Housing cited as key to national recovery

MANILA, Philippines - The national convention of the largest housing developers in the country ended on a high note as participants noted the remarkable resiliency of its members despite the global crisis. Subdivision and Housing Developers Association (SHDA) vice president Manny Crisostomo and this year’s convention chair, launched the two-day event at the Dusit Thani Hotel last month.

One of the convention speakers, Antonio Herbosa, managing director for corporate finance at The Center for Global Best Practices, and a key financial advisor of the National Home Mortgage and Finance Corp. (NHMFC) in resolving its P42-billion UHLP mortgage receivables, suggested that macro-economic dynamics are now in place to catapult housing to new heights, especially if the proper public-private partnership is in place. He cited several positive factors for the housing industry, including low interest rates.

Herbosa suggested that government policy makers seriously consider funding a P10-billion venture capital fund for housing developers. This will help offset the lack of venture capital fund in the Philippines. However for property developers to be eligible for this fund, suggests the following criteria:

• Property developers must have a three-year track record;

• 40 percent of their revenues must come from low, economic or social housing

• Must commit to undertake an IPO within the next two years to allow an exit strategy for the fund

• Must be audited by a reputable, top accounting firm.

According to Herbosa, “if the US government now has a clear policy of rescuing failing banks and car makers (strategic industries) by injecting fresh funds (sometimes on the capital side as well), it is even more logical for our government to consider “widening the capacities of the local property developers,” especially those who cater to social and economic housing units. He cites studies by Hernando De Sotto to show that what separates the poor countries from the rich countries are the inability of the poor to raise capital for entrepreneurial ventures, not because they do not because they do not have homes or crops, but that these assets are on untitled land (squatting) or in business that cannot be documented, have poor records or lack of transparency.

“For instance, in the United States, the single most important source of funds for new businesses is the mortgage on the entrepreneur’s home. Hence, the west injects life into these assets and makes them generate capital. In contrast, the (poor) have houses but no titles; crops but no deeds, businesses but not statutes of incorporation,”said Herbosa.

Hence, Herbosa said the best way to help the poor is to provide them with affordable, documented housing, even better than funding them to start business ventures and to allow them to amortize the cost of the home over time in an affordable manner.

To help SHDA members. Herbosa pledged and volunteered to provide free IPO and family business diagnostic service as the Center for Global Best Practices’ contribution to the housing industry. Those interested to get in touch with him may call 556-8968 or 69. For other programs and services, log on to www.cgbp.org.