the record-low interest rates.
“The Philippine has the lowest interest rates and best financing schemes for home ownership today. Interest rates ranges from P5 percent to 11 percent for short- or long-term payment schemes. This has opened the opportunity for more Filipinos to become owners rather than renters,” said Rick B. Santos, CBRE chairman.
Market observers have pegged the residential backlog at 3.8 million. State estimates meanwhile that the housing need is estimated to reach 7.55 million between 2007 and 2016, based on government estimates where there is an estimated 3.91 million new household needing new houses within this period, on top of the existing demand.
A big portion of the demand, at about 70 percent or so, is estimated to be coming from the lower-end of the segment.
The Organization of Socialized Housing Developers of the Philippines (OSHDP) meanwhile is asking for subsidies for developers that will venture in mid-rise residential buildings as a means to provide supply to the market.
The OSHDP is suggesting that medium-rise buildings are the most cost-effective way of addressing the 4 million housing backlog in the country, with MRBs being ideal for low-income individuals, particularly renters, who need to be in their place of work.
Jefferson S. Bongat, OSHDP national president, said one MRB can be built within a 2,000-square meter area, at five storeys high with a density of 125 units, with a minimum area of 20 sq.m.
The development cost is seen to go as low as P38,000 to P40,000 per square meter, about the same price for a house and lot package in Cavite, and the monthly amortization also the same at about P5,900.
These developments can be made in areas of in Pasig, Cainta and certain parts of Quezon City, according to Bongat.
Bongat said that with subsidies in place, a developer can roll out one MRB in 8 months. The proposal has been presented to the Housing and Urban Development Coordinating Counci, chaired by housing czar Vice President Jejomar Binay, already.
OSHDP’s recent studies reveal that MRB residential units can be built by private developers at the estimated cost of  P840,000 per unit in National Capital Region; Metro Cebu and Metro Davao, give the high cost of city lands.
In other highly-urbanized cities, MRB units can be put up at an estimated P750,000 per unit.
Their study also showed that the housing loan package for socialized housing of P400,000 last set in December 2008, may need to be adjusted to P450,000 to reflect the movements in price of land and construction.

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