A tipping point for businessmen investing in infrastructure projects in the Philippines occurred two years ago when then Transportation secretary Joseph Emilio Aguinaldo Abaya plucked a high-profile government contract from one conglomerate—after it had already won approval from the National Economic Development Authority (NEDA)—and awarded it to another.
After that, following similar contract “rule changes” which marked the administration of President Benigno S. Aquino III, investors more or less came to the conclusion that a Rubicon had been reached: the government’s tottering mantra of “Tuwid na Daan “(“Straight Path”) was truly over.
Today, businessmen are anchoring their hopes on a new leadership. After 2,192 days under the Aquino administration, mostly marked by disappointment, expectations are high that “the punisher”, Rodrigo Roa Duterte, the 16th president of the Republic of the Philippines. will be able to whip the country into shape.
Boon for property, real estate, construction players
For high stakes investors in the real estate and construction business, including low profile “buy-build-and-sell” property entrepreneurs, and millions of Filipino home dreamers, Duterte’s inaugural speech last week exuded sincerity, strength and best of all, hope.
What are the expectations of Philippine real estate professionals about a Duterte presidency?
One, the Philippines could be home to the next Singapore or Hong Kong
In a campaign interview early this year, Duterte intimated that he planned to lease some of the country’s islands (there are around 7,500) to establish the next Singapore or Hong Kong as entrepot centers for business
“If we can lease our land for military bases, why not lease an island… to create our own version of Hong Kong, Taiwan or Singapore? The jobs will come here. Going abroad must be a choice, not a necessity,” he said, adding that the buildings and infrastructure owned by multinational corporations should revert to the Philippines after 50 years.
“From the 51st year to the 99th year, they will pay rental for those buildings and infrastructure from the Philippines, thereby creating the country’s income,” he said.
End crime and corruption
Duterte’s administration could also mean the end of crime and corruption, which would aid in gaining in much-needed government transparency.
Duterte’s victory in the May polls was largely attributed to his promise to eliminate crime and corruption within the first six months of his presidency. While this vow, ambitious as it sounds, remains to be fulfilled, his call to eradicate crime and corruption would definitely improve real estate transparency, which has been categorized as “semi-transparent”, according to Jones Lang LaSalle Philippines.
Lindsay J Orr, country head of JLL Philippines, said that the “perceived corruption in the Philippines has affected the country’s transparency rating.”
Secondary and provincial markets could likewise experience a much-needed shot in the arm under Duterte’s watch.
Observers say Duterte is likely to decentralize Manila, and promote impoverished provincial locations, where he aims to bring prosperity, citing a “crime-less” Davao as his template.
“Davao City is my Exhibit A,” he constantly reminded the press during campaign sorties. “Before a city or province can really prosper, you have to establish order. So that the investors would be coming in, comfortable in their thoughts that there would be no corruption, that they are safe, and that their businesses will prosper.”
Davao real estate, a big winner.
The next six years could belong to Davao, according to property analyst Enrique M. Soriano III.
“The newfound confidence brought about by the first Philippine president from Mindanao could translate into a buoyant real estate sector fuelled primarily by two types of property activity,” said Soriano, Ateneo program director for real estate, and senior adviser for Wong+Bernstein Advisory Group.
“First, there is speculative real estate, or real estate bought for resale at a profit. The second type of property activity is investment in income-producing property, bought to maintain and hold for its rental income and its future capital growth,” he said.”
Monique Cornelio-Pronove, chief executive officer of Pronove Tai International Property Consultants, agreed. “Davao has been one of the next wave cities for the business process outsourcing (BPO) market and has always been in the radar screen as a tourist destination. Duterte will further boost the attractiveness of Davao as he continues to draw local and foreign attention to it,” he said.
Davao was cited as one of the nine trending local cities this year . It remains southern Philippines’ economic and business center.
Federalism fever
Property developers will likely benefit from federalism, one of the key campaign promises of Duterte, said Vista Land president and CEO Manuel Paolo Villar.
Duterte had repeatedly promised to push for a federal form of government to empower the provinces.
Villar said property developers are expected to benefit from federalism as this will further spur developments in other key cities outside Metro Manila.
“I think it benefits everybody and it benefits us because federalism means that there will be more developments outside Metro Manila,” Villar said.
Decentralizing governance throughout the country would encourage real-estate developers to increase investments in areas outside of Metro Manila, agreed Rick M. Santos, CBRE Philippines chairman. He welcomed the Duterte’s ostensible goal to promote inclusive growth by way of a decentralized system of governance.
But he acknowledged that the decentralization process already began with the business process outsourcing (BPO) sector, as well as the real estate market in general.
Metro Manila has always been the country’s center of development but it is now spreading out, he pointed out.
“Developments in these secondary sites were initially limited to the local developers. Over the past several years, the national developers started to enter these sites on a growing scale,” Santos said.
Improve infrastructure
Property experts predict that the market will pick up six months after the Duterte swear in.
“The market is generally optimistic,” said Julius Guevara, Colliers International Research and Advisory Services director. “President Duterte has a very good platform across crime-fighting, infrastructure-building: his advocacy to improve services would really facilitate improvement in the sector,” he said.
Duterte’s vow to kick-start infrastructure PPPs (Pubic Private Partnerships), implement traffic laws more strictly, improve urban thoroughfares, and build more roads and railway systems will open up more options for buyers and encourage them to buy properties outside known (and more congested) key areas,” said Guevara.
“Bringing telecommunications and utilities to underserved areas of the Philippines will also encourage developers to construct more homes in provinces, providing current and future residents with a safer and more comfortable lifestyle,” added CBRE’s Santos.
Sustainable building has new champion?
Finally, green building is steadily gaining momentum in the real estate industry, but not all players have adjusted their developments and construction practices to accommodate sustainable elements.
Duterte, based on his campaign pronouncements, and appointment of a pro-environment secretary at the DENR, could be leaning for a change. Industry experts believe this would mean giving new secretary Gina Lopez elbow room to push for more sustainable residential, commercial, and retail projects.
Said urban developer Paulo Alcazaren: “This would encourage more developers to do their part in lessening their carbon footprint. Hopefully, this would encourage builders and architects to adopt more sustainable technology in their projects, and not just “greenwash” their claims in their respective marketing strategies.”
The press reported during the campaign that Duterte pushed last year a Davao city ordinance requiring property developers to allocate 10 percent of green space in residential subdivision development projects.
Observers said if Duterte would push Congress to require developers nationwide to follow strict regulations on sustainability and urban planning, then the Philippines could be a greener place.