Securitization of assets could increase housing finance in the country, and is something that should be carefully studied by the real industry, a leading mass housing developer said.
In an interview with 8990 Holdings Inc., chief executive officer Januario Jesus Atencio, told reporters that securitization “opens big possibilities to increase housing finance.”
8990 recently made use of the funding channel in a P5 billion deal with China Bank Corp. for the securitization of the contracts to sell (CTS) of 8990’s property development subsidiaries.
Atencio noted that the firm is securitizing its assets not only for the benefit of challenging the firm itself, but also for the country’s housing industry.
“We’re also doing this for the industry, because when you have securitization, this opens up a whole new chapter, a whole new book, maybe even a whole new library of housing finance, which up to today, has not been opened yet,” Atencio said.
Atencio said securitization would offer a more efficient process of housing finance as institutions engaged in primary lending for property buyers can now buy securities, which will entail less risks since they are asset-backed.
“What I’m saying is that, if that happens [securitization], we can take advantage of the efficiencies of the private sector and the risk-averse nature of the government,” Atencio said “They can just buy the securitization, buy the security, earn the yield and let the private sector make sure that the securities themselves are held and become safe over time.”
Atencio also noted that with securitization, developers would no longer need to borrow from banks, as they can now pool their assets and securitize them.
Meanwhile, he also highlighted that securitization will challenge developers to improve their businesses.
“The nice thing about it is that, in order to join securitization, you will have to improve your processes, and the business model and those things, up to a certain standard,” Atencio said. “So if you would like to participate in securitization, you are challenged to actually uplift your business into the next level. You have to be a better businessman.”
Atencio said that while securitization is not yet popular among developers, he sees it as something that will be accepted in ten years’ time.
The CEO cited the case of contracts to sell as an example, when about 15 years ago, developers were trying to convince banks to use them collaterals. He noted that today, CTS financing is now common to all the banks.
“What I’m saying is this, I think we’re struggling with securitization today, I’m betting that by 2025 this securitization thing will be common– but somebody has to start it,” Atencio concluded.