Philippines plans to tap funds from foreign institutions to develop slum areas

Gulf News - The plan includes provision for government-guaranteed access to credit to the poor to buy homes, and help eradicate slum areas in urban areas, says Vice-President Jejomar Binay
The Philippines is tapping international financial institutions to help private businessmen and government jointly undertake mass housing projects for the poor. The plan also includes provision for government-guaranteed access to credit to the poor to buy homes, and help eradicate slum areas in urban areas, Vice-President Jejomar Binay said.

“We must fill a deficit of 3.6 million homes [for urban poor and informal settlers in Metro Manila] between now and the end of 2016,” said Binay at the Global Housing Finance Forum of the World Bank in Washington DC, where he talked about his country’s ambitious plan to eradicate slum areas.

The deadline for providing homes to illegal settlers, one of the aspects of the pro-poor agenda of the United Nations’ Millennium Development Goals, must be met by member states in 2015, said Binay, adding, “The fast rate of urbanisation, the changing roles of stakeholders, and the increasing competition for funding compel us to innovate and adopt new approaches and strategies.”

As chairman of Housing and Urban Development Coordinating Council (HUDCC), Binay has a very big problem to solve.

Over 60 per cent or 53 million of the country’s 90 million live in urban areas nationwide. By 2030, the country’s urban population is estimated to hit 96 million, with three of every four Filipinos living in urban areas.

In Metro Manila, more than 3 million of 10 million residents are informal settlers in more than 200 urban areas.

More than 1.4 million belong to the category of two or more households living in one small housing unit in Metro Manila; others live in marginalised housing units in danger zones, exposed to the natural and to criminal or anti-social elements.

Metro Manila accounts for almost 40 per cent of the Philippines’ GDP and 13 per cent of the country’s total employment. It ranks 14th among the world’s 20 megacities.

In comparison, the annual growth rate of real estate development per capita GDP in the Philippines remained low, starting a sharp decline in the early 80s, according to the Asian Development Bank.

The average annual public expenditure on housing in the Philippines is 0.089 per cent of GDP, the lowest in Southeast Asia, compared to Bangladesh, 0.354 per cent; Malaysia, 0.383 per cent; Thailand, 0.742 per cent; and Sri Lanka, 0.758 per cent, ADB said.

The government is encouraging the private sector to participate in mass housing projects. The public sector provides 75 per cent housing finance through housing loans primarily provided by the Home Development Mutual Fund or Pag-Ibig, and the National Home Mortgage and Finance Corporation, said Binay.
Philippine government agencies have offered mini mortgages to low and mower middle income borrowers who have no access to housing finance.

Congress has passed laws allowing local government units to handle housing projects for the poor.
The local government code of 1991 allows government to issue municipal housing bonds to access the private capital market for development projects; and to issue permits and licensing of land development in their respective areas.

The Urban Development and Housing Act of 1992 allows local government units to undertake partnership with the private sectors, spend for resettlement of informal settlers and protect informal settlers.
The Philippine Climate Change Act (2009) created the Philippine Climate Change Commission that promotes local government units’ awareness on climate change and comprehensive land use.

The Disaster Risk Reduction and Management Act imposed on local government units to integrate climate change adaptation measures into development plans.

In July 2012, the National Home Mortgage Finance Corporation will issue the country’s first-ever retail housing mortgage-backed securities under the securitisation law.

In October 2012, the National Home Mortgage Financial Corporation will issue the first-ever Community Mortgage Programme — Asset-Backed Securities (CMP-ABS) in the market.

Meanwhile, President Benigno Aquino has called on Congress to pass a law creating the Department of Housing and Urban Development.

It will work with environmental planners, builders and community beneficiaries, to ensure a holistic strategy in addressing access to and affordability of housing units. The department will regulate the mobilisation of public and private sectors for the building of housing units.

All these developments will make the Philippines ripe for a public-private investment on mass housing which the World Bank supports, Binay said.

The World Bank’s meeting in Washington DC, “Housing Finance in Emerging Markets”, was a continuation of its support to housing finance in emerging markets following economic slowdown and the mortgage crisis in many developed economies in 2008.

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.