SMDC president Jose Mari Banzon: We have a big pipeline for this year

SM Development Corporation (SMDC) has “performed quite well” so far this year despite the Covid-19 pandemic and has a lot of inventory for launch up to the end of 2020, Jose Mari Banzon, president of the residential property developer, said on Thursday (October 29).

In an online interview with Lamudi Philippines CEO Kenneth Stern, Banzon talked about the impact of the pandemic on SMDC, the company’s response, its newly-launched Gem Residences project, and some of the things to expect from SMDC in the short term.

The interview with Banzon was part of the second installment of The Outlook Roundtable Series in which Lamudi brought together some of the Philippines’ top real estate industry leaders and experts to talk about emerging real estate market preferences and behaviors at the backdrop of the pandemic.

The ‘affordable’ real estate market segment

In terms of the residential market in the affordable segment – the market that SMDC serves – Banzon said so far it was “looking good” for SMDC, as the company’s sales in the first six months of 2020 were up from the same period last year.

Last week, it was reported that SMDC, a unit of local property giant SM Prime Holdings Inc., posted a 7% year-on-year increase in revenue to P34.2 billion in the first nine months of this year, while reservation sales stayed roughly the same at P66.7 billion.

Citing an article by economist Dr. Bernie Villegas, Banzon noted that a Filipino family with household income ranging from P20,000 to P70,000 would normally be able to afford housing that costs between P800,000 and P5 million. That segment represents about 8 million of the 22 million households in the Philippines.

“Of the 8 million, only 3 million don’t have their own homes. So that’s the market that SMDC is serving: 3 million households. But SMDC produces only 30,000 units a year, so 30,000 is only 1% of the demand of 3 million. That’s why our sales continue to be strong,” Banzon explained.

“If we can’t sell with those kinds of odds, then we shouldn’t even be in this business,” he pointed out.

While the pandemic has affected the overseas Filipino workers (OFWs) market, which makes about 70% of SMDC’s sales, Banzon believes that there is still sufficient demand.

Even if an estimated 600,000 OFWs are sent home, there are still 10 million of them around the world who are expected to be remitting around $30 billion back home, he noted. “That’s P1.5 trillion. That’s the kind of money that can be directed to real estate investment,” he said.

“The affordable residential market continues to be strong because the fundamentals are there, and there’s a lot of money going around for that market,” he added.

Making buying a home affordable

While the affordable property market has been relatively resilient, Banzon said SMDC has to take into account the impact of the pandemic on people’s incomes.

Currently, SMDC has one product where homebuyers don’t have to give down payments. They just pay up to 20% of the purchase price for 4 years and the bank takes out the balance of 80% after the 4-year period, Banzon said.

“So you just have to make that monthly amortization match their monthly income. We study that every time just to make sure that the products we come up matches the pockets, the cash flow of our buyers,” he explained.

Given the pandemic, SMDC is creating new products to meet the changing demands in the market.

“We’re sensitive to the fact that, [for] many of our buyers, their incomes have been impaired because of this crisis. So we are coming up with even more affordable products, with features that would address the current trends like work from home and social distancing and so on,” he said.

Gem Residences and SMDC’s pipeline of projects

The impact of the pandemic on SMDC hasn’t been so much on its sales as on its inventory. While the company was able to sell using the internet, its inventory was getting depleted because it couldn’t get permits to launch projects while the government offices were closed.

“Our inventory reached a level where we were not comfortable. Fortunately, when everything reopened, we started to accelerate our launches,” he said.

“We actually have quite a big pipeline for this year. We’ve already launched P60 billion of inventory up to August. And we plan to launch another P80 billion up to the end of the year because we need to replenish our inventory,” Banzon said, noting that SMDC wants to have the inventory to give buyers more choices of homes to purchase.

One of the projects that SMDC has recently launched is Gem Residences along C-5 in Pasig City. Based on SMDC’s website, Gem has a price range of P5.2 million to P9.4 million for 1 bedroom units, some with a den and balcony. The target turnover date for the condominium project, which is now in its pre-selling stage, is 2026.

“Gem has the features of traditional SMDC projects. It’s conveniently located… it has resorts-style amenities and hotel-like lobbies. But a special feature we introduced in Gem is what we call the creator’s park. It is actually a co-working area outside where you have tables and chairs there and strong Wi-Fi where you can actually bring your laptop there and you can work in a nice environment,” Banzon said.

What’s next for SMDC

Banzon expects that the inventory SMDC is launching will be taken up quickly. Thus, the company is still buying a lot of land, not only in Metro Manila and Luzon, but also in southern Philippines.

The company is also boosting its sales efforts online. It is currently piloting an interactive website that allows users to see the virtual showroom across 360 degrees and to reserve units.

“It’s really a seller-less transaction. Even if you’re in a distant country… and you want to buy in the Philippines, you can actually do the transaction just using the internet,” Banzon said. The system will be rolled out “very soon”, he added.

In closing, Banzon said he would like to assure the market that SMDC would continue to come up with products and features people in the segment are looking for.

“We will continue to watch the trends to make sure that we offer products that will make life comfortable for you, give you dignity, give you elegance, but at the same still be affordable,” he said.

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