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Real Estate in a Federal Philippines

PropertyAccess Team |

Several versions, several demands, several interests, the proposed shift to a federal system of government currently has no concrete version other than what was produced by the Constitutional Committee led by former Senate President Nene Pimentel, together with former Chief Justice Reynato Puno. In the real estate industry, none of the technicalities matter but some licensed real estate brokers and agents ask: "How will federalism affect the real estate market?"

We will not discuss any of the versions of the federal constitution, there are far too many (Congress version, versions by some other PDP-Laban stalwarts, etc.), but rather let us focus on the fundamental changes that federalism will bring us.

Decentralization and autonomy of regions
The Philippines is not a stranger to federalism. There are historical advocates, even way back during the First Philippine Republic, but we need not look that far from the current 1987 Constitution. Our current fundamental law for one gives specific option of autonomy to the Muslim Mindanao (Bangsamoro) and the Cordilleras. What federalism does is just extend this privilege of autonomy to the rest of the regions, especially those with historical claims like Negros and Zamboanga.

Regional autonomy means regional governments will have greater control of their internal policies like taxation, land use, and land reform. Now that should pique your interest. Yes, instead of having a centralized housing agency like HLURB, regional housing board will decide on the technical aspects of a housing and residential development projects like scale, scope, terms of sale, and approval. This will reduce the time spent for a project to be approved from a backlog of applications in Manila.

New real estate frontiers and developments
With government agencies decentralized, notably housing, and consequentially, the reduction on processes and time spent getting permits approved in Manila, will also lead to the growth of regional developers. In fact, current regional developers like Cebu Landmasters, Udenna Land, Damosa Land, and the Manila-based but provincial-centric Double Dragon will play an even bigger role in ushering more real estate developments and investments in their core areas and even neighboring regions. 

In fact, Cebu Landmasters and Udenna's corporate offices are based in their core cities, with Cebu Landmasters exclusively based in Cebu, as their real estate developments are exclusively in the Visayas and Mindanao. While Davao-based Udenna keeps an office in Bonifacio Global City to manage their projects there and in their newest hub, Clark Global City in Tarlac. But other small developers currently limited to their core areas are also expected to prosper under a decentralized government.

Double taxation and additional revenue
Critics of the move towards federalism point to double taxation as one of the ultimate reasons why we should not shift in the first place, other than the risk of furthering warlordism (eg. Maguindanao). Why double taxation? Critics point out that both the national government through value added taxes and the regional government through income taxes for example, can levy taxes. What else is new? Regional governments will be "taxed" of their incomes to support the national government.

However, supporters of the move towards federalism also point out that taxation is not the only revenue-generating scheme that the regional governments can implement. For example, local government units may augment their incomes by leasing or selling sleeping assets like land to developers to supplement income through rental and investment fees. Furthermore, lands owned by the government tend to be more affordable and strategic, as with the case of Iloilo Business Park in Iloilo City.