The Philippines’ real estate sector has seen an unprecedented boom in the last two years. And this is leading to an increase in work for law firms.
Real estate is booming in the Philippines. According to property consultancy firm Pinnacle Real Estate Consulting Services, the country’s real estate sector posted 12.7 percent growth in 2015, and was on track to record double-digit growth last year.
Much of this growth has been driven from the inside. The Philippine real estate market is a restricted one, as land ownership is limited to either Philippine citizens or corporations, in which at least 60 percent of the capital is owned by citizens.
As such, foreign investments in real estate have been limited to minority holdings in property developers, and most of the growth has come from large Philippine conglomerates that have taken the lead in the market.
Urbanisation has also been a factor. In the last few years, there has been increased development of residential townships and communities outside of metropolitan areas. This has been driven by improvements in road infrastructure, making it easier to commute to and from urban centres.
Led by President Rodrigo Duterte, the new Philippine government is also looking to spur further growth by revising the Real Estate Investment Trust Law. The current administration wants to loosen the REIT’s implementing rules and regulations that how companies can avail of tax perks.
THE BPO FACTOR
One of the biggest factors driving the growth of real estate in the country is its business process outsourcing (BPO) sector. The industry was worth an estimated $23 billion in 2016 and is predicted to create more jobs and accelerate further expansion, thereby increasing demand in real estate.
“The country has seen continuous growth in residential projects, fueled by the increasing number of young professionals who wish to locate close to their places of work to avoid the traffic that continues to plague urban centres,” says Jim Gatmaytan, managing partner of Gatmaytan Yap Patacsil Gutierrez & Protacio (C&G Law). “Responding to this need, real estate companies have been developing dormitels –dormitories operated as hotels – that offer more affordable rental options compared to traditional condominiums or townhouses.”
Filipinos based abroad are also driving the growth, as remittances from overseas hit $25.8 billion in 2015. A chunk of this money is going into condominiums and condotels – condominium units pooled together and run as a hotel – projects.
The increase in tourist arrivals, albeit minimal, has also encouraged the development of hotel projects. Often, these are coupled with casinos and other gaming facilities.
INVESTMENT TARGETS
At present, residential development projects are considered to be the principal investment targets in the Philippines. Commercial real estate also remains attractive.
“The previous administration had seen a pick-up in interest from foreign investors. If this sentiment spills over to the current administration, then there may be increased rentals in office spaces,” adds Gatmaytan.
Philippine law firms are benefiting from this boom. Gatmaytan says they are now advising on investments in property development companies.
They are also assisting companies in property acquisitions, including conducting due diligence on target properties as well as documenting acquisitions through completion of transaction.
They are also advising on development projects, including assisting in tenders for engineering and construction work, drafting or reviewing engineering and constructing contracts, and advising clients in the course of the implementation of the project.
In the event a client is involved in a construction dispute, they assist in prosecuting or defending the claims.
For foreign clients, law firms advise them about the Philippines’ restricted real estate market with respect to the limited land ownership. “We also advise our clients to deal only with reputable landowners, land developers and contractors in order to avoid unnecessary issues and conflict down the line,” says Gatmaytan.
Firms like C&G Law, however, don’t have specialised real estate teams. Depending on the matter, it is handled by partners either in the corporate or disputes practice.
“Unless the matter involves a dispute, our real estate practice is handled by our general corporate and commercial team, which is led by four partners and a team of associates. Because our corporate and commercial practice continues to grow, we are still looking to grow this team, including by the addition of senior corporate practitioners,” explains Gatmaytan of C&G Law.
On the other hand, if the matter involves a dispute, this would be handled by the firm’s disputes team, which is also led by four other partners and their team of associates. “We are looking to grow this team as well, also to keep up with the increasing requirements of our clients,” he says.
ROBUST FUTURE
A robust real estate sector requires the development of the infrastructure that will facilitate transportation and carriage.
If the real estate sector is to continue to thrive and if the current administration follows through on its promise to focus on infrastructure development, then the market should see increasing activity in construction and infrastructure in the near term.
“The current administration has publicly stated its intention to invest in various road, rail and airport projects, which should open new opportunities in property development,” adds Gatmaytan.
Source: http://www.legalbusinessonline.com/features/building-rush/74429
