September 02, 2015

Property firms fear tighter HLURB rules to slow down project launches

Quoting unnamed industry sources, a Philippine Star today reported that various property developers are concerned about a possible slowdown in project launches due to the tighter rules of the Housing and Land Use Regulatory Board (HLURB) regarding the marketing and advertising of residential projects. The HLURB has started enforcing last February a 2014 guideline which requires property developers to secure its approval on any announcement or advertisement for a project.

The guidelines require full disclosure on the design and standards, amenities and facilities, actual distance to key landmarks, and the payment and financing scheme (including the actual interest rate) for a particular project prior to the approval of the developers’ license to sell the project.

While developers would disclose these details upon inquiry by the buyer, the new HLURB guideline require that these are disclosed right away in marketing and advertising materials.

But the main concern of the developers is on the additional layer of bureaucracy that they have to contend with in order to launch a project. The news report also cited complaints that it is taking a longer time to secure the HLURB’s approval.

Our take: There was a notable slowdown in residential sales takeup by most listed property developers in 1H15, with some companies posting a negative growth in 2Q15. While many of these companies said that the slowdown is partly due to the tail-ended schedule of project launches, some have also cited the new HLURB rules as a factor. At any rate, this highlights the growing risks in the residential sector and underpins our preference for companies with diversified operations and geographical presence. – WealthSec