Subdivision and Housing Developers Association

Recent Reforms and SHDA Pledge 200,000 for the Philippine Mass Housing Sector

Let me start with a short introduction about SHDA – the largest national organization of subdivision and housing developers in the Philippines. Composed of more than 200 of our country’s leading small, medium, large and publicly-listed private developers and real estate corporations, SHDA believes that business has an obligation to make society better. In consistently providing decent and affordable shelter, we are able to improve the quality of life of Filipinos in a way that ensures the viability of their future as productive citizens of our nation. We believe that mass housing is a potent tool for nation-building, for it expands the class of property owners who can begin to have a stake and interest in preserving our society. This leads to a firmer belief and respect for our democratic institutions, ultimately contributing to greater political, social and economic stability.

It is for these reasons that SHDA has always advocated reforms for a more sustainable National Shelter Program that assures the sustainable building for mass housing for generations to come.

Sustainable Building through Developer’s Risk-Sharing

In the Philippines, mass housing finance has gone through several waves of boom-and-bust cycles in the last 20 years, where, because of low collection efficiency, funds for housing loans eventually dry up, only to be re-capitalized again by the government, perpetuating the cycle once more. In fact, during the1997 Asian Crisis, major government financing institutions had to close or stop home mortgage operations because the payments from monthly amortizations were simply insufficient to fund new housing loans. And without sufficient funds for home lending, housing production cannot be sustained. Realizing that the problem was poor collection efficiency – a rate of monthly amortization payments as low as 30% – our organization spearheaded a concept called “Developer’s Risk-Sharing Commitment” – a system of guarantees that assures the payment of monthly amortizations for the crucial first two years of the housing loan.

Failing that, the developer agrees to “buy-back” the unit from the financing institution. This mechanism reduces short-term defaults to zero, providing a strong mechanism for sustainable housing finance in the long-term. The “Developer’s Risk-Sharing Commitment” is a major breakthrough because, for the first time, developers looked beyond short-term profits and realized that long-term sustainability of housing finance could be attained if the payment of monthly amortizations of buyers for the crucial first two years could be guaranteed.

The developers were now willing to buy-back their units in the event that their buyers defaulted in paying monthly amortizations during first two years, and even enter into Collection Service Agreements on behalf of the government to ensure the timely and regular payment of monthly amortizations of their buyers – an activity that until today was largely considered totally outside the scope and business of the developer.

On top of this, we established the SHDA Guaranty Fund – an institution that would provide a back-up guaranty to pay the government in the event the developer refused to honor his buy-back commitment. This is perhaps the only model in the world where developers are willing to share the risks of housing finance by undertaking such activities as collection, monitoring, buy-back and back-up guaranty if only to safeguard the sustainability of housing finance.