^

Business

Real estate sector may collapse in 2-3 years, noted architect warns

- Marianne V. Go -
Noted architect and developer Gilbert Yu warns that a second collapse of the country’s real estate sector will occur in the next two to three years if government does not act now to protect prospective first-time, middle income home buyers.

According to Yu, the real estate collapse is "ticking time bomb" that will potentially hit the middle income home buyers.

He noted that in the previous real estate fiasco, in it was mostly the high-end, investing market that was hit. This time around, he said, it will be the much broader middle income group which will be hit.

Yu estimates that during the crisis of 1997, some P250 billion in real estate and housing investments went sour.

The next round, Yu warned, could be much higher since it would hit the much broader based middle income earners who do not have as much "insulation" and capability to recover from a loss of their hard-earned money.

Yu revealed that because of stricter rules imposed by the banks on real estate loans, mortgages and financing, a lot of unscrupulous developers are resorting to three to six-year gestation projects which they pre-sell to unsuspecting home buyers.

What the buyers’ don’t know, Yu revealed, is that such developers get partial up-front money from the buyers and pay off some of their existing debt. For at least three years, Yu said, the developer does not yet have any actual project and is merely putting together a financing package.

The actual construction of the project is scheduled three years down the line, leaving it vulnerable to inflationary cost inherent in the construction industry, Yu divulged.

Even in the 1990s, he pointed out, a lot of developers who had been able to secure prior financing for their project still went bankrupt when their project cost ballooned.

Yu blames the developers for the 1997 real estate collapse. He cited rampant real estate speculation which drove real estate prices up, sometimes as high as 30 times their original worth.

Most of the buyers, however, Yu said, could have been protected if the government had one simple policy in place: This is requiring developers to post a bond for their project in the event of a failure to complete the project and requiring payments by buyers to be paid to an escrow account rather than directly to the developer.

Requiring a bond would at least ensure a fund from which the buyers could be reimbursed in the event the project collapses or is not completed.

Under an escrow system, the buyer pays his/her amortization to an escrow account in a trustee bank and that money is not touched by the buyer or the developer until the project is completed and the title turned over to the buyer.

Yu lamented the fact that while the government has a so-called housing program and a housing agency, it only caters to the low-income group, neglecting the middle-income to fend for themselves.

Yu also revealed that middle-income home buyers actually have no government agency to turn to in the event that the developer fails to complete a project and runs of with the buyers’ money.

Even the Housing, Land Usage Regulatory Board (HLURB) cannot help swindled home buyers get back their money, Yu said.

The HLURB, Yu explained, merely issues a license to the developers and imposes a sanction on developers who fail to comply with the specifics of the projects.

Otherwise, Yu said, the HLURB has very little police power.

Yu urged the government to come up with a comprehensive policy and even enact the necessary laws to deal with the ever changing real estate market.

vuukle comment

BUYERS

DEVELOPERS

ESTATE

EVEN THE HOUSING

GILBERT YU

INCOME

LAND USAGE REGULATORY BOARD

MIDDLE

PROJECT

REAL

YU

  • Latest
  • Trending
Latest
Latest
abtest
Are you sure you want to log out?
X
Login

Philstar.com is one of the most vibrant, opinionated, discerning communities of readers on cyberspace. With your meaningful insights, help shape the stories that can shape the country. Sign up now!

Get Updated:

Signup for the News Round now

FORGOT PASSWORD?
SIGN IN
or sign in with