‘To give houses that Filipinos can afford’

JANUARIO Jesus Gregorio B. Atencio III

All the talk about a dangerous bubble emerging in the country’s robust real estate market has understandably raised the stress levels of the already wary investors, buyers, lenders and developers.

After all, grim memories of the 1997 currency crisis that led to the demise of many high flying real estate companies that rode on easy credit still haunt the corporate world, which saw a series of high profile bankruptcies, long drawn out debt restructurings and painful cleaning up of balance sheets.

The publicly listed 8990 Housing group, however, is not occupied by thoughts of an asset price bubble that is ready to burst anytime as it has purposely concentrated its resources on mass housing projects.

According to 8990 Holdings President and CEO Januario Jesus Gregorio B. Atencio III, there will always be demand for affordable housing in the Philippines, with its young and growing population that is gradually increasing its purchasing power.

Atencio tells SundayBiz in an interview that while supply is fast catching up with demand in other sectors of the real estate sector, particularly ultra high end condominiums, there remains a sizable backlog in mass housing to the tune of four million units, with demand growing at 3 to 5 percent a year.

Mass housing is defined by 8990 Holdings as units costing a maximum of P1 million and Atencio says that in this sector, the challenge is not so much to find the demand for the units, but more on improving the ability of the potential buyers to purchase them.

“Housing finance is always an issue,” Atencio says in an interview, particularly in the aftermath of the Globe Asiatique controversy that caused government housing agencies to tighten controls and raise credit standards.

Atencio shares that the government understandably slowed down on the release of housing funds to borrowers. The relationship has likewise changed in that the government is now more of a regulator rather than a partner.

Demand remains great, however, thus it falls on developers to find alternative means to help the buyers acquire their dream house.

“To help solve the housing backlog, there has to be more funds, Pag-IBIG is not enough. That is one reason why we went to the capital market,” says Atencio. “We went there as an organization that is growing because we believe that there will come a point when the banks would not be able to lend anymore because of the single borrowers limit.”

Atencio is bullish on the growth prospects of the mass housing unit, which he admits is quite young at just a little over 10 years old compared to its bigger competitors in the market.

“I say we have two unique selling positions, one is that we can build the houses very quickly and that we have a very affordable in-house financing program at about 8.5 percent payable over 25 years,” says Atencio, “so when Pag-IBIG tightened, we were able to come up with a financing package that looked like a Pag-ibig loan.”

Atencio, who has been involved in the mass housing sector for 20 years, the past 14 as chair, president and CEO of various mass housing and subdivision development companies, says it pays to know the market well, as it enabled the company to formulate a program that fits the spending and earning patterns of middle class Filipinos.

8990 Holdings, for example, usually requires a down payment of just P20,000 and not 20 percent as sought by other developers.  And by completing the projects as fast as it can—as short as 20 days thanks to prefab technology—it helps the buyers move in quickly and save them money from renting.

“All of these factors come together to serve a ‘need’ market. If I give buyer a 20-percent equity requirement, I have just saddled him with the prospect of paying rent and paying me. That stresses the cash flow and the market that I serve doesn’t have much savings. So I am being realistic,” says Atencio.

The 8990 Housing group, through flagship company 8990 Housing Development Corp., also goes where the market is, mainly outside Metro Manila, particularly in Cebu and in Davao.

Its biggest project so far is the Deca Homes Resort Residences in Davao City with 6,589 sellable lots, ranging in size from 100 to 150 square meters. Other projects include the Deca Homes Mactan 4 with 1,248 lots; Urban Homes Mandaue I condominium with 52 units and the Deca Homes Subdivision Phase 1in Pavia, Iloilo with 73 sellable lots.

8990 Holdings officially entered the mass housing sector in 2003 and has so far completed 11 projects and sold 22,130 housing units in Angeles and Cavite in Luzon; Cebu and Iloilo in the Visayas and Tagum and Davao cities in Mindanao.

It also has a land bank of 242 hectares and plans to launch 13 new mass housing projects under the “Deca Homes” brand for horizontal subdivisions and “Deca Urban Homes” for medium rise buildings.

As of the first nine months of 2013, its profit jumped 64 percent to P2.1 billion from the P1.28 billion recorded in the same period the previous year, on the back of brisk demand for affordable housing in the Visayas and Mindanao.

The group is majority owned by Atencio, Luis Yu Jr. and Mariano Martinez. It recently completed a backdoor listing on the Philippine Stock Exchange through IP Converge Data Center.

The group, through 8990 Housing Development Corp., 8990 Luzon Housing Development Corp., 8990 Davao Housing Development Corp., 8990 Leisure and Resorts Corp., 8990 Mindanao Housing Development Corp. and Fog Horn Inc., acquired 3.83 billion shares in IP Converge, giving it control of the listed company.

It also recently secured the approval of the Securities and Exchange Commission to sell as much as P13 billion worth of shares through a follow-on offering.

It expects to raise some P6.4 billion from the primary offering, which will go mainly to landbanking and working capital requirements.

From the provinces, the group is now setting its sights on increasing its footprint in Metro Manila, which remains the prime market for real estate development.

The group is also boosting its presence in the tourism sector through its time share business, which it entered three years ago through Azalea Residences in Baguio City.

Atencio stresses, however, that 8990 Group will not turn back on its core competence, which is providing quality homes at mass housing prices.

“We have to consciously stop ourselves from going for the higher markets. We have to be conscious and tell ourselves to stick to the market that we know best,” says Atencio.

“It is really nice to be able to give houses that most Filipinos can afford,” adds Atencio.