As the Department of Human Settlements and Urban Development (DHSUD) rolls out its 4PH housing program, industry leaders and finance specialists express both optimism and concern about funding adequacy for the targeted 1 million units per year.
Pag-IBIG Funding for 4PH
Pag-IBIG Senior Vice President Fermin Sta. Teresa, Jr. reported during the CREBA Advocacy Forum last week that the agency has committed a total of P250 Billion for 6 years for the 4PH program, on top of P130 Billion already allocated for socialized housing take outs.
Pag-IBIG reportedly finances some 38% of the total amount of home loans in the country.
Sta. Teresa said the P250 Billion is earmarked for direct development loans for DHSUD-accredited development of residential subdivision or condominium buildings, construction of housing units eligible for end user financing, and land acquisition and site development.
Developers, local government units, contractors and joint venture entities may avail of the loans, Sta. Teresa said.
Sta. Teresa stressed that the funding program also includes a homebuyer financing component, wherein Pag-IBIG will take out the loans of the project beneficiaries.
Of the interest rate of 6% on the housing loan, 1% will be shouldered by the buyer, while Pag-IBIG will subsidize the remaining 5%, Sta. Teresa added.
Land Bank housing loans
Land Bank Vice President Edgardo Luzano said that as of May 2023, the bank’s total housing portfolio for the year under 4 lending programs already amounted to some P80 Billion.
The bank’s interest rate for socialized housing is 1% below the prevailing rate, Luzano said.
Need for more funding
Meanwhile, former National Home Mortgage Finance Corporation (NHMFC) Vice President for Securitization Daisy Dulay said that if the cost of a socialized housing unit is P1 Million, financing 1 million units per year would require P1 Trillion.
Former Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo, on the other hand, said that even if the cost of a socialized housing unit is at only P750,000, the 1 Million units per year target would require some P750 Billion annually.
“If Pag-IBIG claims it accounts for 38 percent of all home loans, it means aggregate home finance could only do around ₱342 billion a year, or less than half of the required amount,” Guinigundo said.
Guinigundo reported that the BSP has already implemented various regulatory initiatives that allow banks to expand their contribution to the social imperative of providing more housing.
Among these, real estate loan ceiling was adjusted from 20 percent to 25 percent, and in the computation of the ceiling, loans for own use is excluded because they are considered low risk, Guinigundo said.
Less is more
Guinigundo also said it may be worthwhile to consider reducing the targeted number of housing units per year in order to come up with more decent homes and more “livable communities” for the underprivileged.
“In the first place, supply has been facing major challenges including low allocation and utilization of funding, lack of suitable land and considerable delays in securing permits and clearances. There isn’t just enough absorptive capacity,” Guinigundo stressed.
“For the clients of the housing industry, affordability is the major issue. With so much poverty, they could hardly afford the banks’ requirement for collaterals and minimum amortization,” Guinigundo added.
Commenting on CREBA’s advocacy for a Centralized Home Financing Program, Guinigundo said that with housing as a social imperative with economic multiplier effects, it might work to start small and then scale up with private funds.
“All up, if the idea is profitable, and it could be as it is viable, over the long run, the need for public funds may be rationalized,” Guinigundo said.