Lessons: Risks in buying pre-developed real estate in Philippines

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It is cheaper to reserve for a property before the official launching or at the early development stage. The risk, however, of the payment being forfeited is greater if you just get pressured into buying the property because of the "bargain" that you think you are having. Many buyers also get hooked on a project because of the convincing power or charms of the brokers or sales agents. The said buyers may think that the agents are after their protection and welfare, not knowing that a number of the said agents are only after their commission on the sale.

There are really no safeguards to buyers who have put their faith in a project or a developer who have gone bankrupt or who have gotten into a very tight financial situation. In one case, a group of condominium buyers filed their cases at the HLURB against a developer. Some of the buyers paid full down payments on some of the developer's projects without seeing any developments. The condominium buyers feared that they might totally lose all their investment/s as the developer abandoned all their projects when they were badly hit by the Asian crisis. The buyers reasoned out that the fall of the developer was due to a poor financial foundation, over expansion and lack of managerial capability. The buyers were about 400 with a pending refund of Php300 million invested in various projects around the country. (Manila Times, 2/3/99, p. 19)

There is still hope for the said 400 or so buyers, as the said cash-strapped developer is working on inviting the principal shareholders and other strategic investors to participate in the settlement of the company's obligations to the banks and the said buyers in uncompleted projects. (Philippine Star, 5/22/03, p. B4)

Whether the rehabilitation of the said developer will succeed or not depends on many factors. For the buyers that get burned, they will face the dilemma of whether to put their faith again in the said developer to finish the projects or just get their refund plus interest and damages.

The Asian crisis in 1997 brought about significant devaluation of the local currency, high interest rates, increase cost of development and construction. The said crisis affected the financial situation of many actual and prospective buyers, developers and some business conglomerates leaving them with billions of pesos owed to creditors. In the end, the innocent buyers lost the most since the banks got first priority over the assets of the developers.

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