“Philippine Real Estate Opportunities for Foreign and Local Investors” For several years now I have been witness to the contributions of this festival. First, it has been instrumental in highlighting opportunities for investors in the real estate sector, especially those relating to the need of Overseas Filipino Workers or OFWs for increased access to housing. Second, it has promoted “property tourism” as an innovative business strategy in the real estate sector. The 6th Festival’s theme is indeed timely. The bright spots of the Philippine real estate market indeed have to be seen by the world. Governments of global economies, particularly in the US and Europe, are currently struggling to stabilize their economies. In the meantime investors are venturing into the emerging markets—Asia and the Philippines included. And I am happy to note that the Philippines is on their list. In the report of Emerging Trends in Real Estate 2012 in Asia Pacific, Price Waterhouse Coopers and the Urban Land Institute (PWC-ULI) recognize the Philippines as a fast emerging market. The report also notes that under the new administration, the Philippines has become more politically stable and more pro-business than in the past. It has been removed from the “do not touch list” and there is now a growing interest in engaging in the real estate business in the Philippines. The Philippines, like other Asian markets, have defied the downward pull of Western economies and maintained its own capital flow. Investors have recognized the country’s improved economic prospects and the real estate sector is one of the prime channels where foreign investors can find economic value for their investments. With Philippine real estate in its recent boom, investors started to see this market as viable and with minimum risks. Based on the Prudential Real Estate Investors research in February of this year, the growth came from a combination of factors: first, economic growth is projected to increase at a faster rate in Asia than in other regions, and second, the relative wealth of Asian countries will improve. As the country’s population approaches 100 million, a consumer-based economy is emerging with all the needs and wants of the real estate market that is expected to grow each year. As long as the demand outpaces the supply, the real estate industry will continue to experience growth. This positive trend in the Philippine real estate sector is driven by several factors: Political stability. As a basic ingredient to investment growth, the increase in political stability in the country helped in promoting investor confidence in the Philippines, and foreign direct investment (FDI) has started to flow inward again as companies discover attractive investment options here. The commercial real-estate market (particularly Philippine Economic Zone Authority or PEZA-accredited buildings) has seen increased demand in response to this. Key locations like the Subic-Clark Economic Corridor, Bonifacio Global City, Quezon City, Ortigas, Bay Area, Alabang, Cebu, Davao, Iloilo, Bacolod, and major tourist destinations like Boracay and Palawan will see major development because of the influx of investments. BPO investors. Investment flows came mainly from them. Only recently, the PWC-ULI report declared that the Philippines has overtaken India as the largest supplier of call center services. The rapid growth of the BPO sector—currently responsible for 90% of office take-up in the country according to the investment bank CLSA—has led to big demand for office space. The take-up continues to be strong in I.T. Parks where BPO facilities locate. The rise of the BPO industry in our country has brought new developments to commercial and office spaces. While demand for office space remains strong, a steady stream of new building projects continues to match the demand. A Manila Bulletin article last December mentioned approximately 600,000 square meters of new office space as being ready for occupancy this year. This means an additional 240,000 square meters than the actual demand. With an expected rise in the number of BPO employees to over a million by 2016, property investors can further expect good growth prospects in office and residential spaces for BPO businesses. Overseas Filipino Workers. They continue to play a major role in fueling the growth of the real estate market. In 2011, our country was considered a hot spot for real estate due to the growth in the market brought about by the influx of OFW remittances and their desire to acquire real estate in their home country. The increase in the country’s population and the migration from rural to urban areas has also allowed for more real estate development such as residential and housing units, and commercial centers to supply for the increase in demand. Housing. The biggest opportunity lies in the housing sector. The housing sector is saddled with a huge housing need estimated at 3.6 million units as of the end of 2010, and with the steady growth of the population, this number is projected to rise to 5.7 million by 2016. I am glad that the housing sector is gaining ground in addressing this need. From July 2010 up to May 2012, the sector was able to provide security of tenure to about 200,140 households of which 63% or about 127,450 belong to the low-income group. In 2011, the Pag-ibig Fund extended P31.5 billion in end-user financing, or the construction or acquisition of 46,300 housing units by members. Since July 2010, it provided a total of P67.2 billion to fund the construction or purchase of 99,172 housing units. With Pag-ibig Fund’s recent decision to lower its interest rates for the low income group from 6% to 4.5%, we expect more members to pursue home ownership that would spur development in the sector. The Pag-ibig Fund also intensified its campaign on the registration of employers and employees as fund members. As more OFWs were brought into the fund, membership dramatically increased from 8.8 million in 2011 to 10.725 million as of the first quarter of 2012. This means that more salaried employees, regardless of rank and category, as well as other income earners would be able to avail of the fund benefits and privileges. The National Housing Authority (NHA), on the other hand, has provided housing and secure tenure to almost 80,000 families. One of their programs, the AFP/PNP housing program, has built 21,800 housing units in less than a year, and is now in its second phase that would generate 31,200 house and lot packages not only for our soldiers and policemen nationwide but also our firemen and jail guards. The NHA is also embarking on a P10 billion program annually to provide primarily medium rise housing for informal settlers living in danger areas in metro manila. And for the first time, indigenous peoples (IPs) were included in the housing program of the government shelter agencies. A P14 million funding has been allocated for the housing project of 350 Aeta families in Floridablanca, Pampanga, with the provincial government providing counterpart funds. To date, 16 housing units have been completed. More housing projects for IPs will soon be implemented. The Social Housing Finance Corporation (SHFC), which implements the community mortgage program (CMP), has released P1.29 billion in CMP loans that gave tenure security to 20,975 informal settler families (ISFs) during the period of July 2010 to May 2012. Since the program’s implementation in 1989, CMP’s highest annual number of ISF-beneficiaries at 15,875 was achieved in 2011. It was also during this period that the localized CMP (LCMP), where we partner with LGUs to address the housing need of their constituents, took off. Let me stress at this point that housing provision not only builds houses but creates more opportunity. It is estimated that the construction of a single housing unit can provide work to at least eight people. In fact, the consolidated housing production of the shelter agencies has resulted in direct job opportunities to 1.6 million urban and rural workers. Moreover, for every 100 jobs created in the construction industry, another 18 jobs are generated in other sectors. As chairman of the Housing and Urban Development Coordinating Council, I see this opportunity-creation in the property market not only as a response to the housing need but as a potential driver of the Philippine economy. Investing in property and in housing will help in unlocking dead capital and in stimulating local property taxes. Over time, these investments build household wealth through sheer appreciation in value, providing a base for income generating activities where none existed before, while opening the door to credit. For its part, social infrastructure investment develops socially inclusive and environmentally attractive settlements. In addition, it helps develop human capital, worker productivity and ultimately, economic well-being. For this reason, it is important to push for an investment-friendly environment in the housing industry. And I am happy to note that through our joint efforts, mass housing continues to be one of the priority activities in the Investment Priorities Plan (IPP) for 2012. Real estate associations are also encouraged to liquefy their housing loan receivables through the National Home Mortgage Finance Corporation (NHMFC) housing loan receivables purchase program. There are also new developments which will support the growth of the housing sector. Let me now announce that we are set to issue the BahayBonds2, which is the first-ever retail housing asset-backed securities in the Philippine market in August. The bonds are designed to be safe, high yielding and affordable savings instruments. The bonds have higher than most interest rates on bank deposits at 4.80%. This manifests our resolve to continue fund mobilization using the capital market. Through securitization, we are able to quickly recycle funds. It allows us to purchase your housing loan receivables immediately, which in turn, enables you to use the fund for more housing projects. Since the private sector showed unquestionable confidence by investing heavily in urban areas, we can also look forward this year to matching efforts from government. It can now integrate seamlessly all the new developments. For example, the collaboration of private developer and real estate groups with HUDCC has resulted in more liberal VAT exemption. The Bureau of Internal Revenue has raised the ceiling of house and lot acquisitions exempted from the value added tax from P2.5 million to P3.19 million. With the increase in the cap, we can expect to generate more housing acquisition as it becomes more affordable without the payment of the vat. Finally, to further the growth in the property sector and address the housing need, we also look forward to the passage of one of President Benigno Aquino's priority legislations, the creation of the Department of Housing and Urban Development or DHUD. The proposed department, by closely working with environmental planners, builders and community beneficiaries, shall ensure a holistic strategy in addressing access to and affordability of the human basic needs. It will enable the government to address these problems through regulation and the formulation and implementation of the necessary reforms. Sector policies and program interventions will also mobilize public and private resources and ensure their synchronization. The creation of the department is timely as it will be crucial in reaping the potential of our housing and property sector for our country. Meanwhile, we continue to listen closely to local and foreign investors as well as all the stakeholders of the real estate sector. This is to enable us to address their concerns that will then help secure the position of the Philippines as an attractive destination for real estate investments. With our continued collaboration, and the industry’s productivity, we can expect the Philippines to emerge with bustling metropolitan areas, ultra-modern skylines, and picturesque housing estates—simply a better place to reside and do business in. Any capitalist, whether from the government or the private sector, can expect a fairly attractive return in real estate development. Not only will the real estate sector provide decent shelter and security to the Filipino family, but also jobs for the hardworking Filipino. This Festival is a continuing enterprise to make all that possible. And I am greatly honored to be part of it. Together, we are not only garnering gains for the real estate industry, or the Philippine economy, but in fact building better lives for Filipinos. Let us all have three fruitful days in this Festival. Maraming salamat po.