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Housing group pushes ‘socialized condos’

Published on Monday, 20 May 2013 00:00
Written by IRMA ISIP [ ]
Malaya Business News Online - Philippine Business News | Online News Philippines
The Chamber of Real Estate and Builders Associations (CREBA) said the housing industry still needs the tax breaks the government is thinking of scrapping. It instead proposed encouraging the building of socialized condos to ease the housing backlog that will not drain government coffers.
The Department of Finance has earlier suggested that mass housing be removed from the proposed 2013 Investment Priorities Plan (IPP).
Mass housing -defined as socialized and low-cost- currently get tax perks from the BOI. These are housing packages worth up to P400,000 and up to P3 million, respectively.
Charlie Gorayeb, national president of CREBA, in reaction to the DOF proposal said,  that this will add to the housing backlog.
He said the Housing and Urban Coordinating Council estimates the current housing backlog at 3.7 million units but that the National Urban Development and Housing Framework 2009-2016 estimates that the housing need, which covers the housing backlog and the annual compounding new housing demand to reach 5.8 milion units in 2016.
Gorayeb said CREBA is supporting the passage of a law that will require developers of condominium projects to be also covered by the so-called 20-percent balanced housing provision of Republic Act . 7279 or the Urban Development and Housing Act (UDHA). Section 18 of this law requires developers to allocate the equivalent of 20 percent of each subdivision to socialized housing.
CREBA’s proposal though would be novel as it would be an alternative mode of compliance to the provision, if and when condo developers are covered by the requirement. The enabling law, House Bill 5446, did not make it in the last Congress. This would entail the construction of new socialized residential condominiums or medium-rise buildings (MRBs) with a minimum floor area of 20 square meters and a ceiling price of P850,000 per unit located in urban areas.
“The recent trend of development on housing tends to gravitate towards vertical housing. If we can jointly advocate requiring these developers to comply with the balance housing requirement, it will add to the supply in the urban areas where they are needed the most,” said Gorayeb in his letter addressed to BOI executive director Lucita Reyes.
Gorayeb said that in order to entice developers to invest in the production of socialized MRBs, they also should be granted incentives.
Based on CREBA’s computation, the average return on investment in socialized housing is 15 percent without tax holiday and 17.5 percent with tax holiday.
“The ROI is meager considering the risks involved in the development of socialized housing,” Gorayeb said.
The group also laments the fact that developers of mass housing continue to be subject to tedious requirements including the presentation of a ruling of issued by the Bureau of Internal Revenue (BIR) national office for every housing project that is granted exemption from the payment of creditable withholding tax (CWT).
The ruling is required by the BIR before the issuance of the certificate of authorizing registration (CAR), a foremost precondition of the Registry of Deeds for the transfer of the certificate of title.
Without the revenue ruling, the certificate of income tax holiday (ITH) issued by the BOI is not honored as sufficient evidence of tax exemption and thus the revenue district officers will only release the CAR after collecting the CWT.
“Private sector stakeholders involved in the development of socialized housing are hampered by the tedious, strenuous and costly process of availment [of ITH],” said Gorayeb. This has delayed if not discouraged developers to apply their projects for incentives with the BOI.
Gorayeb said housing, especially one in mass, is capital and labor intensive. Housing construction generates at least 8.3 jobs for a minimum of three weeks for every housing unit that is built, according to government data quoted by Gorayeb.
The government’s Medium Term Philippine Development Plan estimates the multiplier effect of housing at 16.6 times—every P10 billion invested in housing translates to P166 billion in economic activity.

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