JOINT ventures (JV) with foreign players in the low-cost and economic housing sector may help address the housing backlog in the Philippines, according to Pinnacle Real Estate Consulting, Inc.

Data from the Housing and Urban Development Coordinating Council (HUDCC) showed as of Dec. 31, 2017, the housing backlog stood at 2 million units, mostly socialized and economic housing.

In his report “Doing Business Together,” Pinnacle President and Managing Director Michael Mabutol outlined several ways the housing market can attract joint venture capitalists.

He said the country should first be able to sustain its strong macro-economic fundamentals.

“A strong economy indirectly fuels demand by putting much-needed money to households. A steady household cash flow can encourage stakeholders to put their capital to housing projects because of greater demand with lesser risk of defaults,” Mr. Mabutol said.

The Philippine economy grew by 6.7% in 2017. For the first six months of 2018, the average gross domestic product (GDP) growth stood at 6.3 percent.

Another strategy is to keep the real estate market growing.

“Keeping a robust real estate market will incentivize participation of joint venture stakeholders, especially foreign players. Participants in joint venture housing development would certainly enjoy the current uptrend of the market as it can mean a healthy investment. A seller’s market is usually desired by investors into house developments as it shows supply absorption of a targeted market,” Mr. Mabutol said.

Pinnacle noted that capital values of properties, particularly prime condominiums, have steadily increased over the years as demand remained strong. It also cited the rising rental rates and declining vacancy rates of many residential condominiums.

“Demand for horizontal housing remains robust. The high demand in this segment has been existing for more than a decade, which has been unfortunately under supplied. This points to a lot of upside for stakeholders who want to venture in this housing sector,” Mr. Mabutol said.

Another strategy to attract foreign capital in the housing industry is to improve the regulatory framework.

“Improving the country’s regulatory framework governing the housing business will draw more interests in the residential housing industry. A sustainable economic growth in the foreseeable future and a real estate market in the uptrend both give investors positive signs for their investments,” Mr. Mabutol said.

However, he said that there is a need to improve the business climate, saying this may “dampen capitalist interests if not addressed.”

Among his recommendations are: to increase the budget for the National Housing Authority, which is in charge of socialized housing; raise the socialized housing ceiling cap; institutionalize tax holidays; strengthen local housing boards; rationalize creditable withholding tax; and review the overall housing policy. — V.M.P. Galang