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Dissecting complexities: How challenges in valuation affect right-of-way acquisition

THE Philippines is embarking on an ambitious nationwide infrastructure initiative, with infrastructure investment targeted at  approximately five to six percent of the Philippines’ gross domestic product;  equivalent to about a trillion pesos every year. This commitment is aligned with our Southeast Asian peers’ level of spending on public projects.

The objective of this allocation is to significantly improve the nation’s transportation networks, communication systems, and other critical infrastructure which should support the Philippine economy’s expansion post-coronavirus pandemic.

Upon completion, these projects are anticipated to yield significant advantages for both the Philippine economy and the everyday lives of more than 110 million Filipinos.

More importantly, these enhancements in the Philippines’ infrastructure network will likely lead to reduced business costs, heightened investment attractiveness, and increased productivity across the country’s more than 7,600 islands. These should contribute to improving the Philippines’ investment climate.

However, because of the sheer scale and complexity of government infrastructure projects, their implementation is not without challenges. One of the initial obstacles each project must hurdle is the intricate nature of obtaining right of way (ROW).

Securing the ROW poses a multifaceted challenge in infrastructure development, characterized by complexity, high costs, prolonged timelines, and heightened societal sensitivity. The valuation conundrum, influenced by an array of inconsistent standards, further compounds these challenges.

The process of ROW acquisition assumes a pivotal role, extending beyond mere property entitlements. It encompasses individuals’ lives and even the collective community fabric, involving potential dislocations both physical and economic in nature.

With such far-reaching implications, the equitable remuneration of affected landowners assumes paramount importance, mitigating the negative socioeconomic impacts ensuing from infrastructure developments.

However, the valuation landscape is marred by discordant standards, generating an impasse in negotiation proceedings. Government appraisals are frequently at loggerheads with property owners’ assessments, leading to a protracted deadlock.

This predicament appears as the clear contributor to the sluggish pace of many government infrastructure ventures despite legislative efforts, such as the enactment of the ROW Act in 2015 that was designed to alleviate valuation disparities and expedite infrastructure implementation across the country. Alas, these attempts have not yet bridged the valuation gap between property owners and implementing government agencies.

Given the pivotal role of property valuation in ROW acquisitions, a comprehensive valuation methodology based on international valuation standards is imperative. The adoption of the most recent valuation benchmarks can streamline the process, possibly mitigating what is often the most intricate and unpredictable facet of infrastructure project scheduling and management.

At Colliers Philippines, we always highlight that improving the country’s infrastructure backbone is crucial in unlocking land and property values.

As we have seen over the past couple of decades, national developers have followed the government’s infrastructure strategy — strategically landbanking and developing masterplanned communities near key public projects.

Overall, we believe that property valuers and appraisers, government officials, and property developers need to work together in intensifying the government’s recovery efforts post-pandemic and shielding the Philippine economy and the domestic property market from future global socio-economic and health risks.

 

Paul Vincent Ramirez is the senior director for valuation services at Colliers Philippines.

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