PHILIPPINE HOUSING INDUSTRY · 2019-06-11 · 2017 WEF GCR. It also dropped in rankings in the...

December 2017

PHILIPPINE HOUSING INDUSTRY

Regulatory Review

Modernizing Government Regulations Program

TABLE OF CONTENTS

INTRODUCTION……………………………………………………………………... 1

OBJECTIVE………………………………………………………...…........................ 2

METHODOLOGY…………………………………………………………………….. 2

HOUSING INDUSTRY IN THE PHILIPPINES

Current Situation…………………………………………………………………

Laws on Housing…………………………………………………………………

Types of Housing Programs………………………………………………………

3

4

4

STEPS IN ORGANIZING HOUSING PROGRAM …………………………………. 7

PERMITS AND CLEARANCES FOR HOUSING PROGRAMS……………………. 8

RESULTS AND FINDINGS

Key Issues on the Current Housing Regulatory System………….………………

Other Issues………………………………………….……………………………

Cost and Benefits of the Housing Regulations…………………….……………..

9

18

18

INDUSTRY REGULATION EVALUATION………………………………………... 24

RECOMMENDATIONS………………………………………………………………. 27

INDICATORS TO GAUGE SUCCESS OF PROPOSED

REGULATORY ENHANCEMENTS…………………………………………………

27

INDICATOR-RECOMMENDATION-IMPACT MATRIX……………..................... 28

CONCLUSION………………………………………………………………………… 31

ANNEXES

A: Application for Land Use Conversion………………………………………...

B: Issuance of Certificate of registration (CR) & License to Sell (LS)

Subdivision/Condominium & other Real Estate Projects......................................

32

35

LITERATURE CITED………………………………………………………………… 36

EXECUTIVE SUMMARY

Decent and affordable shelter has been the long-time goal of the Philippine government as stipulated in the 1987 Constitution, its subscription to the attainment of safe, resilient, and sustainable human settlements which is one of the 17 Sustainable Development Goals. Housing goal is again reiterated in the Philippine Development Plan 2017-2022. Presently, the country’s housing need is estimated at six (6) million units and it is projected to increase to 12.5 million by 2030.

With NEDA’s support, 2017 is the second year of DAP’s implementation of the Modernizing Government Regulations (MGR) Program reviewing the regulations concerning the housing industry among others. The general objective is to identify specific areas for improvement in order to make the industry more attractive to investors especially for socialized housing because this is the type most needed by the less-privileged Filipinos. Documents review, focus group discussions, impact assessments were conducted. Through documents review and FGD, the Team found: a. 9 to 12 steps that housing business firms

undertake to complete the project, taking 24.5 to 57 months or nearly five (5) years to complete the entire process. If the sub-steps of securing Mayor’s Permit, Tax Identification Number, Registration of Books of Account, Authority to Print from the BIR, land titling, land conversion, environmental compliance certificate (ECC), application for tax exemptions, and other requirements are to be included, the steps could total 43;

b. redundant documents (Articles of

Incorporation, SEC Registration, Mayor’s Permit, Tax Declaration, TCT, Locational Clearance, Site Development Map, and Income Statement, etc) as requirement for business registration and actual housing development ;

c. high cost of securing the necessary

permits for business registration averages PhP712,261.00 (18,829 pesos during business start-up; 670,895 pesos for business operations; and 22,537 pesos as incentives application fee, but amount could vary depending on the geographical location of the LGU and the level of urbanity and development as cities exact higher fees compared with the municipal local government;

d. variation among LGUs in the issuance of

building permits depend on three (3)

major considerations, namely: a) non-availability of shared database and automated systems, b) sufficient number of personnel or plantilla positions to conduct the review and evaluation of plans and other documents, and to conduct inspections, c) scheduling of series of inspections by the BFP, and d) other concerned units or departments of local government;

e. the number of signatories among LGUs

vary significantly from a minimum of 17 to a maximum of 27 from TCT/OCT certification, to zoning clearance, to building and occupancy permits.

The other issues concerning the housing industry include: a. limited land for socialized housing,

especially within cities and other urban areas where they are most needed, making socialized housing more expensive and unaffordable for the buyers and a lesser priority for developers;

b. several socialized housing programs by

the national government are considered a failure in the sense that the target beneficiaries do not accept them resulting in low occupancy rate, selling or leasing up of the housing units, or returning of the beneficiaries in the metros to live in slum areas;

c. land reclassification law remains enacted

by Congress; and zoning, which is a

function of LGUs over alienable and disposable lands, is hardly accomplished;

d. decreasing land area for the housing

projects as the national regulatory agencies require developers to set aside 30% for roads and open spaces, and for the greening program in the case of Davao, resulting in increased price of the land;

e. the lack of data by LGUs for local shelter

planning, leading to the lack of local policies on land use;

f. weak coordination among LGUs and

national agencies wherein the latter do not use the LGU-prepared shelter plans as references for socialized housing;

Considering the issues found and the costs and benefits of the housing regulations, the following recommendations are forwarded: a. Development of a shared information

system for national agencies involved in the issuance of permits for housing development projects, and linking this with the LGU database. This will significantly reduce the time and cost to secure the necessary permits. Instead of the agencies and LGUs requiring the applicants to submit the same set of documents, they will just access online the electronic copies.

b. Setting up of a one-stop-shop for processing applications for housing projects. To complement this, all application forms should be made available online. If possible, corresponding payments should also be made through e–banking. HLURB should be the lead agency with other shelter agencies (PagIBIG, SHFC, DENR, DA, SEC, and BIR) linked to the system. The creation of the Department of Housing and Urban Development (DHUD) can help realize this proposal.

c. Set the standards for evaluating application documents (e.g. ECC,

subdivision plans, and feasibility studies) to reduce subjectivity and shorten processing time. This will also reduce the risk of corruption as it leaves very little or no room for misinterpretations and negotiations.

d. Establishing an inter-government

inspection team. Inspection will be done prior, during, and after the development of the housing project. Not only will this harmonize the schedules of the various national agencies mandated to undertake field inspections and thereby fast track the process, but it will also reduce the possibility of conflicting findings and recommendations which could further delay the projects.

e. Provide capacity building programs (e.g. technical review of proposed subdivision plans as there are only a few personnel at the government agencies and local government that can perform this, and use of the automated one–stop-shop for processing applications for housing projects) to the regulatory agencies and the LGU departments and complement these with incentives and disincentives to encourage better performance.

f. Instead of requiring ECC on a per project basis, consider having DENR and EMB assess the larger area and come up with measures to address potential consequences of development. This shall be initially shouldered by the government but eventually be passed on to the developers through the issuance of permits.

The proposed enhancements to the current housing regulations focus on the 1) streamlining of the documentary requirements; 2) the elimination of the redundancies specifically the requirement for same sets of documents; and 3) the establishment of a centralized database for all agencies involved in the housing regulations. When done, processing time will be significantly reduced and the fees will be reduced as well.

Philippine Housing Industry Regulatory Review

Modernizing Government Regulations Program | Page 1 of 36

INTRODUCTION Providing decent and affordable shelter has been the long-time goal of the government. It is stipulated in the Constitution, which states that: “The State shall, by law and for the common good undertake, in cooperation with the private sector, a continuing program of urban land reform and housing which will make available at affordable cost decent housing and basic services to underprivileged and homeless citizens in urban centers and resettlement areas. It shall also promote adequate employment opportunities to citizens. In the implementation of such programs the State shall respect the rights of small property owners” (Art. 13 Sec.9). It is also one of the 17 Sustainable Development Goals (SDG 11: “make the cities and human settlements inclusive, safe, resilient and sustainable.”), and is one of the aspirations of Filipinos, according to AmBisyon Natin 2040, on which the Philippine Development Plan is anchored on. Presently, the housing need is estimated to be at 6 million, and is projected to increase to 12.5 million by 2030. The balanced housing provision of RA 7279, or the “Urban Development and Housing Act of 1992” (UDHA), was crafted to help provide shelter for the underprivileged by requiring developers to allocate 20% of either the total area or total cost of their housing projects. RA 10884, or “An Act Strengthening the Balanced Housing Development Program”, amended Section 18 of RA 7279 (Urban Development and Housing Act of 1992, or UDHA) by reducing the allocation for socialized housing from “at least 20%” to “at least 15%” of the total subdivision area or total subdivision project cost. It also expanded the coverage of the UDHA by requiring condominium developers to construct socialized housing units equivalent to 5% of their project area or cost. Aside from UDHA, several policies have been put in place to support shelter development. These include the establishment of financing institutions such as the National Home Mortgage Finance Corporation (NHMFC), Social Housing Finance Corporation (SHFC), and the Home Development Mutual Funds (HDMF), to provide individuals and developers with access to financing. Further, the government has provided tax incentives to encourage developers to enter into socialized housing projects. As the Country’s population increases, the need for quality yet affordable shelter becomes more pressing. With limited funds for shelter development, the government, more than ever,

needs to encourage greater private sector participation. The initiatives of the governments resulted in significant improvements in the Philippines’ rankings in the World Economic Forum’s (WEF) Global Competitiveness Report (GCR), from 85 (of 139 countries) in 2010 to 47 (of 140 countries) in 2015. The Country’s rating in Transparency International’s Corruption Perception Index (CPI) also drastically improved from 134 (of 178 countries) in 2010 to 111 (of 180 countries) in 2017. Despite the notable accomplishments, the Philippines still has a lot of work to do to become truly competitive. For one, it slid to rank 56 (of 137 countries) in the 2017 WEF GCR. It also dropped in rankings in the World Bank Doing Business Report, from 99 in 2016 to 113 (of 190 countries) in 2017. One of the indicators of the GCR is Burden of Government Regulations. From rank 101 in 2015, the Philippines slid to 111 in 2017. This shows that investors find the overall regulatory environment in the country burdensome. The negative perception on the regulatory environment negates the efforts of the government to improve the quality of infrastructure and work force in the Philippines. The Development Academy of the Philippines (DAP), in cooperation with the National Economic Development Authority (NEDA), is implementing the Modernizing Government Regulations (MGR) Program, which seeks to make the country more conducive for business by improving its overall regulatory environment. The MGR was launched in 2016, and focused on five priority industries, namely: food production, food processing, food service, tourism and transportation. On its second year of implementation, the MGR included housing in its priority industries.



OBJECTIVE

The general objective of the Study is to review housing regulations and identify specific areas for improvement in order to make the industry more attractive for investments. Specifically, the Study shall:

a. Determine the “costs and benefits” of the regulations currently governing the specific industry;

b. Determine the key indicators to measure the results of regulatory reforms relative to the concerned industries;

c. Determine the issues confronting the private and public sector in their compliance and enforcement of regulations, respectively;

d. Provide a regulatory map and profile for the selected industries to understand the

rationale behind each regulatory measure; e. Realize actual compliance cost savings

through the proposal of sound, responsive, business-friendly and citizen-focused regulatory changes;

f. Estimate the projected cost savings and lead time reduction arising from the proposals; and,

g. Provide a realistic assessment of the likely rate of compliance with the proposed changes in regulations.

METHODOLOGY

To answer the research questions and accomplish the objectives of the Study the Research Team used the following methods and tools: Documents Review. The documents that were reviewed include national laws, national agency and local government policies and procedures for the issuance of permits, position papers of industry associations, and previous policy studies on housing industry regulations. The Research Team reviewed discussion papers from national housing agencies and international development agencies. The findings from the document reviews were used in the conduct of the focus group discussions and social impact assessment. Focus Group Discussions. The primary participants were government agencies and attached units/bureaus, local governments, and members and players of the housing industry. The Research Team formulated key questions

for each group. The developers of socialized and economic housing were requested to identify specific requirements and processes that they find burdensome and redundant. Likewise, the government agencies responsible for regulating the housing industry were also requested to identify specific requirements and processes which are very time consuming, as well as measures to reduce the permitting process.

Impact Assessment. An impact assessment was undertaken to determine the possible intended and unintended consequences of the proposed reforms on housing regulations to the greater population. The Research Team also assessed the cost and benefits relative to compliance to housing regulations.



HOUSING INDUSTRY IN THE PHILIPPINES

Current Situation

The latest report from the Department of Trade and Industry (DTI) estimated the housing need at 3.9 million.

Based on the assumption that the average production of housing units is at 200,00 per year from 2012 to 2030, the backlog will increase by 6.5 million by 2030.

The highest housing demand comes from the economic housing segment, followed by socialized housing, and then by low–cost housing. The low-cost, socialized, and economic housing units account for a large share of housing production. From 2010 to 2011, housing production in the high-end, mid-end, and low-cost categories increased, while production of houses in economic and socialized housing was relatively flat. From 2000 to 2011, economic, socialized, and low-cost housing cornered close to 70% of total housing production. During the same period, the socialized segment accounted for 27%, the economic segment 29%, and low cost segment 13%. According to DTI, there are 3,164 developers in the housing industry, as of 2011. However, despite the relative large number of developers, only a few dominate the industry. Most of these are highly-integrated developers engaged in various real estate developments besides housing. These include retail real estate, hotels, commercial office buildings, and industrial estate development. The Subdivision and Housing Developers’ Association (SHDA) is the largest organization of housing developers in the Philippines comprising of 160 members from its chapters in Luzon, Visayas, and Mindanao. Other industry participants are members of the Chamber of Real Estate and Builders’ Associations (CREBA), the Real Estate Brokers Association of the Philippines, Inc. (REBAP), the Philippine Association of Real Estate Brokers (PAREB),

the National Real Estate Association of the Philippines (NREA), and the Organization of Socialized Housing Developers of the Philippines (OSHDP). These associations have been actively participating in various summits and activities organized by the national government for the purpose of shelter policy and program reviews. From their part, SHDA and OSDHP have undertaken several policy initiatives, and have advocated for specific reforms to enhance the production of socialized and economic housing nationwide. Among their recommendations is to provide a one-time housing production subsidy for socialized (urban) and urban development housing amounting to PHP400,000.00 per qualified household. The construction of socialized housing units from government funds will decrease, at least for 2018, with the 70% reduction of the budget for NHA. From the PHP15.3 billion budget for 2017, the housing office’s budget for the succeeding year was reduced to PHP4.4 billion. There is a current proposal for a special provision to enable NHA to extend its fund utilization to three (3) years in order to have longer period to fully exhaust its budget. The said proposal was made in response to the observation on the housing office’s low absorptive capacity. With the reduction of NHA’s budget for 2018, there is a need to encourage greater private sector participation in housing development. While Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) retains the tax exemption for socialized housing, the increase in prices of construction materials might have a negative impact on socialized housing development and the overall real estate industry.



Laws on Housing

Several laws on housing have been enacted since the 1960’s. Two of the more relevant laws are the RA 7279 – Urban Development and Housing Act (UDHA), and RA 7835 – Comprehensive and Integrated Shelter Finance Act (CISFA). The UDHA, which was enacted on March 29, 1992 provides for a comprehensive and continuing urban development and housing program, establish the mechanism for its implementation, and for other purposes.

Urban Development and Housing Act (UDHA) objectives are as follows:

Make available to underprivileged and homeless citizens decent housing at affordable cost;

Provide for rational use and development of urban land;

Regulate and direct urban growth and expansion towards a dispersed urban net and more balanced urban-rural interdependence;

Provide for an equitable land tenure system that shall guarantee security of tenure to program beneficiaries but shall respect the rights of small property owners and ensure the payment of just compensation;

Encourage more effective people's participation in the urban development process; and,

Improve the capability of local government units in undertaking urban development and housing programs and projects.

While the program rationale is to help people in having their homes, it sets the following criteria in selecting beneficiaries:

Must be male or female Filipino underprivileged and homeless citizen (individual/families in urban/urbanizable areas whose income/combined household income is within poverty threshold and does not own housing facilities and does not enjoy security of tenure); and,

Must not own real property in urban or rural areas; not a professional squatter or not a member of squatting syndicates.

Enacted on March 16, 1994, the CISFA provides for a comprehensive and integrated shelter and urban development financing program by increasing and regularizing the yearly appropriation of the major components of the National Shelter Program including the Abot-Kaya Pabahay Fund under RA 6846, augmenting the authorized capital stock of the NHMFC and the HIGC, identifying other sources of funding and appropriating funds for the purposes.

Types of Housing Programs Different kinds of housing programs are implemented in the country which varies on the different organizations holding such program. They are as follows:

1. As defined by RA 7279

1.1 Socialized Housing Program. Refers to

housing programs and projects covering houses and lots or home lots only undertaken by the government or the private sector for the underprivileged and homeless citizens which shall include sites and services development, long term financing, liberalized terms on interest payments, and such other benefits.

1.2 Resettlement Programs. Resettlement of persons living in danger areas (esteros, railroad tracks, garbage dump, riverbanks shorelines and waterways) and public places (sidewalks, roads, parks and playgrounds).

1.3 Balanced Housing. Developers of

proposed subdivision projects are required to develop an area for socialized housing equivalent to at least 20% of the total subdivision area or total subdivision cost with the option to comply instead through any of the following:



development of a new settlement, slum upgrading, joint-venture projects with LGUs or any housing agency, or, participation in the community mortgage program.

2. As defined by RA 7835

2.1 Resettlement Programs. Program for families displaced by government infrastructure projects; those occupying danger areas such as waterways, railroad tracks, etc.; and, those qualified for relocation/resettlement assistance under UDHA.

2.2 Community Mortgage Program. The Community Mortgage Program (CMP) is a mortgage financing program of the National Home Mortgage Finance Corporation which assists legally organized associations of underprivileged and homeless citizens to purchase and develop a tract of land under the concept of community ownership. The objective of the program is to assist residents of blighted or depressed areas to own the lots they occupy, or where they choose to relocate to, and eventually improve their homes to the extent of their affordability.

2.3 Cost Recoverable Program. Undertaken by government through the National Housing Authority in cooperation with LGUs, housing cooperatives, NGOs, POs, landowners, developers and other government agencies. The cost of land, land development and housing construction are to be recovered from the target beneficiaries. At least 60% of the total number of the house and lot packages to be produced under this program shall correspond to the lowest loan package under the Unified Home Lending Program.

3. Medium-rise Buildings. The target

beneficiaries are:

3.1 For Medium-rise Public Housing. City relocation alternative for families affected by relocation activities and qualified for assistance under UDHA.

3.2 For Medium-rise Private Housing. Housing option to low-income families and to provide rental housing stock in high-density urban areas

4. Programs of the National Housing

Authority

4.1 Resettlement Programs: involves the acquisition and development of large tracts of raw land to generate serviced lots and/or housing units for families displaced from sites earmarked for government infrastructure projects and those in danger areas such as waterways, esteros, and railroad tracks.

4.2 Slum Upgrading: an on-site housing development program where NHA acquire occupied lands and provides on-site improvement through introduction of roads or alleys and basic services such as water and power. Land tenure issue is resolved through sale of home lots to bonafide occupants.

4.3 Sites and Services: involves the development of raw land into service home lots to serve as catchment area for informal settlements. The intent is to help families acquire housing on an incremental basis. This program can be tied up with resettlement program.

5. Competed/Core Housing.

This program provides service lots with core housing specifically targeted to low-salaried government and private sector employees. The projects are implemented under joint venture arrangement with private sector or LGUs.

6. Medium Rise Housing. An in-city housing program that entails the construction of two- to five-storey buildings utilizing funds allocated under Republic Act No. 7835 or the Comprehensive and Integrated Shelter Financing Act of 1994 (CISFA). The units are made available under lease or lease to own arrangements. Standard unit cost is about PhP485,000.00 to PHP580,000.00 for a 4-storey and 5-storey building, respectively. This amount excludes the cost of land. Lease rates per



month range from PhP750.00 to PhP4,000.00, more or less.

7. Available Funds for Housing. A number of financing schemes by the different government levels are also available to provide housing programs such as the following:

7.1 National Government

Financing from Key-housing agencies (NHA, HIGC, HDMF, NHMFC)

Lending Program from government banks (DBP, PNB, LBP)

President’s Social Development Fund

DOF-BLGF Municipal Development Fund

7.2 Local Government

Local appropriations for housing

Savings

Special sources of revenue

Bond flotation

Calamity Funds (preparation of relocation sites/facilities pursuant to DILG-DBM Joint Memorandum Circular 2003-1)

7.3 Other Sources

International, bilateral or multilateral aid sources (Ex. Japan Grant Aid for general project)

Non-government organization (Habitat)

Private bank



STEPS IN ORGANIZING HOUSING PROGRAMS IN THE PHILIPPINES

FIGURE 1. Steps constituting the typical procedure being undertaken by a developer in organizing a housing program in the Philippines.

Evaluation Report

Project background information Scope and methodology of evaluation used Findings, conclusion, and recommendation

Monitoring and Evaluation Establish initial program plan and base

information Collect data Compare actual data with plan data Identification of issues requiring decision

Sale/Award

Disposition of house and/or lot packages Loan arrangement (cost recoverable mechanism)

Project Implementation Overall implementation strategy (identification of

critical activities. Use of PERTCPM to identify project time frame )

Project schedule (time, resources requirement and activity)

Management structure (define communication flow and scope of

supervision)

Fund management (budgetary control)

Approval of the project includes permitting requirements

Preparation of Project Feasibility Study

Engineering Details

Development or schematic plan (road layout, gradient, roadway sections and road easements or right-of-way, etc.)

Vicinity plan, lot plan and layout

Topographic or survey plan to include boundary lines, technical descriptions, elevation, significant features,

etc.

Proposed public improvement including existing land use.

Site Selection

Data Gathering Identification of intended beneficiaries, determination of existing supply and demand including required and available resources (land, infrastructure, finance, labor, building

materials)



PERMITS AND CLEARANCES FOR HOUSING PROGRAMS IN THE PHILIPPINES

FIGURE 2. Permits and clearances for housing programs

DAR Clearance

Certified Title (OCT/TCT) and/or other legal

documents establishing land ownership

DA certification that the land has ceased to be

productive economically and agriculturally.

LGU Certification that the project is inside the proper zone (land use

plan/ zoning ordinance)

Proposed project site outline (project details, environmental settings,

mitigation measures)

Cadastral/vicinity map

Photographs of the project site

DENR-EMB Approval (Initial Environment

Examination)

Proof of Compatibility with existing Land Use

Plan

Proof of Authority over the Project Site

Accountability Statements of the

Proponent

Project Environmental Monitoring & Audit

Prioritization Scheme (PEMAPS)

Questionnaire

Subdivision and Housing Projects

Checklist

Sanggunian Approval

Sanggunian deliberations and

approval.

DENR-LMB Verification &

Approval

HLURB Registration & License to Sell

Sworn Registration Statement

TCT/OCT duly stamped with original marking “certified true copy”

LGU’s audited balance sheet and financial

statement

Articles of Incorporation, By-laws, latest annual corporate

report to SEC

Copy of brochure, circular, prospectus,

advertisement or communication used

Sample copy of Contract to Sell or

Award

Environmental Compliance Certificate (ECC) or Certificate of

Exemption (DENR-EMB)

Zoning Certificate from the Regional HLURB

Officer

HLURB Registration & License to Sell (continuation)

Certified True Copy of DAR Conversion Order/ Exemption Clearance

Electrical Plans and Specifications

Permit to Operate a Deepwell/Water

Potabiity Test results

Project Study

Program Development

Affidavit of Understanding to

submit title

Duly accomplished and notarized fact sheet

DOJ-LRA Registration

Original plan approved and certified by the

Office of the Regional Director

Property technical description

Surveyors certificate

Assessed value of the property



RESULTS AND FINDINGS

Key Issues on the Current Housing Regulatory System

The main issue on the housing industry regulations is the process for securing the necessary permits for housing projects. The Housing and Urban Development Coordinating Council (HUDCC) found 12 steps to undergo for a market-driven socialized housing project, from issuance of title to the developer up to the awarding/turnover of housing units to buyers. The entire process takes at least 24.5 months to be completed. In some cases, it may even take 57 months or nearly five (5) years to complete the entire process.

The Research Team also mapped out the process of securing the necessary permits and clearances for housing development, and found 43 steps to register a business and develop housing projects. These exclude the sub-steps, such as those required to secure Mayor’s Permit, Tax Identification Number, Registration of Books of Account, and Authority to Print from the BIR. Part of the process mapping conducted by the Research Team involved the identification of redundant documentary requirements for business registration and actual housing development.

Among the redundant documents identified are the Articles of Incorporation, SEC Registration, Mayor’s Permit, Tax Declaration, TCT, Locational Clearance, Site Development Map, and Income Statement.

The summary of the process mapping conducted by the Research Team is presented in Tables 1 to 3.



TABLE 1. List of Documentary Requirements for Starting a Business (Housing Industry)

Regulations for Starting a Business

Legal Basis Number of Procedures

Agencies Involved

Number of Documentary

Requirements per Agency

Overlapping Regulations

Business Name Registration

RA 8424 6 (filing directly); 7 (via online)

SEC 4

Barangay Clearance RA 7160 2 Barangay 1

Locational Clearance for New Business Permit

RA 7160 City/ Municipality

1

Mayors Permit (Quezon City's Process)

RA 7160 7 (excluding the steps to secure certification

from Bureau of Fire Protection, Health Department, and

Office of the Building Official)

LGU 8 plus 11 additional

required information

Tax Identification Number, Registration of Books of Accounts, and Authority to Print

RA 8424 3 main steps, and 13 sub - steps

BIR 8 1. SEC Registration 2. Articles of Incorporation (Required when

securing Mayor's Permit)

SSS Number RA 8282 Unspecified SSS 2 1. Articles of Incorporation (Requirement in BIR docs)

PAGIBIG Registration RA 9679 2 PagIBIG 4 1. Mayor's Permit (Part of requirements for SSS) 2. SEC Registration (Required when securing

Mayor's Permit and BIR docs) 3. Articles of Incorporation; or Articles of

Partnerships

PhilHealth Registration RA 10606 Unspecified PhilHealth 3 1. SEC Registration and 2. Articles of Incorporation/ Partnerships

(requirement for Mayor's Permit & PAGIBIG)



TABLE 2. List of Documentary Requirements for Operating a Business (Housing Industry)

Regulations for Operating


Agencies Involved




Application for DAR Clearance for Purchased Land under CLOA

RA 6657 2 DAR 9

Application for Environmental Compliance Certificate

PD 1586; RA 9003; RA 9275; RA

6969

2 (via online

application)

DENR - EMB 9 1. Proof of authority over the project site (e.g. Deed of Sale) - Already part of the requirements for DAR Clearance

Application for Land Use Conversion

RA 6657 7 DAR 26 steps, with additional 2

requirements in case land is

untitled, and 6 more

requirements, if the applicant is not

the registered owner

1. Tax Declaration (part of the requirements for DAR Clearance)

2. Vicinity, topographic, and site development map; and photographs (parts of the requirements for the ECC)



Regulations for Operating


Agencies Involved




Development Permit PD 1096; (1) PD 1185; (2) RA 9266; (3) RA 4566; (4) RA 1364; (5) RA 1378; (6) RA 8534;

& (7) Art. 1723 of the

New Civil Code.

6 LGU 14 1. TCT (part of the requirements for land use conversion),

2. Tax Declaration (part of the requirements for DAR Clearance and Land Use Conversion),

3. Locational Clearance (part of the requirements for ECC)

Issuance of a Certificate of Registration (CR) and License to Sell (LS) Subdivision/ Condominium Projects and other real estate projects

RA 7279 8 HLURB 10 plus 2 for condominium devt

or plus 5 for subdivision

projects

1. TCT or OCT (part of the requirements for land use conversion and development permit);

2. Articles of Incorporation and By - laws (part of the requirements for Mayor's Permit, BIR, SSS, PhilHealth, PAGIBIG);

3. Electrical Plan and specifications (part of the requirements for Mayor's Permit and Development Permit)



TABLE 3. List of Documentary Requirements for Providing Incentives (Housing Industry)

Regulations for Incentives


Agencies Involved




Application for Registration at BOI

EO 226 5 BOI 5 1. Project Site Development Map (part of the requirements for ECC and Land Use Conversion)

2. Income Statement and 3. Business Model (parts of the requirements for Land Use Conversion)

Application for Income Tax Holiday

EO 226 4 BOI 15 1. Full Cost Benefit Analysis (part of the requirements for Land Use Conversion)

2. SEC General Information Sheet (part of the requirements for Mayor's Permit, BIR, SSS, PhilHealth, PAGIBIG, and License to Sell)



1. Land Titling. The issuance of land title is essential for any housing development to commence. During the public consultation, the participants raised the issue on the tedious process of land titling. In the process map formulated by HUDCC, the average time needed by the Land Registration Authority (LRA) and Register of Deeds (LRD) to process and issue land titles is two (2) weeks to one (1) month. Developers do not agree. Accordingly, the process can last from weeks to years, depending on several factors, including red tape. They also pointed out that approval for land titles for development covering more than 10 hectares is in Manila, even if the development is located in the province.

2. Application for Land Conversion. The application for land use conversion takes the longest time to complete. On the average, it takes 12 to 36 months for the Department of Agrarian Reform (DAR) to process applications for land conversions. This alone makes up 50-63% of the time for the entire process for socialized housing. The process of converting agricultural lands into non-agricultural uses is meticulous. Republic Act 9700, otherwise known as the Comprehensive Agrarian Reform Program Extension with Reforms (CARPER), amended specific provisions of RA 6657 or the Comprehensive Agrarian Reform Law of 1988. These included the section on land

conversion. Section 22 of CARPER states that:

“After the lapse of five (5) years from its award, when the land ceases to be economically feasible and sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes, the DAR, upon application of the beneficiary or the landowner with respect only to his/her retained area which is tenanted, with due notice to the affected parties, and subject to existing laws, may authorize the reclassification or conversion of the land and its disposition: Provided, That if the applicant is a beneficiary under agrarian laws and the land sought to be converted is the land awarded to him/her or any portion thereof, the applicant, after the conversion is granted, shall invest at least ten percent (10%)of the proceeds coming from the conversion in government securities: Provided, further, That the applicant upon conversion shall fully pay the price of the land: Provided, furthermore, that irrigated and irrigable lands, shall not be subject to conversion: Provided, finally, That the National Irrigation Administration shall submit a consolidated data on the location nationwide of all irrigable lands within one (1) year from the effectivity of this Act.”



FIGURE 3. Process Map for Market- Driven Socialized Housing

Source: HUDCC Strategic Implementation Plan



It is important to note that the average time to process the applications for land conversion excludes the time for the applicant to secure the necessary requirements which include: 1) the True copy of Original Certificate of Title (OCT) or Transfer Certificate of Title (TCT) of the subject land, certified by the Register of Deeds, 2) Project Feasibility Study, 3) True copy of the current Tax Declaration covering the subject property, 4) Certification from DENR CENRO that the landholding is classified as alienable and disposable (A & D), and 5) Certification from DENR CENRO (for administrative confirmation of imperfect title) or the Clerk of Court (for judicial confirmation of imperfect title) that the titling process/proceedings have commenced and there are no adverse claimants, in case the land is untitled. The details of the land conversion application process are provided in Annex 1.

There is a pending executive order (EO) which seeks to declare a moratorium on the processing and approval of all applications for land use conversion of agricultural lands to non-agricultural uses. Specifically, the EO covers 4.7 million of agricultural lands distributed under various agrarian reform programs since 1972. The rationale for the said EO is the need to ensure food security. Once it takes effect, proponents of housing projects will have to look for other lands to develop. This could result in an increase in the cost of land for residential, commercial, and industrial uses which could discourage developers from investing in socialized and economic housing.

3. Application for Environmental Compliance

Certificate. The industry experts that participated in the public consultation claimed that the processing and issuance of ECC takes at least three (3) months. This is way beyond the 10 working days indicated in the process map by the DAP, which was derived from the interviews with DENR-EMB. The developers raised the lengthy time it takes for DENR and EMB to assess the proposed project. According to them, it should not take long because the said agencies already have all the maps (e.g. geo-hazard maps) to guide them in their review.

4. Local Permits. Aside from the processing of applications for land conversion and environmental compliance certificate, developers also point to the issuance of development permits at the local level as another major bottleneck. Accordingly, the procedure, time frame, and cost of securing development (Mayor’s Permit) and construction permit varies from one local government unit (LGU) to another. RA 7160, or more commonly known as the Local Government Code of 1991 grants LGUs the power to generate and apply resources. Section 18 of the Code states that LGUs shall have the power and authority to establish an organization that shall be responsible for the efficient and effective implementation of their development plans, program objectives and priorities; to create their own sources of revenue and to levy taxes, fees, and charges which shall accrue exclusively for their use and disposition and which shall be retained by them.

The period for securing local permits varies from one LGU to another. Generally, it takes longer time and is more expensive to secure permits in urban LGUs compared with securing permits at municipal LGUs because of the larger population and voluminous transactions in the urban LGUs even if there are more personnel at the business permits and licensing office (BPLO), engineering, treasurer, and planning and development offices than in the municipal counterpart offices.

Furthermore, urban LGUs exact higher fees compared with the municipal LGUs making it more expensive to secure permits as urban LGUs need to generate more resources to enable them to provide the needed services for their larger population.

Many cities have uploaded the step by step procedure to secure Mayor’s and housing development permits

1. For instance, the

City Government of Cebu has a 5-step process for the issuance of subdivision permits. Documentary requirements are as follows: development plan, barangay resolution, environmental compliance certificate (ECC), and Sangguniang

1 https://www.cebucity.gov.ph/index.PHP/home-new/avail-

apply-inquire/business?showall=1

https://www.cebucity.gov.ph/index.php/home-new/avail-apply-inquire/business?showall=1




Panlungsod (SP) Resolution. The corresponding fees are based on HLURB’s guidelines as well as City Ordinance 1656.

With regard to the issuance of building permit, the USAID, through its Investment Enabling Environment (INVEST) Project assessed the current construction permitting process

2. The variation among

LGUs in the issuance of building permits depend on three major considerations, namely: 1) non-availability of shared database and automated systems, 2) sufficient number of personnel or plantilla positions to conduct the review and evaluation of plans and other documents and to conduct inspections, 3) scheduling of series of inspections by the BFP, and 4) other concerned units or departments of local government. It was also found that the number of signatories among LGUs varies significantly from a minimum of 17 to a maximum of 27 from TCT/OCT certification to zoning clearance to building and occupancy permits.

The national government, in partnership with the private sector and international development agencies, has undertaken several measures to improve the overall competitiveness of LGUs. These include the Business-Friendly and Competitive LGUs which was spearheaded by the Department of the Interior and Local Government (DILG), and the Cities and Municipalities Competitiveness Index (CMCI) which was developed by the National Competitiveness Council (NCC). Both initiatives seek to streamline the permitting process at the local level in the bid to attract more investments. Among the indicators used in the CMCI are Business Registration Efficiency and Compliance to BPLS standards.

2 http://pdf.usaid.gov/pdf_docs/PA00K8K2.pdf

5. Application for Tax Exemption. Contrary to the process map of HLURB (which was probably based on the service charter of BIR) which states that the issuance of Tax Exemption takes two (2) weeks to one (1) month, developers claim that it takes them between six (6) to 12 months to do so. This diminishes the incentives provided by the Board of Investments (BOI) especially if the time frame for the said incentive is just two (2) years.

Generally, developers find the processing time for the License to Sell and Certificate of Registration issued by HLURB satisfactory. They are also satisfied with the process of renewing business registration at the LGU level. The details of the process of application for License to Sell and Certificate of Registration are provided in Annex 2.

http://pdf.usaid.gov/pdf_docs/PA00K8K2.pdf



Other Issues

Socialized housing is not a prime investment area. Compared with high-end housing development and other businesses, the return of investment (ROI) in socialized housing is quite long. Large developers only engage in socialized housing because it is mandated by law (UDHA). Aside from the lengthy process of securing permits, the following are issues related to housing development which were raised during the public consultations: 1. Limited land for socialized housing,

especially within cities and other urban areas where they are most needed. Relatedly, the costs of land in these areas are quite high making it very difficult for developers to build socialized housing projects. According to the comparative study on In-City and Off-City Housing Projects being conducted by the National Housing Authority (NHA), the latest NHA Board-approved cost of a house and lot package in off-city resettlement sites (row-house) is PHP310,000.00 per unit, while the cost of in-city housing units in 3-storey low-rise buildings (LRBs) and 5-storey LRBs is set at PHP410,000.00 and PHP600,000.00, respectively. The developers view the NHA costing for the row houses as quite low.

2. Many socialized housing programs by the national government are considered as failure in the sense that the target beneficiaries do not accept them. As a result, the occupancy rate is either low, or the beneficiaries end up selling or leasing their dwelling units, and return to the metro to live in slum areas.

3. Land classification hinders housing production. One of the factors that hinder

housing production is the land reclassification which is a function of Congress, and different from zoning, which is a function of LGUs over alienable and disposable lands. Timberlands, even those that no longer have timber within them, cannot be utilized for residential purpose without congressional legislation.

4. The national government requires developers to set aside 30% percent of the land for roads and open spaces. On top of this, some LGUs (such as Davao City) require additional land for the other purposes (e.g. greening program). This leaves developers with lesser area for their housing projects. Consequently, the price of housing units will have to be increased to cover the cost of the additional land requirements.

5. Lack of data for local shelter planning. One of the problems faced by LGUs is the lack of data for local shelter planning due to their limited resources to obtain data, hence leading to the lack of local policies on land for most LGUs. In the case of national agencies, the problem is the limited manpower to monitor a certain area.

6. Relatively weak coordination among LGUs and national agencies. While LGUs are required to prepare their respective shelter plans, these are seldom used as references by the national government and the private sector in identifying lands for socialized housing.

Cost and Benefits of the Housing Regulations

In Table 4, the average cost of securing all the necessary permits for business registration and actual housing development amounts to a total of PHP712,261.00 which is broken down in the following values: TABLE 4. Cost of Securing Business Permits and Clearances for New Businesses in the Philippines

Business Phase Amount

Starting a Business PHP 18,829.00

Operating a Business PHP 670,895.00

Registering for Incentives PHP 22,537.00

Total PHP 712,261.00



The breakdown of the values indicated in Table 4 is presented in Tables 5 to 6. Meanwhile, it must be noted that the cost of securing permits at the LGU level varies from one city/municipality to another. The cost of permits in cities and other urbanized areas are higher compared with rural areas. Other cost determinants include the size and location of the land and housing project, land classification, project specifications, project cost, and number of employees (for SSS, PhilHealth, and PAGIBIG registration). The costs identified by the Research Team are limited to the fees imposed by the regulatory entities. Transportation, manpower, and other costs were not factored in the study.

The primary benefit of compliance to the regulations is securing the necessary permits and clearances to operate a business, and proceeding with the actual housing project development. Other benefits include higher marketability and positive corporate image. Over the years, buyers have become more knowledgeable in shelter development. They are wary of scrupulous developers that sell housing projects that do not have the necessary permits. They also avoid housing projects which are located in disaster-prone areas. It is therefore in the interest of developers to secure all the necessary permits to be able to market their projects, recover their investments, and earn considerable profit.

TABLE 5. Cost of Starting a Business: The Case of Quezon City

No. Procedures Time to

Complete Associated Costs

1 Verify and reserve the company name with the Securities and Exchange Commission (SEC)

1 day PhP40.00

2 Deposit paid-up capital in the Authorized Agent Bank (AAB) and obtain bank certificate of deposit

1 day No cost

3 Notarize articles of incorporation and treasurer's affidavit at the notary

1 day PhP500.00

4 Register the company with the SEC and receive pre-registered Taxpayer Identification Number (TIN)

3 days PHP2,665.00 (PHP1,667.99 filing fee

equivalent to 1/5 of 1% of the authorized capital stock or the

subscription price of the subscribed capital stock,

whichever is higher but not less than PHP1,000.00 + PHP16.68

legal research fee (LRF) equivalent to 1% of filing fee but

not less than PHP10.00 + PHP500.00 By-laws + PHP150.00

for registration of stock and transfer book (STB) required for new corporations + PHP320.00 STB + PHP10.00 registration for

SEC bulletin)

5 Obtain barangay clearance 1 day PHP500.00 (between PHP0.00-PHP600.00)





6 After issuance of the SEC certificate of incorporation, pay the annual community tax and obtain the community tax certificate (CTC) from the City Treasurer's Office (CTO)

1 day PHP500.00

7 Obtain the business permit application form from the Business Permits and Licensing Office (BPLO)

1 day No cost

8 Obtain the business permit to operate from the BPLO

6 days PHP4,939.00 (PHP2,084.98 business tax (25%

of 1% of paid-up capital) + PHP200.00 mayor’s permit +

PHP50.00 sanitary inspection fee + PHP50.00 signboard fee + PHP250.00 business plate +

PHP100.00 QCBRB + PHP545.00 zoning clearance + PHP1,300.00

garbage fee+ PHP259.50 FSIC (10% of all regulatory fees))

9 Buy special books of account at bookstore

1 day PHP400.00

10 Apply for Certificate of Registration (COR) and TIN at the Bureau of Internal Revenue (BIR)

2 days PHP1,115.00 (PHP1,000.00 certification fee + PHP15.00

documentary stamp tax)

11 Pay the registration fee and documentary stamp taxes (DST) at the AAB

1 day PHP4,670.00 (PHP500.00 registration fee + PHP4,169.97 DST on original

issuance of shares of stock. DST on the lease contract is not

included in the computation of the cost)

12 Obtain the authority to print receipts and invoices from the BIR

1 day No cost (fees included in procedure 11)

13 Print receipts and invoices at the print shops

7 days PHP3,500.00 (between PHP3,000.00 –

PHP3,800.00)

14 Have books of accounts and Printer’s Certificate of Delivery (PCD) stamped by the BIR

1 day No cost

15 Register with the Social Security System (SSS)

7 days No cost

16 Register with the Philippine Health Insurance Company (PhilHealth)

1 day No cost

Total 36 days PHP18,829.00

Source: Worldbank (http://www.doingbusiness.org/data/exploreeconomies/philippines/sub/quezon-city#starting-a-business)



TABLE 6. Dealing with Construction Permits: The Case of Quezon City



1 Obtain certified true copy of the land title from the Register of Deeds (RD)

7 days PHP160.00 (PHP30.00 for the certification + PHP6.00 for each additional page (4 pages needed) + PHP112.00 IT

fee)

2 Obtain lot plan with site map from the geodetic engineer

3 days PHP1,250.00

3 Obtain barangay clearance 2 days PHP300.00

4 Apply for the locational clearance at the City Planning and Development Office (CPDO)

1 day PHP45.00 (filing fee)

5 Notarize the locational clearance application form at the notary

1 day PHP50.00

6 Receive inspection for the locational clearance from the CPDO


7 Obtain the locational clearance from the CPDO

5 days PHP2,926.00 (PHP2.25 per square meter)

8 Apply and obtain Fire Safety Evaluation Clearance (FSEC) from the local Fire Marshall at the Bureau of Fire Protection (BFP)

7 days PHP19,500.00 (0.1% of the estimated project

cost)

9 Apply and obtain the building permit and ancillary permits at the Office of the Building Official (OBO)

12 days PHP39,018.00 (according to the National

Building Code of the Philippines, the cost of the building permit is

PHP23.00 per sqm. The computation here is based on

PHP30.00 per sqm to account for ancillary costs such as electrical, mechanical and plumbing fees)

10 Receive inspection from the BFP during construction


11 Receive inspection from the OBO during construction


12 Apply for the Fire Safety Inspection Certificate (FSIC) at the BFP

1 day PHP3,901.00 (10% of building permit fees)

13 Receive final inspection for the FSIC from the BFP


14 Obtain the FSIC from the BFP 5 days No cost

15 Apply for health certificate at the City Health Office (CHO)

1 day No cost





16 Receive inspection for the health certificate from the CHO

1 day No cost

17 Obtain the health certificate from the CHO

5 days PHP400.00 (fixed fee for commercial

applications)

18 Apply for the Certificate of Final Electrical Inspection (CFEI) at the OBO

1 day No cost

19 Receive final inspection for the CFEI from the OBO

1 day No cost

20 Obtain the CFEI from the OBO 1 day No cost

21 Apply for the Certificate of Occupancy at the OBO

1 day No cost

22 Receive final inspection for the Certificate of Occupancy from the OBO


23 Obtain the Certificate of Occupancy from the OBO

18 days PHP32,000.00 (PHP1,600.00 per

PHP1,000,000.00 of the project value based on Quezon City

Revenue Code)

24 Apply for electricity connection at Manila Electric Company (Meralco)

1 day No cost

25 Receive inspection for electricity connection from Meralco

1 day No cost

26 Obtain electricity connection from Meralco

56 days PHP564,490.00 (PHP35,000.00 for poles +

PHP334,400.00 for two 75 kVA transformers + PHP44,000.00 for

dressings + PHP6,700.00 for buying + PHP144,390.00 for

security deposit)

27 Apply for water and sewage connection at Maynilad Water Services, Inc. (Maynilad) or Manila Water Company, Inc. (Manila Water)

1 day No cost

28 Receive inspection for water and sewage connection from Maynilad or Manila Water

1 day No cost

29 Obtain water and sewage connection from Maynilad or Manila Water

21 days PHP6,855.00

30 Obtain telephone connection from the telephone company

5 days No cost

31 Apply for the tax declaration of improvement at the City Assessor's Office (CAO)

1 day No cost





32 Receive inspection from the Appraiser of CAO

1 day No cost

33 Obtain the tax declaration of improvement from the CAO

3 days No cost

Total 169 days PHP670,895.00

Source: World Bank (http://www.doingbusiness.org/data/exploreeconomies/philippines/sub/quezoncity#starting-a-business)

TABLE 7. Availing Incentives

No. Particulars Associated Costs3

1 Application Fees

PHP3,787.50 (MSE Fee of PHP750.00 + PHP3,000.00 Regular Fee + PHP37.50 LRF which is equivalent to 1% of filing fee but not lower than PHP20.00 as per P.D. 1856.)

2 Registration Fees

PHP18,750.00 (MSE Fee of PHP3,750.00 which is equivalent to 25% of 0.1% of project cost, but not less than PHP3,000.00 + Regular Fee of PHP 15,000.00 which is equivalent to 1/10 of 1% of project cost, but not less than PHP3,000.00; and not to exceed PHP15,000.00).

Total PHP22,537.00

Source: Board of Investments (http://investphilippines.gov.ph/wpcontent/uploads/2014/11/CostofDoingBusinessjan2013)

3 Business with authorized capital stock of PHP 15 Million.



INDUSTRY REGULATION EVALUATION Table 8 evaluates the different steps that are being undertaken by the stakeholders of the housing industry in terms of complying with the regulations being implemented by the government. TABLE 8. Industry Regulation Evaluation


Factors affecting compliance The influence of enforcement on compliance The Influence of

sanctions (Penalties)

How aware is the target industry

and how well do they understand

them?

What are the benefits if you

comply

Is there a regular monitoring?

How likely is it that non-compliance will be discovered other

than through an official

investigation?

What are the measures to monitor the

industry?

Are there any sanctions for

non-compliance?

Are these effective?

STARTING A BUSINESS

Business Name Registration The housing industry is well - aware of the regulations for business startup, as the national and local governments have been effective in disseminating information regarding this.

The main benefit for compliance is securing the necessary permits to start a business.

Yes. Although the sequence varies from one LGU to another, compliance to regulations is monitored on a regular basis. On the part of the national agencies, monitoring is also done.

Although it can happen, it is unlikely for companies not to secure the permits for business startup. The documents are requirements for securing permits to operate.

LGUs/ national agencies undertake regular monitoring. Also, Mayor’s permit is renewed annually. Further, submission of documents to BIR is done quarterly.

Yes, there are. Non-compliance will result to imposition of penalties, suspension of operations, and/or closure.

Barangay Clearance

Locational Clearance for New Business Permit

Mayor’s Permit (Quezon City's Process)

TIN, Reg. of Books of Accounts, Authority to Print

SSS Number

PAGIBIG Registration

PhilHealth Registration








them?


comply




investigation?


industry?


non-compliance?


OPERATING THE BUSINESS

Application for DAR Clearance for Purchased Land under CLOA

The housing industry is aware of the regulations for business operations. However, they find the process tedious and unnecessarily lengthy. They claim that the processing time as stated in the service charter of the concerned agencies, is not being followed.

The main benefit for compliance is securing the necessary permits to be able to operate.

Not often as necessary. For one, EMB needs more manpower to monitor compliance upon issuance of ECC. On the other hand, developers are required to post the CR and LS details for their projects.

For the LGU to issue a development permit, it needs to review the clearances issued by agencies. These include ECC, Land Use Conversion, and DAR Clearance. HLURB also reviews the subdivision plan prior to issuance of CR and LS. This makes non-compliance difficult.

Physical inspection of project site and document reviews prior to issuance of clearances and licenses.

Yes, there are. Non-compliance will result to imposition of penalties, suspension of operations, and/or closure.

Application for Environmental Compliance Certificate


Development Permit

Issuance of a Certificate of Registration (CR) and License to Sell (LS) Subdivision/ Condominium Projects and other real estate projects








them?


comply




investigation?


industry?


non-compliance?


REGULATIONS FOR INCENTIVES

Application for Registration at BOI

The housing industry is aware of the regulations for incentives. However, they claim that the incentives are insufficient to attract mode investments on socialized housing. For one, there is a current proposal to remove VAT exemption on socialized housing.

The main benefit for compliance is securing the incentives to reduce the cost of undertaking socialized housing projects.

The tax incentives have specific scope and expiration period. It is unlikely for developers to receive tax incentives for their respective projects beyond the said time frame.

Unless BOI and BIR validate the financial reports, they will not be able to identify possible misdeclarations and other violations.

BIR issued Revenue Memorandum Circular No. 32-2012 to prevent developers and contractors from taking advantage of the law providing VAT exemption for socialized housing.

BOI can cancel the incentives if they (through BIR) discover discrepancies in the financial reports.

Application for Income Tax Holiday



RECOMMENDATIONS Considering the issues found and the costs and benefits of the housing regulations, the following recommendations are forwarded: 1. Development of a shared information

system for national agencies involved in the issuance of permits for housing development projects, and linking this with the LGU database. This will significantly reduce the time and cost to secure the necessary permits. Instead of the agencies and LGUs requiring the applicants to submit the same set of documents, they will just access online the electronic copies.

2. Setting up of a one-stop shop for processing applications for housing projects. To complement this, all application forms should be made available online. If possible, corresponding payments should also be made through e–banking. HLURB should be the lead agency with other shelter agencies (PagIBIG, SHFC, DENR, DA, SEC, and BIR) linked to the system. The creation of the Department of Housing and Urban Development (DHUD) can help realize this proposal.

3. Establishing an inter-government inspection

team. Inspection will be done prior, during, and after the development of the housing project. Not only will this harmonize the schedules of the various national agencies mandated to undertake field inspections and thereby fast track the process, it will also reduce the possibility of conflicting

findings and recommendations which could further delay the projects.

4. Set the standards for evaluating application documents. Standards on ECC, subdivision plans, and feasibility studies to reduce subjectivity and time. This will also reduce the risk of corruption as it leaves very little or no room for misinterpretations and negotiations.

5. Capacity building to perform specialized

function. Provide necessary capacity building (e.g. technical review of proposed subdivision plans as there are only a few personnel at the government agencies and local government that can perform this, and use of the automated one–stop-shop for processing applications for housing projects) to the regulatory agencies and LGU departments, and complement these with incentives and disincentives to encourage better performance.

6. Environmental Compliance Certificate (ECC) for larger area. Instead of requiring ECC on a per project basis, consider having DENR and EMB assess the larger area and come up with measures to address potential consequences of development. This shall be initially shouldered by the government but eventually will be passed on to the developers through the issuance of permits.

INDICATORS TO GAUGE THE SUCCESS OF PROPOSED

REGULATORY ENHANCEMENTS The proposed enhancements to the current housing regulations focus on the streamlining of the documentary requirements. The redundancies identified in Tables 1 to 3 are burdensome on the part of the business sector because they are required to present the same sets of documents to several regulatory entities. By establishing a centralized database for all agencies involved in the housing regulations, the processing time will be significantly reduced.

The key indicators to measure the results of the regulatory reforms to the housing industry are: 1. Decrease (stated in %) in the cost of securing

all documents to register a business; 2. Decrease (stated in %) in the total time for

processing of business permits; 3. Number of redundant documentary

requirements (business registration) removed. 4. Increase in the number of government

regulatory agencies that is linked to the centralized database system (proposed).



INDICATOR-RECOMMENDATION-IMPACT MATRIX The following matrix will evaluate the abovementioned recommendations vis-a-vis the success indicators. This matrix is aimed at determining the impacts of each recommendation for the realization of better regulations. TABLE 9. Indicator-Recommendation-Impact Matrix

Recommendations

Indicators

Decrease in the cost of securing permits

Decrease in the total time of processing

Removal of redundant documentary requirements

Increase in the number of NGAs linked to the

centralized database system

Development of a shared information system for national agencies involved in the issuance of permits for housing development projects, and linking this with the LGU database.

This might require additional cost imposed to the public to finance the system.

The online availability of documents will decrease queuing time needed by the public to secure these documents.

The centralized database will contain all the necessary documents for verification and approval.

The use of the online portal will push other agencies to link with the system.

Setting up of a one-stop shop for processing applications for housing projects

This would require more funds from the government due to logistical needs.

This will fast-track the processing of documents.

This does not necessarily address this indicator unless the whole permitting process is revisited/ revamped.

In attending to the logistical needs of the one-stop shop, will enable the linking of most agencies in the system.

Set the standards for evaluating application documents (e.g. ECC, subdivision plans, and feasibility studies) to reduce subjectivity and time.

Having a well-devised standard would decrease corruption which adds-up to the cost incurred by the public.

This will facilitate easier evaluation by the agencies, hence faster release of permits.

This will depend on the new standards that will be implemented.

This does not necessarily address this indicator.



Recommendations

Indicators

Decrease in the cost of securing permits


Removal of redundant documentary requirements

Increase in the number of NGAs linked to the

centralized database system

Establishing an inter-government inspection team

This might require additional cost to pay the manpower that will be needed.

This will fast-track the evaluation process since there is a committee that focuses on this.

This will reduce the possibility of conflicting findings which sometimes require additional requirements.

The results of the inspection team might conflict with the data of the centralized system.

Provide necessary capacity building to the regulatory agencies and LGU departments

This would entail additional cost to the government.

This will improve the efficiency of the employees in regulatory agencies.


Boosting the technical skills of the employees might push them to be linked with the centralized system.

Larger area assessment by DENR other than per project assessment in issuing ECC.

This would entail additional cost to the government and to the people.

This will cause faster release of ECCs.

This will remove redundant documents in as far as ECC is concerned.


In order to determine the overall impact of the recommendations in the achievement of the indicators, the table above can be quantified using the following score equivalents:

Impact Score

Positive Impact 1

Neutral (net effect) 0

Negative Impact -1



TABLE 7. Recommendation Score Matrix

Recommendations

Indicators

Total Score Decrease in the cost of securing

permits


Removal of redundant

documentary requirements

Increase in the number of NGAs

linked to the centralized

database system

Development of a shared information system for national agencies involved in the issuance of permits for housing development projects, and linking this with the LGU database.

-1 1 1 1 2

Set-up a one-stop shop for processing applications for housing projects

-1 1 0 1 1

Set the standards for evaluating application documents (e.g. ECC, subdivision plans, and feasibility studies) to reduce subjectivity and time.

1 1 0 0 2

Establishing an inter-government inspection team

-1 1 1 -1 0

Provide necessary capacity building to the regulatory agencies and LGU departments

-1 1 0 1 1

Larger area assessment by DENR other than per project assessment in issuing ECC.

-1 1 1 0 1

Based on the scores presented above, it can be deduced that the development of a shared database and setting of a standard in evaluating documents are the ones that must be prioritized inasmuch as the success indicators are concerned. This result, however, does not remove the importance of the other recommendations.



CONCLUSION a. It is possible to further streamline the

process of securing permits and clearances to register a business and to proceed with the actual housing projects. Streamlining will be done by removing the redundancy in documentary requirements. The central database shall provide the platform for data sharing among the national and local offices involved in regulating business registration and housing developments. It is difficult to accurately quantify the cost and benefits of improving the current regulations because there are many variables other than transportation and other logistical requirements. For one, opportunity cost is relative to each developer.

b. All of the current steps in securing permits and clearances for housing development are important. While securing the clearances from DA does take considerable amount of time, it cannot be removed, as it will further compromise food security. Similarly, the issuance of permits and clearances by DENR and its bureaus cannot be removed as it will compromise environmental management and public

safety. The processing time can be removed by increasing manpower and equipment of the concerned offices and by strictly implementing the ARTA and its mechanisms such as the service charter.

c. The processing time and cost for securing clearances and permits for housing development can be reduced through a policy issuance. This policy issuance expedites applications for housing projects located in areas jointly identified by the NHA and the LGU. It is even possible to set standards in fees across similar LGUs (i.e. cities and municipalities in the same region).

d. There are not enough incentives to encourage greater private sector participation in housing development. Many real estate developers have openly admitted that they engage in socialized housing for compliance purposes only. The imposition of VAT on socialized and economic housing development may further discourage new players from coming in.



ANNEXES

Annex A


Legal Basis Regulatory Agency Regulated Entities

Republic Act No. 6657 An Act Instituting a Comprehensive Agrarian Reform Program to Promote Social Justice and Industrialization, Providing the Mechanism for its Implementation, and for Other Purposes

Department of Agrarian Reform (DAR)

Owners of private agricultural lands or other person/s duly authorized by the landowner;

Beneficiaries of the agrarian reform program after the lapse of five (5) years from award and who have fully paid their obligations and are qualified under these Rules, or persons duly authorized by them; and

Government agencies, including government-owned or controlled corporations, and LGUs that own agricultural land as their patrimonial property.

Procedure Documentary Requirements

1. Get Application Form 2. Install Public Notice

Billboards in the subject Property

3. Furnish the Municipal Agrarian Reform Officer 2 copies of Application Form together with a photocopy of title and directional map

4. Fill Application Form with necessary data, reproduce 3 copies,

1. Requirements: Six (6) sets of land use conversion folder (LUCF) consisting of the following: (one [1] original set and five [5] photocopy sets) with table of contents and page numbers of all documents including photographs, sequentially numbered, except for maps and development plans, which shall l be submitted in six separate envelopes with contents properly labelled on each envelope. Of the six (6) folders, two (2) will be transmitted to the MARPO, containing therein only the filled-up

2. Application form and the documents specified in Nos. 4, 5, 14 and 21. 3. The remaining four (4) folders shall contain all the documents enumerated that are applicable.

a. Official Receipt showing proof of payment of filing fee and inspection cost. b. Official receipt showing proof of posting of bond or an original copy of the GSIS surety bond in accordance

with the terms and conditions set forth in Sec24 of DAR A.O. No. 1, Series of 2002. c. Sworn Application for Land Use Conversion. d. True copy of Original Certificate of Title (OCT) or Transfer Certificate of Title (TCT) of the subject land,

certified by the Register of Deeds not earlier than thirty (30) days prior to application filing date.




place in 3 separate folders, submit the same, attaching thereto the MARPO’s Certification

5. Pay necessary fees 6. Transmit Notice of OSII

to MARO and indicate the inspection date on the billboard

7. Participate during the OSII

Duration: At least 120 days

4. In case of untitled land, the following shall be required in lieu of a title: 5. Certification from DENR CENRO that the landholding is classified as alienable and disposable (A & D); and 6. Certification from DENR CENRO (for administrative confirmation of imperfect title) or the Clerk of Court (for judicial

confirmation of imperfect title) that the titling process/proceedings have commenced and there are no adverse claimants.

a. True copy of the Certificate of Title of the subject land as of 15 June 1988, and all successor Titles until the present Title referred to in No. 4, if applicable.

b. True copy of the current Tax Declaration covering the subject property. c. Project Feasibility Study. d. Joint Venture Agreement or other business arrangement on the use of the land between the landowner and

developer (if the developer is other than the landowner) or between the Emancipation Patent/Certificate of Land Ownership Award (EP/CLOA) holders and the developer (if land was awarded under the agrarian reform program).

e. Narrative Description of development plan describing in detail the activities, program components, phasing, schedule, work and financial plan, duly certified by a licensed engineer, architect, or land use planner.

f. Proof of financial and organizational capability of the developer to develop the land, including the following information:

7. Statement of project cost and availability of potential funding source(s) for the development of the proposed project; 8. Profile of the developer; 9. Most recent financial statement, not later than the year before application, duly authenticated by a certified public

accountant; and 10. If the developer is a corporation/partnership, a copy of its Certificate of Registration and recent General Information

Sheet (GIS) for the immediately preceding year, certified by the Securities and Exchange Commission (SEC), or in lieu of the latter, a duly accomplished GIS sworn to before a notary public, provided that if the land is to be used for socialized by the LGU under EO 124-1993, a Sanggunian Resolution appropriating funds for the project and authorizing the LGU to undertake the same shall be required: Provided further, that if the socialized housing shall be undertaken by other government agencies such as the National Housing Authority and the like, a board resolution approving the project and appropriating funds shall likewise be submitted.

11. Socio-economic benefit cost study of the proposed project. 12. Photographs of the landholdings. Size 5R(five [5] inches by seven [7] inches. The applicant shall attach the pictures to

a paper background and the photographer who took said pictures shall sign on said paper background to certify the authenticity of the pictures. On each background paper shall be written a short description of each picture.




13. Affidavit/Undertaking in a single document of the applicant.

14. MARPO Certification and Notice of Land Use Conversion 15. HLURB Certification 16. DA Certification 17. DENR Certification 18. Environmental Compliance Certificate (ECC) 19. If applicable, when the applicant is not the registered owner:

a. Special Power of Attorney; b. Notarized Secretary’s Certificate of a corporate/cooperative board resolution authorizing the representative,

when the applicant is a corporation or cooperative ; c. Concurrence letter of the mortgagee or of the individual or entity in whose favor the encumbrance was

constituted, when the property is encumbered; d. Endorsement from the concerned government agency, if the project is involved in a priority development

area or project e. LBP Certification attesting that the applicant-owner has fully paid his/her obligation to the LBP, when the

applicant-owner is a beneficiary of agrarian reform program; f. PARO Certification attesting that the applicant-landowner acquired the subject land from a landed-estate or

under Voluntary Land Transfer/Direct Payment Scheme (VLT/DPS) and he has already fully paid his obligation thereunder, when the applicant-landowner is a beneficiary of the agrarian reform program.

20. Vicinity Map and Lot Plan prepared by a duly-licensed geodetic engineer. Directional sketch map. 21. Map of the developmental plan. For socialized housing projects, the applicant shall submit map of the development

plan with marked “reviewed by the HLURB”. 22. Topographic Map, if the subject property is within an upland, hilly, or mountainous area.



Annex B

Issuance of a Certificate of Registration (CR) and License to Sell (LS) Subdivision/ Condominium Projects

and other real estate projects

Legal Basis Regulatory Agency Regulated Entities

Republic Act No. 7279 - Urban Development

and Housing Act of 1992

Housing and Land Use Regulatory Board

(HLURB)


1. File application with supporting

documents.

2. Receive Notice to Publish.

3. Publish Notice to Publish.

4. Submit Affidavit of Publication.

5. Coordinate with processor/inspector

for the scheduled site inspection.

6. Post-performance bond and submits

documents certifying performance

bond/guarantee from Financing

institution.

7. Receive documents and prepares

Order of Payment (OP).

8. Pay processing fee

1. Sworn Registration Statement

2. Certified True copy of TCT or Original Certificate of Title (OCT)

3. Duly audited Balance Sheet

4. Articles of Incorporation, By – laws and latest annual corporate report to SEC

5. Copy of any circular, prospectus, brochures, or communication used for public offering of subject

project and for circulation upon approval by this Board.

6. Sample copy of Contract to Sell Environmental Compliance Certificate (ECC)/Certificate of Non –

Coverage (CNC)

7. Zoning Certificate from HLURB Regional Officer

8. Certified true copy of DAR Conversion Order/Exemption Clearance

9. Electrical Plan and Specifications

10. Permit to operate a deepwell/water potability test results

11. For condominium projects: 1. Master Deed with Declaration of Registration and Declaration of

Restrictions evidenced by the proper annotation thereof in the title(s) of the property and the

certified true copy of such title(s) from the Register of Deeds;2. Building Permit

For subdivision projects:

1. Verified Survey Returns (two copies)

2. Sangguniang Resolution granting of Development Permit/Plan

3. Certified true copy of resolution conferring authority to the Mayor or other local government official to

issue development permit

4. Proof of compliance to Sec. 18 of RA 7279

5. One(1) set of subdivision development plan



LITERATURE CITED

Housing and Urban Development Coordinating Council. LGU Guidebook for Local Housing. Makati City Housing and Urban Development Coordinating Council. Strategic Implementation Plan. Makati City Congress of the Philippines. (March 1992). RA 7279 Urban Development and Housing Act of 1992. Quezon City Congress of the Philippines. (December 1994). RA 7835 "Comprehensive and Integrated Shelter Financing Act of 1994." Quezon City Congress of the Philippines. (October 1986). 1987 Constitution of the Republic of the Philippines. Quezon City http://www.nha.gov.ph (Accessed: October 2017) http://www.pdhre.org/materials/learning4.html (Accessed: October 2017) http://www.industry.gov.ph (Accessed: August 2017) https://www.cebucity.gov.ph/index.PHP/home-new/avail-apply-inquire/business?showall=1. (Accessed: October 2017) http://pdf.usaid.gov/pdf_docs/PA00K8K2.pdf. (Accessed: October 2017) http://www.doingbusiness.org/data/exploreeconomies/philippines/sub/quezon-city#starting-a-business. (Accessed: January 2018) http://investphilippines.gov.ph/wp-content/uploads/2014/11/CostofDoingBusinessjan2013. (Accessed January 2018) https://www.iconfinder.com/


http://pdf.usaid.gov/pdf_docs/PA00K8K2.pdf

PHILIPPINE HOUSING INDUSTRY · 2019-06-11 · 2017 WEF GCR. It also dropped in rankings in the...

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