Real Estate Industry

Gianna-Mirabella DG. De Guzman

Maria Vira Kristiana V. Tribunsay

Submitted To:
Mr. Ricardo Deri
CHAPTER 1
BACKGROUND AND HISTORICAL ACCOUNT OF THE INDUSTRY

As the Philippines have undeveloped land before, some significant personalities

tried to develop it and build housing or business space for the Filipinos. These
personalities formed a Real Estate Industry in the Philippines to compete and
improve the lands which causes the company and industry to generate revenues.
The Real Estate is a tract of land pertaining to residential living, undeveloped land,
business space facilities and buildings. There are three categories to consider in
real estate these are commercial, residential and industrial. Real estate have agents
called Real estate brokers, they assist the owner or possible buyer regarding the
conditions about entering into real estate.
According to Mr. Antonio Varias, founder and first president of the Philippine
Association of Real Estate Boards, Inc. or PAREB, it was after the World War I when
the first brokerage activities happened by Americans and other foreigners who
became interested in investing such as investment on real estate in the Philippines.
Mr. Colin M. Hoskins, an U.S Army, founded the real estate brokerage in the
Philippines. He stayed in the Philippines after serving the army to engage himself in
business. In the year 1920, he decided to go on a fulltime job in real estate services.
But on December 2, 1932, it was given in Art. No. 3969 that real estate brokers
should be licensed in order to assist innocent buyers as ordered by the Bureau of
Commerce. After World War II, unlicensed brokers defrauded innocent buyers by
selling non-existing properties in Luzon area. In 1960, Mr. Antonio Varias made
Commerce Administrative Order No. 60 to level up the method in licensing the soon
to be real estate brokers. Department Administrative Order No. 1-75, Series of 1975
updated the rules and regulations and was later on replace by Ministry Order (MO)
No. 39, Series of 1985 . In 1992, Realty Service Council of the Philippines was
created by the DTIs Department Administrative Order No. 97. And sometime in July
2009, DTI passed its entire task to Professional Regulations Commission as
expressly said in RA No. 9646 or Real Estate Service Act of the Philippines.
The real estate company Ayala Land, Inc. is the Philippines top leading real estate
developer which is committed to consistently shape the countrys land setting since
March 10, 1834. It was first a distillery business named Casa Roxas opened by
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Domingo Roxas together with his business partner Antonio de Ayala. The business was
run by Margarita Roxas, the heiress of Domingo Roxas when he died on 1842. In the
year 1844, Margarita Roxas and Antonio de Ayala got married and both took over on the
business. By the year 1872, the Ayala have joined constructing the Puente de Ayala
over Pasig River and was built out of wood. In 1888, they also introduced the first rail
vehicle service in the country. Ayala have also finally reconstructed the Ayala Bridge
made with steele in 1908. Ayala y Compania decided to open the Forbes Park, the first
exclusive subdivision to be open to public in 1940s. It was a 25 year Ayala Master Plan
for Makati. In the year 1950-1960, Ayala Land had founded the Hacienda Makati, an
undeveloped tract of land. After World War II, Ayala had created a great development in
Makati as the Philippines premier and financial district in the year 1960-1970. Ayala
Land found a suburban community which they have thought of building a quality homes
in Ayala Alabang Village, Alabang Town Center, and Madrigal Business Park in 19701980. Ayala Land had spread its chances in the Visayas and Mindanao region in the
year 1980-1990. With their subsidiary, Cebu Holdings, they had converted a golf course
into a first business district in the country which is the Cebu Business Park and
Asiatown IT Park. By 1990-2000, Jaime Zobel de Ayala, Enrique Zobel, Col. Joseph
McMicking and Mrs. Mercedes Zobel-McMicking sustained the Ayala in developing
great quality properties. And in 2000s, Ayala had widely spread its development over
the country building a new and prosperous community. In todays time, Ayala Lands
new president and chief executive officer is Mr. Bernard Vincent O. Dy who succeeded
Mr. Antonio Aquino. Their head office is located in 6750 Ayala Avenue, Makati City. Its
estates are Bonifacio Global City, Nuvali, Vertis North, Atria, Alviera, Arca South, Cebu
Park District, South Park District and its project Make it Happen, Make it Makati. Ayala
Land is really making its way to prove that they are the best because not only they
develop locally but also entered internationally. According to what the researchers have
found out that they have offices Milan, Rome, London, San Francisco, Dubai,
Singapore, USA, Canada, Japan, Australia, Switzerland, Qatar, Bahrain, Kingdom of
Saudi Arabia, United Arab Emirates and now their newest project is located in China.
One more real estate company is the Robinsons Land Corporation which was founded
by Mr. John Gokongwei, Jr. The real estate company was a holding company of JG
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Summit Holdings, Inc. which started in 1957 to produce different kinds of products and
services to Filipinos and one of these is the real estate. The Robinsons Land
Corporation was incorporated on June 4, 1980 to become the real estate arm of JG
Summit Holdings, Inc. They continually build residential subdivisions, office buildings,
mixed-use properties and residential condominiums to improve

the

housing

development in the Philippines. Robinsons Land Corporation in currently under Mr.

James L. Go, as chairman of the company and their main office is located in Level 2,
Galleria Corporate Center EDSA corner Ortigas Avenue 1100 Quezon City, Philippines.
Another real estate developer in the country is Filinvest Land, Inc., a subsidiary
company of Filinvest Development Company founded by Mr. Andrew L. Gotianun, Sr.
The Filinvest Development Company is the holding company of Gotianun family. This
family first engaged themselves to small-scale financing of second hand cars in 1955
and later on broaden their business by associating with the foreign institutions like
Chase Manhattan Bank, Westinghouse Electric Corporation and Ford Philippines. In
1967, the Gotanium Family incorporated the Filinvest Realty Corporation as soon as
they started to expand their business in real estate. Finally on November 24, 1989,
Filinvest Land, Inc. was incorporated as Citation Homes but subsequently changed its
name to Filinvest Land, Inc. on July 12, 1993 and its commercial operations had started
in August 1993. As a real estate developer, the Filinvest Land, Inc. had developed its
residential business to a more profitable company by adding leisure part like farm
estates, physical and relaxing areas on their properties. They also had established
several commercial, industrial, and residential properties as a part of their master plan
to build up the countrys undeveloped land. Currently, Filinvest Land is in the power of
Mr. Andrew Gotianun Sr.s daughter, Mrs. Jospehine Gotianun-Yap, CEO. Their main
office is located in 79 EDSA, Mandaluyong City, 1550 Philippines. It offers to develop
communities, subdivisions, medium-rise, high-rise, office buildings, townships and mall.
One of its major and greatest project is the Timberland Heights in San Mateo, Rizal
which has an overlooking view of Metro Manila.

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CHAPTER 2
PERFORMANCE OF THE INDUSTRY
The researchers tried their best to find the accurate number of competitors in a real
estate industry. However, they have relied to the Securities and Exchange
Commissions record as of 2011 where there are 1,783 players within the country. Real
Estate Industry is being classified into three: 1) Buying, selling, renting, leasing, and
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operating of self owned/leased apartment, 2) Buying, developing, subdividing and

selling and 3) Other activities with own or leased properties. The researchers gathered
the top three real estate companies from the classification of buying, developing,
subdividing and selling.
Market Share (In Php)

Total Revenue of

Ayala Land Inc.

Robinsons Land

Filinvest Land

the Industry

Revenue (2011)

Corp. Revenue

Inc. Revenue

(2011)

(2011)

(2011)
258,751,017,000

38, 986, 675,000

11,466,435,155

8,590,807,000

Market Share

15%

4.43%

3.32%

Figure 1
In the figure above it is stated the total revenue for 2011 in the real estate industry and
the revenue in each company in the same year. Also in 2011, Ayala Land Inc. got the
highest market share which is 15% than Robinsons Land Corp. and Filinvest Land Inc.
with a market share of 4.43% and 3.32% respectively. The market share is being
determined to identify the competitive companies within the industry and it may also be
an effect from the product development and advertising. Ayala Land, Inc. generating the
highest market share indicates it was the most active in the industry.
In real estate, it is easy to determine the product and service they offer because from
the word itself real estate when people hear it, they could know right away that it is a
property of land where houses or buildings are being erected. It can be a subdivision
where dream houses can be built on, condominiums a building that is a common ground
for individuals who have bought a unit and it has several leisure components within the
area, and business spaces for office workers which can be rent or lease.

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The Real Estate Industry is an example of Perfect Competition. Perfect Competition

consists of many competitors in the market and it is easy to go in and out of the market
as they please, the product is heterogeneous for a reason that it varies by location and
type. Another uniqueness of this industry is its characteristic of being interdependent.
When a company took an action by changing its price, anticipation from the other
companies may reflect.

Thats why there must be a proper consideration in doing

market actions because other competitors may react subsequently.

The cost behavior is a mixed cost and can be determined by using a formula which is
y=a+bx, where y is the total cost and a is the fixed cost while b is the variable cost and
x is the number of units of activity. However, a was computed as a=

y
N

and b, as b=

xy
. Here are the results for the forecasted years which are being highlighted. The
x2
computation of forecasted results can be seen below the table.

Ayala Land, Inc.

(Amounts in Php)

Year

Revenue

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2009

-2

26, 841, 928,000

-53,683,856,000

2010

-1

33, 764, 584,000

-33, 764, 564,000

2011

38, 986, 675,000

2012

49, 904, 333,000

49, 904, 333,000

2013

76, 337, 434,000

152, 674,868,000

Total

225, 834, 954,000

10

115,130,781,000

2014

79, 706, 225,100

2015

91, 219, 990,800

2016

102, 732, 381,300

2017

114, 245, 459,400

2018

125, 758, 537,500

Figure 2

Computation available:
a=

225,834,854
5

a=45,166,990,800

b=

115,130,781,000
10

b=11,513,078,100

2014:

2015:

y=45,166,990,800 + [11,513,078,100(3)]

y=45,166,990,800 + [11,513,078,100(4)]

y=45,166,990,800 + 34,539,243,300

y=45,166,990,800 + 46,052,312,400

y=79, 706, 225,100

y=91, 219, 990,800

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2016:

2017:

y=45,166,990,800 + [11,513,078,100(5)]

y=45,166,990,800 + [11,513,078,100(6)]

y=45,166,990,800 + 57,052,312,400

y=45,166,990,800 + 69,078,468,600

y=102, 732, 381,300

y=114, 245, 459,400

2018:
y=45,166,990,800 + [11,513,078,100(7)]
y=45,166,990,800 + 80,591,546,700
y=125, 758, 537,500

Robinsons Land Corporation

(Amounts in Php)
Year

Revenue

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2009

-2

9,462,505,411

-18,925,010,822

2010

-1

9,447,587,702

-9,447,587,702

2011

11,466,435,155

2012

12,130,980,461

12,130,980,461

2013

14,407,695,250

28,815,390,500

Total

56,915,203,979

10

12,573,772,437

2014

15,155,172,527.8

2015

16,412,549,771.8

2016

17,669,927,015.8

2017

18,838,040,795.8

2018

20,184,681,503.8
Figure 3

Computation available:
a=

56,915,203,979
5

b=

12,573,772,437
10

a=11,383,040,795.8

b=1,257,377,244

2014:

2015:

y=11,383,040,795.8 + [1,257,377,244 (3)]

y=11,383,040,795.8+[1,257,377,244[(4)]

y=11,383,040,795.8 + 3,772,131,732

y=11,383,040,795.8 + 5,029,508,976
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y=15,155,172,527.8

y=16,412,549,771.8

2016:

2017:

y=11,383,040,795.8 + [1,257,377,244 (5)]

y=11,383,040,795.8+[1,257,377,244[(6)]

y=11,383,040,795.8 + 6,286,886,220

y=11,383,040,795.8 + 7,544,263,464

y=17,669,927,015.8

y=18,838,040,795.8

2018:
y=11,383,040,795.8 + [1,257,377,244 (7)]
y=11,383,040,795.8 + 8,801,640,708
y=20,184,681,503.8

Filinvest Land Corporation

(Amounts in Php)
Year

Revenue
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2009

-2

4,862,193,000

-9,724,386,000

2010

-1

7,063,643,000

-7,063,643,000

2011

8,590,807,000

2012

10,685,452,000

10,685,452,000

2013

12,512,555,000

25,025,110,000

Total

43,714,650,000

10

18,922,533,000

2014

14,419,689,900

2015

16,311,943,200

2016

18,204,196,500

2017

20,096,449,800

2018

21,988,703,100
Figure 4

Computation available:
a=

43,714,650,000
5

b=

18,922,533,000
10

a=8,742,930,000

b=1,892,253,300

2014:

2015:

y=8,742,930,000 + [1,892,253,300(3)]

y=45,742,930,000 + [1,892,253,300(4)]

y=8,742,930,000 + 5,676,759,900

y=8,742,930,000 + 7,569,013,200
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y=14,419,689,900

y=16,311,943,200

2016:

2017:

y=8,742,930,000 + [1,892,253,300(5)]

y=45,742,930,000 + [1,892,253,300(6)]

y=8,742,930,000 + 9,461,266,500

y=8,742,930,000 + 11,353,519,800

y=18,204,196,500

y=20,096,449,800

2018:
y=8,742,930,000 + [1,892,253,300(7)]
y=8,742,930,000 + 13,245,773,100
y=21,988,703,100

CHAPTER 3
MAJOR PROBLEM/S ENCOUNTERED OR CURRENTLY ENCOUNTERING BY THE
INDUSTRY

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There are recurring problems in the real estate market and even economists and
regulators are in disagreement. As can be expected, all this speculation and uncertainty
makes it very difficult to detect or even prevent such problems from forming. Real estate
problems tend to crash with devastating after-effects, such as the US housing crisis in
2007. One of these side effects was the global economic downturn of 2008, which left
the world and many of its economies in crisis, especially the Philippines. The most
important lesson that could be learned from this global downturn was that the threat of a
real estate problem is real and its effects are grim. The Philippines experienced a similar
crash in the aftermath of the Asian financial crisis. The crisis led to property developers
facing massive problems, suppliers and construction firms lost contracts and clients,
while property values were cut in half. The central bank is continuously devising plans to
prevent problems and how to deal with it, in the case that a problem like that would rise
again. Potential buyers should also be wary of the problems involved in buying in the
Philippines. Arising problems include fraudulent titles, inconsistent property valuation,
and lengthy property registration processes. High transaction costs and the lack of
information also hamper the real estate market.
Here are some problems that the researchers found out that may affect the real estate
industry:
There is a shortage of housing, in contrast to the supposed oversupply of housing
units, the Philippines has an acute housing backlog in the affordable segment3.9
million housing units to be exact (according to Professor Enrique Soriano III of Ateneo
de Manila University Graduate School of Business). In todays time, there are a lot of
condominiums than real houses. The researchers think that it will or it is a problem
because compare to a house with a land that you bought and was named after you,
when natural disasters, your condominium unit will be in great burden because your unit
is not insured. Unlike a house you can have it insured and get it back when disasters
come.
Consumers lack knowledge, for many people, buying or selling a home is a once or
twice in a lifetime experience. Buyers must rely upon agents to give them advice. This
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costs them thousands of pesos and much heartache. Also, many buyers never realise
how much they are losing. They do not know what goes on 'behind the scenes'. People
are being exploited in ways they wouldn't dream of. Buying a home should be a fun
thing to do because you get to look and calculate the space that you will be needing but
some real estate brokers, dont explain things thoroughly at times especially if the
customer didnt ask.
Limited mortgage options, for the real estate mortgage market to grow, demand from
local buyers needs to strengthen. In other countries, a housing market boom is usually
accompanied by a mortgage boom, i.e. most property purchases are financed by loans.
In the Philippines, most buyers pay cash, or finance by pre-selling.
The Philippines also have some laws regarding real estate. These laws are the major
ones that the researchers saw and found out.

The Republic of the Philippines had implemented several policies to minimize the
problem regarding real estate issues. One of these policies is the Republic Act No.
9646 or Real Estate Service Act of the Philippines signed on June 29, 2009 and
published on July 15, 2009 was defined as An act regulating the practice of Real
Estate service in the Philippines, creating for purpose a Professional Regulatory Board
of Real Estate, appropriating funds thereof and for other purposes. The Declaration of
the Policy (Section 2) as stated The State recognizes the vital role of real estate
service practitioners in the social political, economic development and progress of the
country by promoting the real estate market, stimulating economic activity and
enhancing government income from real property-based transactions. Hence, it shall
develop and nurture through proper and effective regulation and supervision a corps of
technically competent, responsible and respected professional real estate service
practitioners whose standards of practice and service shall be globally competitive and
will promote the growth of the real estate industry. In short, the government put a set of

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standards on real estate service practitioners to give proper and honest service that will
lead to the development of real estate industry in the country.
Another policy is the Republic Act No. 9856 or The Real Estate Investment Trust
(REIT) Act of 2009 determined as An act providing the legal framework for Real
Estate Investment Trust and for other purposes. The Declaration of the Policy as told
It is the policy of the State to promote the development of the capital market,
democratize wealth by broadening the participation of Filipinos in the ownership of real
estate in the Philippines, use the 2 capital market as an instrument to help finance and
develop infrastructure projects, and protect the investing public by providing an enabling
regulatory framework and environment under which real estate investment trusts,
through certain incentives granted herein, may assist in achieving the objectives of this
policy. Shortly, the act was made to increase the growth of the capital market, let the
Filipinos enter into real estates, and put protection the public real estate trusts by
providing frameworks and grant incentives which they can gain after.
One more policy is the Republic Act No. 6552 or Realty Install Buyer Act explained
as An act to provide protection to buyers of Real Estate on Instalment Payments. The
Declaration of the Policy says It is hereby declared a public policy to protect buyers of
real estate on instalment payments against onerous and oppressive conditions. The
law protects the real estate buyers by implementing policies in contrary to any prejudice
circumstances.

III.

Areas for Future Policy Prescriptions

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The researchers would like to give emphasis in the insurance of residential

buildings. Tenants when encounter unforeseeable events or natural disasters (i.e.
earthquake, flash floods, landslides, burning house) should get at least insurance
from the company. A policy should be made upon for this kind of situation. How can
a tenant deal with their lost property without receiving any credits from the
management? However, practicality of a person is a must when purchasing any kind
of real estate. For residential building like condominiums, it is practical to buy a unit if
living in an urban area. While subdivision nowadays can be purchased by buying a
land and it is up to the buyer what architectural type can be erected, and another is
both house and lot can be purchase. Insurance from residential building is essential
for it is still the satisfaction and benefits of the customer should be prioritized.
The researchers think that the real estate industry will continually be a boom in the
market because the population in our country is getting bigger, thus they will be
needing houses to live on. Since after five years, many possible things might happen
depending on the economic activity of the country. The researchers have thought the
real estate industry may even bloom more. Though if there are instances where
scarcity of land may occur, condominiums may build and compete through high level
types. Condominiums will be in demand in the future. Earthquake may just be a
probable threat in here. In creating subdivisions, land is still the subject and if still
scarcity is a problem, companies might sell this at a high price.

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