Mass housing developers have asked the Board of Investments (BOI) to raise to P4 million from the current P2 million threshold price per housing unit that would be eligible for government tax incentives, and extend the income tax holiday (ITH) availment period to six years from four years.
In its 14-page letter on April 4, 2023 addressed to BOI Governor Marjorie O. Ramos-Samaniego, the Subdivision and Housing Developers Association (SHDA) strongly emphasized that the current P2-million per unit price ceiling is already outdated given increasing costs of construction.
SHDA pointed to data from the Philippine Statistics Authority showing that when the 2017 Investment Priorities Plan (IPP) took effect and the threshold was adjusted from P3 million to P2 million, the Consumer Price Index (CPI) in the country already increased by 25 percent, the Construction Materials Wholesale Price Index (CMWPI) by 27 percent, and wage cost has also rose 11 percent, as to the current year. The IPP, which is administered by the BOI, lists strategic industries, including mass housing, that are eligible government tax and fiscal incentives.
“All these point to the need for review and consideration by the Board to increase the current threshold,” stated the position paper signed by SHDA National President Leonardo B. Dayao, Jr., SHDA Chairman Arlene C. Keh, and SHDA Legislative Committee Chairman Joy Z. Mananaog.
“The current threshold no longer takes into account the increasing costs of construction every year,” said the position paper identifying high cost of lumber/wood, cement, sand and gravel, among others, have been consistently increasing since 2012.
A study conducted in 2020-2021 by the Housing Industry, also showed an increase in prices of construction materials by 14 percent in 2018 compared to 2012.
Recent PSA data also showed that the CPI showed an overall increase of 14.48 percent from 2015 to 2020, and continues to increase to date, the group pointed out.
The zonal values of residential areas in highly-urbanized cities in the country have constantly increased, as well as determined by the Bureau of Internal Revenue, the group added.
SHDA also attached a letter by the National Economic and Development Authority (NEDA) on November 4, 2021, recommending the adjustment of the low-cost housing price ceiling to P4,284,853.00.
“NEDA’s recommendation approximates the Housing Industry’s current land and construction costs for both horizontal and vertical housing,” it added.
Meantime, SHDA pointed out that the said housing segment (P2 million per unit) also accounts for 55 percent of the current housing backlog. The country has an estimated six million units in housing backlog.
This brings to the group’s another plea for BOI to raise the income tax holiday (ITH) eligibility period from three-four years to six years.
At the Philippine Furniture Furnishings Market press conference for the launch of the Furniture Exhibition on July 5-7 this year, Dayao explained that a typical housing construction usually takes three years up to its final completion of four to five years for horizontal developments, and around five to six years for vertical developments, especially those that are filed with the Fiscal Incentives Review Board for projects breaching the P1 billion investment threshold.
According to Dayao, the first 12 or 18 months of construction all a developer does is land development with no sales yet.
“Extending the ITH that can be availed by BOI-registered projects will enable developers to offer more affordable payment schemes to its end-users,” it added.
In addition, the group has sought to rationalize compliance for housing requirement of BOI-registered projects to encourage more horizontal developers to venture into economic and low-cost housing segments.
“The increase in the demand for housing, the constant increase in the value of land and the rigid price ceilings, lower incentives, and high socialized housing compliance imposed by the government disincentivize private sectors in participating in the development of economic housing and, thus, impacting the housing backlog in the country,” it added.