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Bank involvement in this segment amounted to P561. s 38 land based utility and merchant bank told 434bn ($10. 47bn) or 77. 3% of the total exposures, while 71 savings institutions were responsible for the other 22. Savings and loan associations are institutes that offer essential bank service and focus on deposit and mortgages, which are important components of the Philippine financial system.
Most of the exposition, about 97. 5 billion ($13.18 billion), is made up of real estate credits, with the remainder 2.7% (P1 2 billion, $28.94 million) being made up of real estate company bonds. 3 billion ($537,89 million) of the new credit granted in the second quarter was allocated between P11. 9 billion ($287,04 million) in home mortgages and P10.
4 billion ($250,85 million) in the business area. Investments in real estate papers comprised P12. There are several reasons why the real estate sector is benefiting, not least the Philippines' economy, which, according to the World Bank, is set to grow by 5% in 2012 and more or less constant in 2013. Lower interest rates - which, according to GDP, are likely to stay the same or even be lowered in the near term - are also an important issue, as the global media has pointed out.
It is also influenced by increased interest from foreign purchasers, many of whom are migrating to the Philippines to work with the country's emerging business processes Outsourcing (BPO) industry, as real estate company CB Richard Ellis (CBRE) recently noted. It is, however, the country's large resident populace of about 95 million people, which according to various estimates is rising between 1.5% and 2%, which will be crucial for the industry in the long run.
A large part of this unsatisfied market fall into the low incomes bracket, which is poorly serviced by personal investments in many developing countries as it is difficult to make cheap accommodation workable. The CBRE business is also experiencing buoyant growth in the offices sector, with BPOs looking for custom-built premises, among others. Capacity utilisation in the five major business areas of Manila has not fallen below 95% since 2011, but has generally been somewhat higher.
In spite of such buoyant momentum, GDP is cautious in building a real estate bubble, as has been the case in recent years in other fast-growing developing countries and the advanced underworld. During October, the newspaper said that the GNP was considering strengthening the rules on banks' real estate exposures next year.
Currently, creditors must restrict credit to developer of real estate to 20% of their credit portfolio. Exceptions are mortgages, credits to organizations active in the field of public sector housebuilding or investment in real estate papers. In fact, numbers do not point to a hazardous overuse of real estate.
The wider bank expansion is also very pronounced; the share of real estate in banks' overall loan portfolios even declined slightly in the first three months, from 15 to 15. In addition, creditors in the real estate sector currently have a limited share of non-performing mortgages, an average of 4%, compared with 4.8% in March.
The imminent maturing of the high-margin, high-quality real estate market in other developing countries has led to a concentration of developer focus on low-income and accessible homes. The Philippines could now see this tendency, which will help the Philippines cover demands in these sectors and reduce the alarming house shortage.