In today’s column may I excerpt from a lecture delivered at Ateneo Graduate School of Business, March 16, 2017 by JJ Atencio, president and CEO of 8990 holdings, the country’s largest home builder:
“It’s really more fun in the Philippines when you consider a nation of 7,107 islands with 175 dialects, each with their own distinctive cuisines; a young population of 104 million, 13 million living in Metro Manila and 4 million overseas Filipinos responsible for foreign currency remittances totaling P3 billion in 2016, raising per capita incomes to $3,500, achieving a GDP growth of 6.5 percent every year for the past 15 years.
But it is also the country, where 50 percent of adults do not own any kind of property, a housing backlog of 5.5 million growing 5 percent every year, and a housing industry that can only produce 250,000 homes annually. You know right away that something is amiss, or that you realize a great potential in a market that is severely underserved.
In our 13 years as 8990, we’ve grown from one branch in Cebu to 8 across the nation, 49 completed projects and 18 ongoing, we’ve delivered more than 50,000 housing units, making us the largest homebuilder in the affordable housing space in the Philippines today.
Behind this growth is a vision that’s way bigger than the business. I’ve always believed that in order to be successful in mass housing, you’ve got have a sense of mission, because there are easier ways to make money in real estate, honestly. When we started 13 years ago, we wanted to run a business that was not only profitable, but also had tremendous social impact. We are continuously driven by the idea that housing is not about houses, it’s about people, and how we use housing as a vehicle to transform people’s lives for the better.
Eighty-two percent of our market are primary or first-time home buyers who want to stop renting and move up the social ladder to become property owners paying a monthly amortization.
Fifty-eight percent of our buyers are young. Without a doubt, the new and emerging market for affordable housing are millennials. That means while these young, tech-oriented, information-driven Filipinos have adequate cashflows for housing, and will have increasing income levels as they get older, they don’t have the savings for a huge downpayment today. To be successful today is to tap into the millennial market, and we’ve got to know who they are, what they value, how they behave, and how they make their choices.
Key to this is communication. Part of the core message is affordability. And so we must communicate this effectively. For millennials, it’s more about the HOW of things, not just the WHAT of it. It’s giving them infographics that they can understand at a glance, and information that they can easily relate to. It’s about using social media, Facebook, Viber and Instagram, hand in hand with traditional fliers, brochures, billboards and tarpaulins.
This brings us to innovation. It’s about adding value to the business in ways never thought possible, it’s about the courage to try new approaches, and the creativity to see new ways to solve people’s old problems. It’s about being a market disruptor. It’s about knowing the rules and then breaking them.
Our business model is anchored on the basic concepts of FAST delivery, CHEAP finance, and GOOD paying behavior.
FAST, CHEAP and GOOD. Have you ever heard of this theory before? In every product or service, there are three characteristics that consumers look for: FAST, CHEAP and GOOD. The reality is, however, you can only get two out three. Meaning: If it’s fast and cheap, it cannot be good. If it’s cheap and good, it won’t be fast. And, if you want to good and fast, it won’t be cheap.
But just what if, you are able to innovate your business model so that you could actually have a product that is all three? Fast, Cheap and Good?
At 8990, we’ve developed our building technology using pre-cast monolithic panel walls that give us the capability to erect solid houses in as fast as eight days.
Then we developed our own in-house financing program that offers the lowest equity and interest rate, and the longest terms in the industry, allowing our buyers to move in at the shortest time possible, with monthly amortizations that are the lowest and therefore the easiest to pay over the long term.
In the tagalog context, the word CHEAP doesn’t mean “MURA”, it means “SULIT.”
Our business model brings to reality our unique business proposition that low cost can also mean high quality. We are able to build townhouses, single-attached units, 4-storey MRBs (medium-rise buildings), and high-rise condominiums that sell for below $35,000 per unit. It is a price that’s less than a good second hand SUV, or a monthly amortization equivalent to two cups of Starbucks coffee per day.
Using economies of scale, we are able to provide high value amenities such as wakeboard parks, basketball courts, impressive entrances, churches, swimming pools and clubhouses. And our buyers understand that for as long as their monthly amortization payments are current, they can use any of our amenities for free.
It’s not about “MURA”. It’s about “SULIT”.
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