REAL ESTATE INDUSTRY

I. OVERVIEW

 Real Estate refers to the land and all those items which are attached to the land. It is the physical, tangible
entity, together with the additions or improvements on, above or below the ground while Real Estate
Development Projects means the development of land for residential, commercial, industrial, agricultural,
institutional or recreational purposes, or any combination of such including, but not limited to, tourist
resorts, reclamation projects, building or housing projects, whether for individual or condominium
ownership, memorial parks and others of similar nature. 1

 Real Estate, Renting and Business Activities was among the main drivers of GDP growth for the 4Q of
2017 of the country, together with Manufacturing and Trade. The Philippines’ Gross Domestic Product
(GDP) posted a 6.6% growth in the 4th quarter of 2017, driving the economy to grow by 6.7 percent for
the entire year of 2017.2

 The Real Estate industry contributed a total of 3.2% to the country’s 2017 GDP. Comparatively, an
increase of 12% was posted by the industry with respect to the 2016 values, at current prices.

 It is seen that the massive thrust of the government in building crucial infrastructure projects through its
Build Build Build (BBB) Program, to usher the “Golden Age of Infrastructure” in the Philippines, is a major
contributor of dispersing property developments not just in major urban areas but also in its peripheries.

II. MARKET SEGMENTS

A. RESIDENTIAL

 Supply3:
- Recent data shows that about 1,970 units were completed in 3Q 2017 most of which are located
in Makati and the Manila Bay area. Findings of Colliers shows that concerns on oversupply of
condominium units is not to be an issue right now given the following determinants 4:
1. The level of condominium take-up is considerably lower than household formation;
2. The remaining inventory life across segments is well-within developers’ construction periods
3. Condo prices continue to increase, characteristic of a market far from any correction

Metro Manila Residential Condominium Launches and Take-up (units)

Source: Colliers International Philippines

1
Real Estate Service Act of the Philippines
2
http://psa.gov.ph/nap-press-release [accessed 30 January 2018]
3
http://www.colliers.com/-/media/files/marketing%20reports/3q2017_colliers_quarterly_residential_final.pdf?la=en-GB
4
http://www.colliers.com/-/media/files/marketing%20reports/3q2017_colliers_quarterly_residential_final.pdf?la=en-GB accessed [01
February 2018, page 1]
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 - Residential Supply Forecast (units)
An additional of 21,400 condominium units is expected to be delivered by the end of the year,
bulk of which is expected to locates mostly in the Manila Bay area and Makati.

LOCATION AS OF 2016 2017F 2018F 2019F 2020F 2021F TOTAL

Alabang 3,800 400 1,300 - - - 5,500

Araneta Center 4,200 - 300 - - - 4,500
Eastwood City 7,500 1,000 - 600 - 100 9,200
Fort Bonifacio 24,300 4,200 8,200 3,000 - 1,000 40,700
Makati CBD 22,100 3,600 1,900 600 300 200 28,700
Manila Bay Area 8,900 5,500 8,500 2,600 2,200 - 27,700
Ortigas Center 16,200 1,500 800 600 600 400 20,100
Rockwell Center 4,200 - 400 800 - 600 6,000
Total 91,200 16,200 21,400 8,200 3,100 2,300 142,400
Source: Colliers International Philippines Research

 Demand
- Take-up in the secondary market still on-line to reach 7,500 units by year-end. For 2018
onward, growth in take-up of at least 3% annually is expected, consistent with household
formation.

 Vacancy
- Overall vacancy rate in Metro Manila stands at 12.7% which is expected to further increase by
the end of 2017 which in turn could result to reach mid-teen levels of vacancy by 2018 before
normalizing at lower rates by 2019.

 Important considerations that developers must be aware to opposition their projects properly:
- Spot on location/accessibility
- Construction and service quality
- Reliable track record
- Retail and recreation options
- Capital appreciation potential

B. OFFICE SPACES5
 Supply

- Recent data also shows that for 3Q 2017 alone, eight (8) buildings were completed,
representing 194,000 sq m (2.1 million sq ft) of office space. The biggest contributor is
Robinsons Cyber Sigma in Taguig City on about 48,000 sq m. Other contributors include Vertis
BPO Phase 1, The Menarco Tower, Rockwell Sheridan Tower 1 (North), and The Curve
- Total stock in Metro Manila to 9.4 million sq m (101.1 million sq ft). The majority of which comes
from Makati and Fort Bonifacio

Completed Buildings, 3Q 2017

BUILDING LOCATION GLA, sqm
Robinsons Cyber Sigma Fort Bonifacio 48,200
Vertis BPO Phase 1 Quezon City 39,200
Menarco Tower Fort Bonifacio 25,400
The Curve Fort Bonifacio 24,200
Rockwell Sheridan Tower 1 Mandaluyong 22,000
South Park Corporate Center Alabang 12,900
Inoza Tower Fort Bonifacio 12,400
81 Newport Square Pasay 10,300
Total 194,600
Source: Colliers International Philippines Research

5
http://www.colliers.com/-/media/files/marketing%20reports/3q2017_colliers%20quarterly_office_final.pdf
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 - Office Supply Forecast
There are at least 900,000 sq m (9.7 million sq ft) expected annually in the pipeline until 2020,
twice the yearly supply in the past five years. Colliers foresee a paring of supply occurring in
2019 and 2020, particularly if issues on demand persist.

Office Supply Forecast, GLA (sq m)

LOCATION AS OF 2016 2017F 2018F 2019F 2020F TOTAL
Alabang 483,100 89,500 60,200 64,800 - 697,600
Fort Bonifacio 1,533,800 383,000 190,100 246,500 38,900 2,392,300
Makati CBD 3,199,000 28,400 37,600 79,500 54,100 3,398,600
Makati Fringe 229,400 25,300 72,300 14,300 120,800 462,100
Mandaluyong 304,900 80,600 68,500 103,600 - 557,600
Manila Bay Area 330,600 70,300 223,300 84,500 141,000 849,700
Ortigas Center 1,578,000 66,900 78,100 23,700 429,900 2,176,600
QC* 888,200 89,600 133,400 223,500 149,000 1,483,700
Others** 293,700 19,000 53,800 64,100 33,100 463,700
Total 8,840,700 852,600 917,300 904,500 966,800 12,481,900
Source: Colliers International Philippines Research *Includes Araneta Center, C-5 Corridor, Eastwood City, and North EDSA Triangle
**Manila and other fringe locations

 Demand:
- Demand for 2017 has been driven by requirements from offshore gambling and traditional
companies. During the past years, BPO dominated the demand for office spaces but recently,
according to Colliers International Philippines, offshore gambling has substituted for the said
demand. A total of 153,000 sq m (1.6 million sq ft) of newly leased space has been recorded
from this sector so far, this year. This can be seen through the 42 Philippine Offshore Gaming
Operators (POGO) licenses issued by the Philippine Amusement and Games Corporation
(PAGCOR). Requirements from POGOs have sprung across the Metro, ranging between 5,000
sq m (53,800 sq ft) to 30,000 sq m (322,800 sq ft) per site.

Source: Colliers International Philippines Research

 Vacancy
- Overall vacancy for office spaces in Metro Manila is at 5.6% but assuming developers cut their
supply by 2019 and 2020, vacancy will normalize at the 7% range.

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 C. HOTEL AND LEISURE6

 Supply

- It is seen that at least 1,700 additional rooms to be completed by the end of 2017. Most of the
new rooms from 2019 to 2020 will be in Fort Bonifacio, Manila Bay Area, and major townships
across Metro Manila.
- During the 1H of 2017, the following rooms were completed: 100 rooms in I’M Hotel in Makati
Fringe, 80 rooms in Rizal Park Hotel in Manila, and an estimated 200 rooms in Okada Manila
located in the Manila Bay Area.
- New Hotel Room Supply
The 280-room Aruga Hotel in Rockwell Center once completed will complement the existing 114-
unit Aruga serviced apartment and capture a fraction of the hotel accommodation demand
coming from the Makati CBD. Aside from the planned 'millennial' hotel, Filinvest has also
announced plans of opening new hotels in key urban areas across the country. The firm said it
will build new hotels in Cubao, Tagaytay City, and Palawan, attractive locations for both business
and leisure travelers.

Metro Manila New Hotel Room Stock

6
http://www.colliers.com/-/media/files/marketing%20reports/2q2017_colliers_quarterly_hotel.pdf
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 Demand
- Demand for hotel rooms in Metro Manila is still being driven by the Philippines’ traditional visitor
generating markets such as South Korea, United States, China, and Japan, which account for
about 60% of the country’s total foreign arrivals. Real property experts forecast a10% growth this
year to 6.6 million, slower than the Tourism department’s 17% or 7 million tourists.
- Popularity of “staycations” of the domestic travel market is expected to sustain the demand for
three- and four star hotels. Moreover, budget hotels are still popular among millennials who
account for more than half of local travelers.
- A total of 2.88 million international tourists visited the Philippines in the first five months of 2017.
The figure is 14% higher than total arrivals recorded in the same period of 2016.
- The better-than-expected figures from January to May 2017 can partly be attributed to the
Tourism Department’s marketing efforts as well as the hosting of the Association of Southeast
Asian Nations (ASEAN) summit in April.

Source: Department of Tourism, Colliers International Philippines Research *As of May 2017

 Vacancy Rate
- Given the projected rise in both foreign and domestic tourists, hotel occupancy in Metro Manila
is seen to range between 65% and 70% over the next 12 months (Colliers). Occupancy rates will
be between 60%-65% from 2019 to 2020 due to projected new completions.
- Overall hotel occupancy in Metro Manila stood at 71% for the first half of the year. The decline
in occupancy in the second quarter (68%) was offset by the better-than-expected 73%
occupancy rate from January to March this year.
- Despite the perennial dip in occupancy rates during the third quarter of the year and the projected
impact of the Resorts World Manila and Marawi, Mindanao incidents, Colliers still see occupancy
rates in Metro Manila hovering between 65% and 70% over the next six months.

 Room Rate
- Average hotel rates across all segments in Metro Manila rose by 2% HoH to USD275 a night
from USD270 in 2H 2016. However, average rates in Manila Bay Area hotels declined by an
average of 3% due to the significant number of available rooms in the casino-hotels in the area.
- During 1H 2017, hotel rates in Quezon City and Manila posted the fastest growth at 6.7% and
3.7%, respectively. The Fort Bonifacio area posted a 4.4% rise in average room rates to USD132
a night.

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 D. RETAIL7

 Supply
- Projections from Colliers shows that about 30,000 sq m (322,920 sq ft) of leasable space will be
completed for the remainder of the year 2017. For 2018 to 2020, they see Metro Manila's retail
stock expanding by about 800,000 sq m (8.6 million sq ft), or by more than 250,000 sq m (2.7
million sq ft) annually.

- Newly-completed malls, 2Q 2017 to 3Q 2017

Mall Developer Location Type
Vertis North Ayala Land Quezon City District
Festival Mall Expansion Filinvest Lan Alabang Regional
Source: Colliers International Philippines Research

- Retail Supply Forecast, GLA (sq.m.)

CLASSIFICATION 1Q 2017 3Q 2017 %CHANGE 3Q 2018F %CHANGE

(HoH) (YoY)

Super Regional 3,354,900 3,354,900 - 3,554,900 -

Regional 1,321,500 1,427,500 8.02% 1,430,400 0.20%
District Center 1,299,600 1,339,600 3.08% 1,412,500 5.44%
Neighborhood 507,200 507,200 - 609,100 20.1%
Total 6,483,400 6,629,200 2.25% 7,006,900 5.70%
Source: Colliers International Philippines Research

 Demand
- From 2018 to 2020, Colliers sees food and beverage (F&B) and fast fashion businesses
occupying a combined 50% to 60% of new retail space in Metro Manila.

 Vacancy
- We see vacancies in regional and super-regional malls at around 4% to 9% annually over the
next three years. The smaller neighbourhood and district centres will continue to encounter
difficulty filling vacant spaces. We see overall vacancy rising to 9% to 10% annually from 2018
to 2020.

 Rent
- Given the rising vacancy rates and projected new completions, slower growth is seen in lease
rates over the next three years. Rents in Makati CBD and Ortigas Center to grow to grow by only
1% and 2% annually from 2018 to 2020.

E. INDUSTRIAL8

 Supply
- Cavite-Laguna-Batangas area's industrial stock is expected to grow by at least 10% over the
next 12 months as developers accommodate the rising demand in the area. Moreover, according
to Colliers, the completion of major townships in Pampanga and Pangasinan with substantial
industrial space allocation should also raise the Northern/Central Luzon's industrial stock
between 2019 and 2020
- Most of industrial park locators are composed of manufacturing plants such as but not limited to
the following:

7
http://www.colliers.com/-/media/files/marketing%20reports/3q2017_colliers_quarterly_retail_final.pdf?la=en-GB
8 http://www.colliers.com/-/media/files/marketing%20reports/2q2017colliers_quarterly_industrial.pdf
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 Major Investments and Expansions in CALABARZON, 1H 2017

COMPANY/LOCATION PROJECT ESTIMATED COST

Dyson (Laguna) Manufacture of bladeless fans USD20M
Concepcion Industrial Corporation Expansion of airconditioning USD10M
(Laguna) and refrigerator facilities
Knauf Gips KG (Batangas) Manufacture of gypsum-based USD50M
plasterboard
Integrated Micro-electronics, Inc. Manufacture of motorcycles N/A
(Laguna)
Source: Various media reports as cited in Colliers International Philippines Research

 Demand
- Colliers sees the demand for industrial space and standard factory buildings (SFBs) in the
Cavite-Laguna-Batangas area being sustained by the continued influx of manufacturing
investments. The expansion of existing industrial locators as well as the diversification of Filipino
conglomerates into manufacturing should further raise the demand for industrial space and
facilities in the Cavite-Laguna-Batangas corridor, the Philippines' primary industrial hub.

 Vacancy rate
- As of 1H 2017, vacancy in the Cavite-Laguna-Batangas area reached 9.3% from 9.8% in 2H
2016. The significant take-up of industrial space in Batangas offset the marginal rise in vacancies
in INDUSTRIAL and Laguna. Colliers expects vacancies to remain below 10%.

REGION 4 2H -A 2016 1H 2017

Cavite 7.7% 10.6%
Laguna 3.8% 6.3%
Batangas 17.8% 10.2%
TOTAL 9.8% 9.3%
 Rent
- Experts from Colliers expect industrial land and SFB leasehold rates growing by 4-5% over the
next 12 months. We see the increase in rates slowing down to 2-3% between 2019-2020 due to
the development of more industrial space in Northern/Central Luzon area and the rising viability
of these parks for industrial operations.

III. ECONOMIC CONTRIBUTION

 PSA also reported that in 2017, the Real Estate Industry recorded a total of PhP501.5 billion gross value
added at current prices which is 12% higher than that of 2016 i.e. PhP444.3 billion.

 The sector also poses around 1.2% output-multiplier effect or impact to the rest of the economy9. This
means that a 1-peso increase in investment spending for the real estate industry generates PhP1.20 of
additional output into the economy.

 As of October 2017, Real Estate activities was able to contribute a total of 186,000 jobs to the country,
or an increase of 2,000 jobs (1.1%) during the same period last year.

 Based on the 2014 Annual Survey of Philippine Business and Industry (ASPBI) - Real Estate Activities:
Final Results released on 13 February 2017, there is a total of 4,862 establishments in the formal sector
of the economy were engaged in real estate activities. Majority (89.6%) or 4,358 establishments had a
total employment (TE) of less than 20. The remaining 504 establishments (10.4%) were with TE of 20
and over.10

9
http://www.nscb.gov.ph/ncs/12thncs/papers/INVITED/IPS-26%20Input%20Output%20Accounts/IPS-
26_1%20Multiplier%20Analysis%20for%20Major%20Industries%20of%20the%20Philippines%20by%20Input-Output%20Approach.pdf
10
https://psa.gov.ph/content/2014-annual-survey-philippine-business-and-industry-aspbi-real-estate-activities-final
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IV. INDUSTRY OUTLOOK11

 Colliers International Philippines, during the last month of 2017 released the following top 10
predictions for the real estate market in 201812:

1. Infrastructure-led GDP to buoy property – the Duterte Administration is geared towards the
construction of crucial infrastructure projects to usher in the “Golden Age of Infrastructure” that is
expected, among others, to decentralize government as well as disperse various economic activities
outside Metro Manila. Thus, it is recommended that developers further grab/explore opportunities
outside the Philippines’ capital

2. Metro Manila condominium leasing to remain challenging – there is still the continuous demand for
residential units within major urban areas other than Metro Manila, like Metro Cebu and Metro Davao.
This is also greatly fueled not just by the growth of households but also from the remittances of the
OFWs. Improvement of road networks and expansion of airports is expected to unlock land values in
these areas making them more feasible for residential projects.

3. Diversified office tenancy mix to be led by non-BPOs – The previous year statistics showed the
increasing requirement of POGOs, however, according to Colliers, it is very difficult to assure the
sustainability in the medium to long term of this activity due to cases filed in the Supreme Court against
PAGCOR with reference to its jurisdiction over POGOs Less office launches is expected given the
decline in BPO companies less space demand which is attributed to concerns about the US taking a
more protectionist stance, increasing talent recruitment difficulties (and cost), threats to jobs and delay
in PEZA approvals. But accordingly, noting some improvement in the last quarter of 2017, it is
expected that traditional companies will take on a bigger role in 2018 in terms of demand compared
to previous years.

4. Flexible workspace to accelerate – Office tenants nowadays pose a diverse profile, this varies from
start-ups to law firms, long-before established Fortune 500 companies and freelancers. With mobility,
connectivity and flexibility become the norm in working in the 21st century, it is expected that office
tenants will require more flexible office spaces over the near to medium term.

5. Growing popularity of e-commerce to drive warehousing and logistics demand – Recent popularity of
online shopping means more need for logistics services and warehousing facilities to surge. It is also
expected that logistics and warehousing to be a major driver of Northern/Central Luzon economy over
the medium term especially in light of the planned expansion of Clark Airport and the construction of
the Subic-Clark cargo railway.

6. Industrial park developers to head north of Luzon – this can be seen in the recent acquisitions of
properties to become industrial hubs in Tarlac (Double Dragon at 6.2hectares) and Pangasinan (Xu
Linag’s Dragon Group - China’s biggest economic zone in Xiamen province at 3,000 hectares). Ayala
and Filinvest is also currently into developing industrial parks in Porac, Pampanga and Clark Green
City, respectively. These foregoing activities can be a contributing factor to having flattish growth in
industrial lease rates in Cavite, Laguna and Batangas.

7. More townships outside Metro Manila – Mixed-use developments being offered by townships offer a
better value proposition (live-work-play-shop lifestyle) making these integrated townships integrated
townships a more attractive option for investors. It is seen that developers pursuing township projects
in areas outside of Metro Manila could be sustainable in the medium term given the government’s
push to generate economic opportunities in the countryside anchored on its commitment to usher in
the “Golden Age of Infrastructure.”

8. More resort-oriented hotels across the country – Developers are encourage to consider developing
hotels in Bohol, Bacolod, Davao, and Iloilo given that regional airports in these areas are up for
expansion and modernization under the Duterte administration. Investors could also look into
investing in budget hotels to cater to a continuously growing domestic market that is primarily driven
by millennial travelers.

9. Continued growth of e-commerce and experiential retail – Not all retailers in the Philippine setting
totally migrate to e-commerce but in fact use online shopping and social media platforms to
complement their physical stores. There is opportunity in this practice thus mall operator/retailer
should tap these activities

11
http://www.colliers.com/en-gb/asia/realestate2015#.VOPxpCz6jcU
12
http://www.colliers.com/-/media/files/marketing%20reports/top_10_predictions_for_2018_final.pdf?la=en-GB
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 10. Leisure and Industrial sectors to drive expansion of Cebu property – Cebu’s increasing attractiveness
is seen to support 15% - 20% of tourist arrivals for the next 12 months, enough to sustain hotel
occupancy of between 65% and 70% across Metro Cebu. Demand for warehouses and container
yard spaces becoming significant in 2018 given that Mandaue City recently implemented an ordinance
that disallows the presence of Warehouses and Container Yards around Mandani Bay area, thus
there is a rush on relocating some of existing warehouses. Foregoing, industrial locators is being
encpurage to consider Cebu Due to its proximity in local and foreign markets, in addition to Metro
Manila, due to its strategic location and skilled manpower.

V. GOVERNMENT EFFORTS TO SUPPORT THE REAL ESTATE INDUSTRY

A. REGULATORY EFFORTS

1. Nationality Requirement. As a general rule, only Filipino citizens and corporations or partnerships
where at least 60% of the capital is owned by Filipinos are entitled to acquire land in the Philippines.
Leasing of private land by foreign companies is allowed for a period of 50 years and renewable for
another 25 years.

2. Republic Act 9646 (RESA Law). The RESA Law (Real Estate Service Act of the Philippines)
professionalizes and regulates the practice of real estate in the country through the development
of technically competent, trained and accountable real estate practitioners in the country

3. Republic Act 9856, known as The Real Estate Investment Trust (REIT) Act of 2009. The Act
assists in achieving the objectives 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 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.

4. Issuance of the following developing license/permits are also necessary before the start of
commercial operations:
1. Housing and Land Use Regulatory Board (HLURB) Registration
2. Approved Development Plan
3. License (or Permit) to Sell from HLURB
4. Building Permit from Local Government Unit (LGU)
5. Environmental Permit from Department of Environment and Natural Resources
(DENR)
6. Conversion Clearance from Department of Agrarian Reform (DAR), if applicable.

B. EFFORTS ON PROMOTING INDUSTRY GROWTH

 On the Residential/ Housing Segment:

Financial Support (Developers and Buyers)

In recognition of housing as a catalyst for economic growth and development, numerous laws were
passed in order to promote and support the component activities of housing production through
different modes of financial support. The following are some of the housing financial institutions,
including their respective programs, established by these laws:

1. Home Guarantee Corp. (HGC)

A Government-Owned and Controlled Corporation (GOCC)mandated by law to promote
sustainable home ownership by providing risk coverage or Guarantees and tax/fiscal incentives
to banks and financial institutions/investors granting housing development loans / credits, and
home financing. Major customers of the HGC includes 27 Banks, 10 Housing Developers, 10
other institutions such as insurance companies, SSS, National Home Mortgage Finance
Corporation and Pag-Ibig (HDMF).

2. National Home Mortgage and Finance Corp. (NHMFC)

A Secondary Mortgage Institution (SMI) that operates a viable housing finance system thru the
securitization of the residential home mortgages. The NHMFC shall purchase the housing loans
receivables from the originating institutions and will be turned into an asset pool for eventual
Page 9 of 11
 issuance of securities or bonds for sale in the capital market. Moreover, NHMFC is also
designated as the administrator of the Amortization Support Program, Social Housing
Development Fund and Mortgage Trading Support Program.

3. Social Housing Finance Corp. (SHFC)

The lead government agency that undertakes social housing programs that will cater to the
formal and informal sectors in the low-income bracket. SHFC is also the agency that is taking
charge of developing and administering social housing program schemes, particularly the CMP
and the Abot Kaya Pabahay Fund Program (amortization support program and developmental
financing program).

4. Home Development Mutual Fund (Pag-Ibig)

Popularly known as Pag- Ibig, this corporation was established in response to the need of a
national savings and financial assistance to Filipino workers who are acquiring their own housing
unit.

Incentives

Under RA 7279 – Urban Development and Housing Act of 1992

Section 20 of RA 7279 or UDHA of 1992, provides the following incentives for socialized housing
developers to encourage greater private sector participation in socialized housing and further reduce
the cost of housing units for the benefit of the underprivileged and homeless:

1. Reduction and simplification of qualification and accreditation requirements for participating

private developers;
2. Creation of one-stop offices in the different regions of the country for the processing, approval
and issuance of clearances, permits and licenses: Provided, That clearances, permits and
licenses shall be issued within ninety (90) days from the date of submission of all requirements
by the participating private developers;
3. Simplification of financing procedures; and
4. Exemption from the payment of the following:
a. Project-related income taxes;
b. Capital gains tax on raw lands use for the project;
c. Value-added tax for the project concerned;
d. Transfer tax for both raw and completed projects; and
5. Donor’s tax for both lands certified by the local government units to have been donated for
socialized housing purposes.

Under EO 226 – Omnibus Investments Code of 1987, as Amended

To encourage more mass housing projects, low cost housing has been included as one of the priority
areas in the annual Investments Priorities Plan (IPP) of the Board of Investments. In return of the
incentives given to BOI-registered low cost housing developers is the mandatory compliance to the
20% allocation requirement for socialized housing under Republic Act No. 7279 to help address the
remaining 70% of the total housing backlog.

Developers of low cost housing projects registered with the BOI are entitled to the following fiscal
and non-fiscal incentives:

1. 3-4 years Income Tax Holiday (ITH)

2. Duty-free importation of capital equipment (EO 70), such as but not limited to the following eligible
equipment:
a. Lift /Elevators (for medium and high-rise buildings)
b. Tower Crane and its accessories
c. Concrete Steel Formworks
d. Stand-by Power Generator
e. Various Forms such as Foundation, Modify, Tunnel, and Facade Forms
3. Employment of Foreign Nationals

 On the Hotel & Leisure Segment:

National Tourism Development Plan (NTDP)

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In view of the government’s thrust to promote the tourism industry as means of achieving inclusive
growth, the Department of Tourism (DOT), in cooperation with other government agencies and private
stakeholder, implements the Philippine National Tourism Development Plan (NTDP). The NTDP
provides strategic framework and outline action plans for the employment generation and further
growth of the industry. Among the major programs included in the NTDP are the following:
1. Improving access and connectivity
2. Developing and marketing competitive tourist destinations and products
3. Improving tourism institutional, governance and human resource capacities

DOT’s New Standards for Accreditation of Tourism Accommodation Establishments

In May 2012, the DOT approved and issued its Memorandum Circular 2012-02, adopting the five star
grading system as its new standard for accreditation of tourism accommodation establishments
namely; for Hotels, Resorts and Apartment Hotels. Prior to the new standards, DOT uses
classifications such as De Luxe, First Class, Standard and Economy for hotels; and A, AA and AAA
ratings for resorts.

Continued Inclusion in the Investment Priorities Plan

The BOI continues to grant fiscal and non-fiscal incentives to tourism enterprises that are located
outside Tourism Economic Zones, whose projects are registered with the BOI.

DOT-DPWH Memorandum of Agreement for Convergence Program for Enhancing Tourism

Access

In February 2012, the Department of Tourism and the Department of Public Works and Highways
(DPWH) signed a Memorandum of Agreement (MOA) for a “Convergence Program for Enhancing
Tourism Access”. The program, aims to boost tourism infrastructure projects in priority tourist
destination areas in the country.

The two government agencies will be assisted by the Research, Education and Institutional
Development (REID) Foundation, a policy research and advocacy institute based in Metro Manila, in
facilitating efficient and more coordinated effort between DOT and DPWH in identifying, prioritizing
and implementing technically correct and politically-participative road access leading to tourism
destinations as identified in the NTDP.

January 2018

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