THE MOST densely populated district of Manila—Tondo—is often associated with slum congestion, criminality and other ills of urban sprawl. Given this reputation, classic business sense should deter businessmen from doing business in the area unless they come from the place, have business partners who can protect there back, or are eternal optimists.
Apparently, 8990 Holdings Inc., a low-cost mass housing developer, does not share the same impression [or apprehension] of the birth place of the nation’s capital. The company has commenced the construction of a 13-tower high rise residential complex in Vitas, Tondo, worth P8.3 billion. The project will be complemented by a two-storey mall to meet the residents’ marketing needs.
Vitas is a poor man’s community deep inside Tondo that can be reached through narrow and congested streets. Its decades-old slaughterhouse gained notoriety for lawlessness because it was used as backdrop for bloody gang wars in vintage movies. In a nutshell, the place is a microcosm of the state of poverty and neglect in the country.
Default
The launch of a private or commercial mass housing project in Tondo goes against the grain in the way real estate developers do business in the county. The standard practice for projects of this nature is to build them on wide open tracks of land outside the urban areas. The construction work is more efficient and economical under those conditions. Or if it is done in existing residential districts, the target market is the lower middle class or those who have sufficient income to regularly pay the amortization on their houses. Because of the perceived high credit risk of the D and E sectors of our society, mass housing projects are usually undertaken by the government. The latter also provides subsidies or long-term repayment terms to make the houses more affordable to their beneficiaries.
The risks of default, high administrative costs and low returns discourage private capital from engaging in mass housing projects in depressed areas or for the benefit of what credit analysts describe as “sub-prime” creditors.
By putting its stakes in what was before considered “no man’s land” in Manila, 8990 Holdings is, in effect, sending the message to the real estate industry that the credit worthiness of people in the D and E classes deserves serious reevaluation. Perhaps, it’s time for certain prejudices and stereotypes about the less privileged members of our society to be reviewed or set aside for the good of the country.
Obligations
Can the poor be trusted to properly manage credit and comply with their financial obligations? The experience of Grameen Bank in Bangladesh has shown that, contrary to popular belief, they can and for good reasons. Organized in 1976, Grameen extends small loans (or micro credit) without collateral or security to the most marginalized Bangladeshis to enable them to engage in micro or small scale businesses.
The borrowers are grouped into clusters to provide emotional and social support to their members. Peer pressure, or the desire to maintain a good reputation in the community, accounts for approximately 96 percent rate of repayment of credit facilities. It’s a record that all banks or financial institutions would gladly give an arm and a leg to achieve.
The four percent or so who renege on their debts either got hit by natural calamities or underwent personal problems that prevented them from meeting their obligations. But they make up for their shortcomings after they have straightened out their finances. They do not go the way of so-called sophisticated creditors who file for bankruptcy, blame forces beyond their control, or claim poor business judgment when their businesses hit the skids.
Trustworthy
Closer to home, we have Gawad Kalinga (GK), a community-based organization that aims to alleviate poverty in the country. Since 1999, it has built thousands of homes and communities for the D and E sectors of our society.
Private donations and volunteer work, which includes people for whose benefit these communities are built and, in the process, give them a sense of ownership of their houses, have made this possible. After completion, GK turns over the administration or management of these communities to their residents. They become responsible for maintaining the well-being and peace and order of their neighborhood.
So far, there have been no reports of these communities going to seed or their residents returning to the unwholesome ways of the neighborhoods from where they were relocated by GK. With their self-pride restored, the beneficiaries of GK’s housing program have ceased to be burdens to the government and instead became responsible and productive members of our society.
The Grameen and GK experiences show that, treated with respect and given the opportunity to show their capability to take hold of their own lives, the poor can rise to the standards to which their more privileged counterpart are held.
No doubt, there are risks in extending credit to the financially challenged members of our society. More so, if they do not have assets that can be used to secure the payment of their debts. Despite this shortcoming, however, 8990 Holdings has gone ahead and taken on the challenge of giving the people of Vitas, Tondo, an opportunity to improve their housing conditions in accordance with established financing procedures.
Only time will tell whether it made a reckless move or wise business decision. Hopefully, it is the latter so it can be used as template for other real estate developers to replicate.
For comments, please send your e-mail to rpalabrica@inquirer.com.ph.