Housing developers fret over incentive removal

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    Massive slowdown. Without incentives, buyers can no longer afford to buy and developers can no longer afford to build for lack of qualified takers.

    By Ruelle Castro and Irma Isip

    Developers have raised alarm over the removal of incentives including exemption from value-added tax (VAT ) on low-cost units  saying this will raise prices and  slow down housing development which in turn will hurt  efforts to address the estimated 6.57-million backlog.

    Republic Act 10693 or the Tax Reform for Acceleration and Inclusion (TRAIN) law) extended for three years VAT exemption on lots of up to P1.9 million  and house and lots of  P3.2 million. By January 2021, the cap slides down to as low as P2 million.

    Charlie Gorayeb,  national chairman of the Chamber of Real Estate Builders Association (CREBA), in a statement said low-cost housing prices the impending VAT imposition will rise beyond affordability levels which will only worsen the current housing deficit, not to mention new housing need of 300,000 units every year.

    CREBA  appealed to Congress to preserve the status quo on VAT-able housing packages to provide  homeless Filipinos an equal chance to a dignified quality of life through decent and affordable housing.

    “VAT is a buyer’s tax which real estate developers have no choice but to fully pass-on to homebuyers. And because a once-in-a-lifetime housing purchase at the range of P3.2 million and below is usually availed of under long-term loan, the VAT burden is not a one-time impact,” Gorayeb said.

    He explained that for a housing unit sold at P3 million, for example, the 12 percent VAT of P360,000 per unit actually translates to P1 million over a 30-year mortgage life.

    Noel  Cariño, CREBA national president,  said imposing VAT will negate its benefits and will only stifle the growth the sector is experiencing.

    “Whatever estimated collection from the additional VAT on housing is not realizable as we expect a massive industry slowdown when buyers can no longer afford to buy and developers can no longer afford to build for lack of qualified takers,” Cariño said.

    CREBA said housing is already heavily-taxed and highly-regulated and must be spared from any new taxes.

    Marcelino Mendoza, chairman of the  Organization of Socialized and Economic Housing Developers Association of the Philippines (OSHDP), said  the VAT  exemption is what makes socialized housing “viable because we are cost-sensitive. Because there is a bigger margin in the higher price segment, that it’s a subsidy on our part already just to make (socialized housing) viable.”

    Christopher Ryan Tan, president of Center for Housing and Independent Research Synergies, the research arm of  OSHDP, said the group is apprehensive of the  government’s intent to remove mass housing from Investment Priorities Plan as envisioned by the Corporate Income Tax and Incentive Rationalization Act .

    “We know the sentiment of DOF (Department of Finance) is to remove mass housing from the incentives program of the government. We are appealing against that because it’s not only the socialized housing that has a backlog. Mass housing encompasses the full spectrum of what is called poor…. (who) still rely on this incentitivized housing,” said Tan.

    Tan said if the government  removes all these incentives, , “we might as well remove the compliance (requirement on developers) so that the private sector can just go through pure market. We now fight for the lowest, and let the market dictate. No more 15 percent (compliance),” Tan added.

    Tan was referring to the requirement for developers to allocate 15 percent of their landbank to socialized housing.

    Januario Jesus  Atencio, OSHDP board adviser, laments the fact that a provision of   the Urban Development and Housing Act of 1992   which requires local government units to provide a list of socialized housing unit beneficiaries to developers is not effectively implemented.

    Atencio said this is an additional cost to developers which have to spend for marketing, which is about 6 percent of gross.

    Atencio said  if the government removes the incentives, housing projects “will stop.”

    “And we don’t want that,” he added.