DISCUSSION PAPER
Report No. UDD-94
I                    THE ANALYSIS OF MULTIPURPOSE
NATIONAL HOUSING AUTHORITIES
by
Donald A. Gardner
(consultant)
April 1986
Water Suipply and Urban Development Department
Operations Policy Staff
The World Bank
The views presented herein are those of' the author(s), and they should no t be
in'terpreted as reflecting those ofi the World Bank.



Mr. Gardner has served as a housing and housing finance consultant
for the past six years. Most recently he has been President of USL
International, a wholly-owned subsidiary of the United States League of
Savings Institutions, which carries out studies and provides technical
assistance in housing finance in developing countries.
Prior to 1980 Mr. Gardner served with the Agency for International
Development for twenty years, the last eight in the housing and urban field.
His assignments included Deputy Director of the Office of Housing, head of the
Regional Housing and Urban Development Office for East Africa in Nairobi,
Kenya and Director of the West Africa Regional Capital Development Office
located in the Ivory Coast.



ABSTRACT
There is increasing awareness that the efficiency of public
enterprises in developing countries must be improved. The multipurpose
national (government) housing authority or housing corporation exists in
almost every developing country with its number of functions varying from the
complete array of producing and selling houses to only a few of the
functions. Because these agencies are often running inefficiently with
heavily subsidized funding and are often subject to destabilizing political
influence, most current thinking is that as many of the NHA functions as
possible should be spun off to the private sector. However, there are strong
arguments for exercising first some level of intervention in a national
housing authority where one exists, developing a basic approach to analyzing
the authority, and being able to reach conclusions as to its effectiveness and
making recommendations to improve its operations. What has been developed in
this paper is an analytical checklist or, if one prefers, the basis for terms
of reference for the analysis of a National Housing Authority that will: (a)
identify the right questions; (b) provide the basis for determining and
proposing priority actions given the history of the institution within the
current economic and political context of its country; (c) outline alternative
measures and how they might impact on all participants. Examples are taken
from available studies and reports of the Philippine National Housing
Authority (PNHA) to illustrate certain points. But it must be kept in mind
that this is not a case study of the PNHA and that most of the points
discussed date back to 1983 or earlier and may not reflect the current
situation of PNHA in 1986.



CONTENTS
I.   Introduction  and  Purpose                  .1............................. 1
II. Analytic Requirements of a National Housing
Authority versus the Appraisal of a US Developer ................ 3
III. An Overview of the Housing Development Process   ............. 4
A.   Developed Countries .......................................4
B.   Developing Countries ..................................... 11
IV.  The Analysis of Multipurpose National Housing
Authorities -- An Appraisal Format., ........................... 15
A.   Legal Status and Ownership ................................ 15
B.   Background of the Institution and Its Place
in the Shelter Sector System .............................17
C.   Policies and Operating Guidelines .........................20
D.   Description of Activities Carried Out
by Institution ........................................... 21
E.   Organization and Operations ............................... 28
F.   Management ............................................... 29
G.   Specific Programs and Projects ............................ 32
H.   Financial Analysis ....................................... 33
I.   Major Issues and Recommendations ..........................34
V.   Conclusions ................................................... 39
Annexes
A.   Bibliography .................................................. 41
B.   Outline for Terms of Reference ................................. 43
0.   Value Line Financial Report of Selected US Developers .......... 45
D.   Agencies Implementing the National Shelter Program .............1. 1
E.   Organization Chart of National Housing Authority ............... 53
F.   Summary of NHA Accomplishments, 1975-1984 ..................... 55
G.   NHA Comparative Balance Sheet, 1979--1982 ..................... 59
H.   NHA Projected Balance Sheet, 1983-1988 ......................... 61
I.   NHA Draft Five Year Plan, 1984--1988 ..........................63
J.   NHA Financial Review and Plan: Summary
and Recommendations .......................................... 65



PREFACE
During the second decade of World Bank activities in the housing
sector the focus has shift.... from project specific activities -- particularly
demonstration projects for low-income housing-- to a more systematic focus on
the policies and institutions affecting the dynamics of housing markets. With
the financial difficulties of recent years it has also become abundantly clear
that heavily subsidized welfare state approaches to housing in developing
countries are simply not feasible. The productivity and efficiency of public
agencies and enterprises is often called into question and a new division of
labor between the public and the private sector is also being sought.
In housing, the public sector has three major functions and
activities: production, regulation and finance. In particular, direct
production of low income housing has been the dominant mode of public
intervention over the last debcade. Financial austerity, budget deficits, as
well as a better understanding of the constraints inherent to direct public
sector production of housing are leading to a desire to redirect government
intervention away from direct production to the improvement of the regulatory
and financial environment. Obviously, any lasting improvement must be based
on an accurate and operational knowledge of the actual working conditions of
the public sector agencies operating in the housing sector because experience
shows that institutional arrangements have more staying power than formal
policies. Besides, these agencies take an overwhelming share of the policy
makers' attention and they are themselves often influential in shaping
policies and regulations.
In developing countries, the public sector operates through agencies
covering every phase of the housing development process. In some countries,
they are specialized into land agencies, housing agencies and financial
agencies; in others, these functions are assigned to single multi-purpose
agencies or authorities whose roles vary according to country and time. The
present discussion paper is about multipurpose housing authorities. It is
part of an on-going effort by WUD to improve our understanding of the
decision-making environment of housing institutions. It is a working paper
and not a definitive paper on the subject for two reasons: first, it is WUD's
first paper on the subject; second, the comparative analysis of about six
NHAs which was originally intended could not be carried out due to constraints
beyond the control of the author and WUD. Illustrations are drawn from
information available on the NHA of the Philippines. However, it is important
to keep in mind that this is not a case study of that particular institution.
Many of the issues illustrated with the case of the Philippines are frequently
encountered elsewhere and this is our primary concern. Not everyone may agree
with all aspects of the analysis presented, but if this paper helps in
improving our views on multipurpose housing authorities it will have met its
purpose. We would appreciate comments and suggestions for its improvements.
Bertrand Renaud
Housing Finaace Adviser



I.    INTRODUCTION AND PURPOSE
There is an increasing awareness that the efficiency of pulblic
enterprises in developing coun'..ries must be improved.  There is also a growing
awareness that the housing sector in most developing countries must be
self-financing; the resources of most governments do not permit much in the
way of subsidization. It is in this context that this paper is written.
The multipurpose national (government) housing authority or national
housing corporation exists in almost every developing country with the number
of its functions varying from the complete array of producing and selling
houses to only a few of the functions. Thus, such an agency can be involved
in acquiring land, developing it, designing projects, constructing houses,
marketing the houses, providing the long term financing for the eventual
recipients of the houses and servicing the loans or some combination of these
functions.
Because these agencies are often inefficient with heavily subsidized
programs and are often subject to political influences, most current thinking
is that as many of the functions as possible should be spun off to the private
sector. Another more pessimistic view is that there's little you can do about
such agencies in many countries; therefore, just assume they'll exist and work
around them. A variation of the latter, often emanating from aid agencies, is
to create a new organization or unit with new staff and without the "baggage"
of the existing NHA and its political pressures.
But there are strong arguments for exercising some level of intervention
in a national housing authority where one exists and developing a basic
approach to analyzing the authority, being able to reach some conclusions as
to its effectiveness and making recommendations to improve its operations.
First, there are a number of reasons why the NHA or some variation of it
will remain on the scene in most developing countries for the foreseeable
future. One, conditions in a given country such as lack of long-term
financing or an atmosphere not conducive to risk-taking or innovations are
often such that the private sector can play only a limited role in the
delivery of housing, at least across a wide income spectrum. There may, in
fact, be a legitimate role for the housing authority at the lowest income
levels to provide for at least some of the functions listed above if not all.
In the case of successful NHA's, they have helped introduce technical,
managerial and regulatory improvements, especially during the take-off of
urbanization. Very often NHiA's play a key role in the formulation of building
stanlards for the sector.
Second, the provision of housing is and always will be subject to
political motivations and pressures. The NHA provides the government with a
convenient tool to intervene in this area and it is unlikely that this will be
given up completely even though there may be acknowledgment that the
government must utilize the private sector more.
Finally, most NHA's represent a very strong entrenched bureaucracy,
often with influential individuals at their head who have a vested interest in
maintaining the agency in its present form.



Therefore, in looking at the housing sector across the board in any
given country, there must be a thorough examination and understanding of the
housing authority or corporation if it exists, where it fits in the system and
whether its operations can be changed for the better. If changes can be
effected they will probably be incremental; its unlikely that an agency will
accept wholesale changes in some sweeping reorganization of activities and how
it goes about them. But some refocussing of activities in many NHA's would
appear to be necessary.
The purpose of this paper was originally to set forth guidelines for an
analyst to undertake a management and financial review of an NHA which would
tie-in operating activities, financial analysis and policy and program
objectives. Tne intent is to structure an analysis from the perspective of
both a board member or CEO of an NIHA and an institution that is contemplating
assistance to the NRA or assistance to the sector of which the NHA is a part;
that is, an analysis that would be useful to an appraising organization and
the NHA itself as a management tool. The method was to identify the most
frequently encountered problems of NHA's through international comparisons.
However, lack of time and availability of relevant information led the
examination to focus on the real estate development process with data
illustration limited to the Philippines NHA.
This paper provides a first cut at a comprehensive checklist, an
appraisal format, to be used in analyzing a multipurpose national housing
authority from the programmatic, management and financial sides. It will give
the analyst a point of reference in gaining an overview of the institution to
a depth necessary to identify trouble spots or where more detailed analysis is
necessary.  This recognizes that the NHA in each country will be different and
that it will be operating in a different context. Such an analysis should
result in conclusions as to whether the NHA is playing the role it should and
doing so effectively. Recommendations could then flow as to improvements in
operations but which include the potential for revising the NHA's role, e.g.,
to spin off some of its functions to, for instance, the private sector and, if
so, what, the coiiditions are that might be necessary to do this.
The analysis of the internal operations of an NHA remains incomplete
without a review of its role in the sector. Included, therefore, should be,
1) any duplication of the agency's functions by other agencies of government
and, 2) how the development process works for the private sector. To provide
a point of reference, a general description of the housing development
process in the U.S. from the standpoint of the typical private developer is
provided. This includes some comments on the type of analysis of a developer
undertaken by a construction lender prior to providing financing. This is
then contrasted with the situation that exists in developing countries,
supplemented by a more specific example of the Philippines.
There is no implication here that the US is the perfect model to
follow. What we are attempting to show are the limitations of the LDC housing
market where many market functions taken for granted in developed countries
are not available or functioning in LDC's.
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The appraisal format that has been developed is presented using examples
taken from available studies and reports of the Philippines National Housing
Authority (PNHA) to illustrate certain points.   However, it should be pointed
out that most of the points presented date back to 1983 and may no longer
reflect the situation of the PNHA in 1986. The concluding section suggests
the next steps that can be taken to further develop the work.
In summary, what has been developed in this paper is an analytical
checklist or, if one prefers, the basis -or a terms of reference for the
analysis of a national housing authority that will:
a)   identify the right questions;
b)   provide the basis for identifying and proposing priority actions
given the history of the institutions within the current economic
and political context of a country; and
c)   outline alternative measures and how they might impact on all
participants.
The conclusions in any such analysis must be developed in sufficient
depth to be able to persuade people that some change might be necessary and to
monitor such change. Ir, many cases heretofore the focus of analyses by
international lenders or bilateral lending agencies often appears to have been
on the structure of programs and affordability to low income families and,
perhaps, the need to move more functions to the private sector.    Not   enough
attention has been paid to the institutional effectiveness of the NHA itself,
the trade-offs among its various functions, and, in particular, the quality of
its financial management as a reflection of all its operations.
II.   ANALYTICAL REQUIREMENTS OF A NATIONAL HOUSING AUTHORITY VERSUS THE
APPRAISAL OF A US DEVELOPER
What is the relationship of the development process in the US to how one
looks at a multipurpose national housing authority in developing countries?
First, the comparable steps the developers go through is roughly
analagous, whether it is a private developer in the US or a national housing
authority in a developing country. This is particularly true of the large US
developer with their building materials subsidiaries, mortgage financing
subsidiaries, etc.
But the method of analysis is completely different and this really
relates to the purpose of the institution.   If, oTie case you're looking at
developers whose primary purpose is to earn a profit for their owners and in
the other you're looking at an institution whose purpose is presumably to
carry out public policy and often is assisted in this endeavor by obtaining
cheap (or sometimes free) land, cheap money and operating subsidies.
Thus, the institutions that are most concerned with appraising a
developer or its activities in the U.S. are investors/lenders whose main
concern is profitability; their analysis is very narrowly based and
financially-oriented. To the extent that public agencies are involved, say, a
county government that wants to make sure a developer carries cut its
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responsibilities with regard to putting in streets in connection with a
housing development, it achieves this by requiring performance bonds and not
by analyzing the developers.
On the other hand, the need to examine multipurpose national housing
authorities is entirely different because their purpose is to achieve
government housing objectives and they receive public funds to achieve this.
Thus, the requirement to ascertain whether they are carrying out this function
as effectively as possible merits analysis in depth.
Nevertheless, it is useful to provide a brief exposure to the US system
and contrast it with what goes on in the case of private buildrrs in the
Philippines as a point of departure in looking at National Housing Authorities.
IlI. ANi OVERVIEW OF THE HOUSING DEVELOPMENT PROCESS
A.   Developed Countries
1.   The Development Process
The development process is a complicated one. The sequence of
steps and considerations leading up to a completed project have many
variations and considerable overlap in terms of timing. The larger the
project the more complex become the steps, particularly with any changes
that may occur in financing.  Improvements in management techniques by the
larger developer have become imperative. In addition, as complexity grows,
developers are tending to become more and more specialized in their
activities, especially in terms of market; both locations and type of
dwellings.
Outlined below are the general steps that would be undertaken
in the development of a housing project and the factors that enter into these
steps. They are listed in the approximate sequence that they would occur but
there is a lot of overlap in timing; time is of the essence to the developer
so as many things as possible must get underway simultaneously.
a.   Determination of overall market potential.
As stated above, developers are tending to carve out
their own niche in the market, both as to location and income level of the
market they will try to reach. To determine the annual effective demand in a
market the developer must stay current on demographics, incomes, employment
outlook, county and regional planning trends, other residential building
activities, etc.
b.   Decision on market selection.
Selection of general location and type of project. The
latter would include the price range of the units, size of the project, style
of the project and phasing.
c.   Specific site selection
Cost of raw land
Cost of infrastructure/availability of utilities
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Accessibility as to schools, transport, shopping,
employment and other community facilities
Zoning considerations
Physical, environmental and legal considerations
d.   Selection of design team including architect, eagineer,
landscaping, etc.
e.   Preliminary project feasibility
Preliminary designs, site layout, etc.
Estimated costs
Land and development
Design
Construction
Financing assumptions and costs
Overhead and profit
Marketing plan
Projected sales revenues
Implementation schedule, preliminary budget, cash flows
and profit estimate
f.   Financial arrangements
Determination of internal funds that the developer will
commit
Decision on outside equity partners, if any
Financing for land and development
Construction loan
Comnitment for long term (mortgage) financing
g.   Final project design
Determination of project components i.e., final mix of
house types and any other project components
Final site, engineering, architectural and landscape
designs and preparation of contract documents
Final cost estimates
Financial plan including budget, projected revenues, cash
flow and profit.
h.   Decisions and approvals
Internal decision to proceed
Decisions as to equity partnership arrangements, if any
All necessary approvals by public agencies
Final financing commitment by lending institution
i.   Contracting and constructior, management
Decisions on competitive/negotiated contracts
Developer as the general contractor with series of
contracts or a general contract with sub-contracts
Contract management
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j.   Marketing
Outside broker or developer's own sales force
Marketing plan including pricing strategy.
2.   The Appraisal Process - The Lender's Perspective
In looking at the analysis of housing developers in the UJS,
profitability is the bottom line. Those factors which go into profitability
also enter into the analysis. Obviously, profitability is more difficult to
isolate A,n looking at the multi-purpose housing authorities in developing
countries who are usually owned by government, often receive subsidies in one
form or the other and also usually pursue specific government policy
objectives. Such elements are lacking when analyzing a US housing developer.
Analysis of developers in the US is carried out by investors
and lenders, both of whom ultimately look to the profitability of the firm
and/or a specific project. Some of the financing required by developers is
done internally, particularly the large corporations, and through joint
ventures or limited partnerships. Other than internal financing, developers
get financing either through lines of credit from commercial banks or through
construction loans for specific projects where the lenders include savings and
loan associations. In recent years, the high cost of financial capital has
led to increased emphasis on equity participation.
Generally, the larger developers don't deal with project
specific construction loans; they finance internally or get a line of credit
from a commercial bank. A number of major builders are owned by a parent
company which provides financing.
When conmercial banks make a line of credit available to a
developer they look at the firm's financial statement; they do not evaluate a
particular project. Such lines of credit are unrestricted as to use; they can
go to finance payroll, equipment, land, housing construction. They are much
cheaper than whiat a developer would have to pay for a constructioni loan for a
specific project and normally carry floating rates in today's market.
However, in order to secure such a line of credit the developer must put all
of its assets on the line as guarantees, something many developers do not like
to do.
The alternative is for a developer to go the construction loan
route. The advantage to the developer is that the exposure is much less since
the loan is secured by the real estate. The negative to the developer on a
construction loan is the logistics; getting the financing on a periodic draw
basis. In making disbursements on a construction loan, a lender will closely
monitor the application of funds. There are always many procedures associated
with a construction loan which result in lag time; there are also all of the
pre-loan project appraisals to go through. Although the construction loan
process is cumbersome for the developer, most building is done on the basis of
construction or project loan financing, not lines of credit.
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Project loans can be all inclusive but, to clarify the level
of risk, most typically are split into separate loans for thL acquisition of
land, land development, actual construction of buildings and ultimately
individual loans f£r the long term financing of the housing units. Typically,
loans for land or a development loan which includes the provision of
infrastructure will be made for 75-80% of the raw land value. For
construction financing the loan will usually be for 80% of the estimated cost
of the construction. These loals can be progrc?ssive in the sense that a loan
for acquisition and development of land will be converted into a loan for
construction which in turn is broken down into a series of draws based on work
progress and finally the long term financing.
As to appraisal of loan applications, at least many of the
lenders do not have some formal checklist against which a construction loan
application is appraised. Nor are specific financial ratios examined. In
describing the process one lender indicated that it applies "prudent
underwriting" considerations. It must be noted that with disinflation and
some problem loans, much tighter underwriting standards are being applied.
Listed below are the factors considered most important in
appraising a construction loan application.
-    The form of ownership of the developer.  Is it a legally
incorporated entity?
-    lWhat is the capitalization of the firm? An examination of
financial statements, particularly cash, but these are usually
unaudited.
-    How are decisions made within the firm?
-    lWhat is the track record on previous projects?  Does it appear
the firm can handle diversity and set-backs? What is the
firm's staying power over market cycles?
-    An examination of the credit history and Dunn and Bradstre~_
rating of the firm if publicly owned.
-    A follow-up with other organizations that have done business
with the firm; other lenders, suppliers, sub-contractors. A
check on the firm's general reputation in the community, with
any consumer agencies if there are any or other agencies of
goverrment with which the firm must deal in getting
approvals. Interestingly, a survey of customers i.e., buyers
of homes in other projects, is considered of limited value.
-    Are there a lot of limited partners in the project?
-    An appraisal of the project.  A review of the plans,
specifications and cost estimates; the financial proiections
as to timing and sales prices. What is the market and what
are current inventories of similar types of housing in the
area? What's been built and how fast is it selling? W<hat's
on the market now?  All of these elements are eventually
summarized into cash flow and profitability estimates. This
constitutes the feasibility study which the lender will review.
-    Most lenders will also provide a commitment for the long term
(mortgage) financing so these factors are also important from
that aspect.
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-    Is the firm proposing a project that it is well experienced in
or is it trying something new for the firm? If the latter,
what are the implications?
-    Is the project in a location where the lender can monitor
construction easily so that decisions on disbursements can be
made?
Has the developer obtained all of the required local
government and utility agency approvals? This can be an
extremely crucial consideration. A developer can go broke if,
say, a sewer easement hasn't been obtained and construction is
well underway.
Although most of the above considerations involve questions of
fact there is a considerable amount of judgment involved,particularly on
questions of market and the staying power/reputation of the developer.
Conseque1itly, most decisions on large construction loans are made at a senior
level in the lending institution. As one lender described it, there must be a
good "gut" feeling about the project and the lender. The lender must know the
developer and trust him. Every developer is different, developes and manages
its projects differently and it is difficult to develop a comparative check
list. Besides, as noted above, most financial statements are usually
unaudited.
In the final analysis, it's the project that underlies the
loan as security; if the developer fails the lender can foreclose on the
project. If the project is bad the lender can lose. Thus, to stay on top of
a project, a construction loan will usually be spread out over, say, five
draws and construction will be monitored by inspectors.
As stated earlier, most residential building in the US at the
development stage is financed through construction loans. For line of credit
financi-',g to the larger developers many of the same considerations apply but
without the project considerations. Here the focus is on capitalization,
assets, management, profitability and overall market. Many of these firms are
diversified with subsidiaries including building materials manufacturers,
mortgage financing, etc.
In this sense they could be similar to the multipurpose
national housing authority that is the focus of this paper. But the analysis
of such firms by a lender, as stated, will be focussed more narrowly rather
than the more broad-based analysis of NHA's being proposed in this paper
because they do not have the various types of support by government. By way
of example, several analytical sheets of large residential housiig firms by
the Value Line Investment Survey are attached as Annex C to indicate the
fin-_icial review that is applied.
3.   Recent Trends in the US
What does the current homebuilding industry look like in the
US and how does it compare to a developing country?
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The home building industry in the U.S. includes individuals
and firms whio build anywhere from a single home to hundreds of homes per
year.  The industry accounted for an estimated $105 billion in new housing
construction activity in 1984, providing new homes for an estimated 1.7
million families.
No single firm or small group of firms dominates the
industry. The largest firm accounted for fewer than 1 percent of the total
housing starts in 1983. In the U.S. small builders (producing fewer than 25
homes annually) predominate among the slightly less than 100,000 firms
categorized as residential builders. There is, however, a trend toward
greater concentration of home building among larger builders.
Recently, changes in the mortgage finance market have favored
larger producers with greater access to the capital markets. The sharp
housing recession of the early 1980's led to an overall 28 percent decline
among all home building firms -- from almost 130,000 to fewer than 94,000 from
1977 to 1982. The factors that led to increased concentration of the home
building industry during the early 1980s are expected to continue for the
balance of this century. Recent trends in the housing industry suggest a
changing role for the medium-sized builder who builds 26 to 100 homes a year,
an expanding role for the large builder with annual production exceeding 100
units and rising opportunities for the small builder whose annual production
is fewer than 25 homes a year.
Al4though the number of large builders has de^reased fairly
steadily as a sha^-e of the nation's total building firms during the past two
decades, their portion of the market in terms of the percern.tage of units
built has increased significantly.
In 1982, they comprised only 10 percent of builders who were
members of the National Association of Home Builders (NAHB) but increased
their market share to 68 percent of all units started. The share of large
builders starting more than 500 homes annually increased from 1.3 percent in
1979 to 1.7 percent in 1982.
Larger builders have traditionally concentrated their efforts
on smaller subdivision homes with prices at the middle to the low end of the
market. Th.ey have been able to attain economies of scale in the acquisition
and development of land and the use of 1nanufactured components supplied by
their own companies. Centralized quality control, large sales and marketing
forces and well-trained management have enabled them to reduce the cost of
administrative overhead per unit. In a market where consumers have become
increasingly sensitive to the issue of affordability, larger builders have
become highly competitive by shifting into more cost-efficient, higher-density
production and optimizing the use of prefabricated components. More recently,
many large corporate builders have phased down their land development
operations to reduce the risks and upfront costs of residential construction..
Instead, they purchase finished lots from local developers and builders.
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This response to market factors usually does not occur in
developing countries as rapidly as in developed countries, often because the
market information is not there. In the case of National Housing Authorities
there can be great resistance to change, particularly if they are operating
with subsidized money.
The big builders' greatest advantage in the US has been their
access to the credit markets. Several large building firms have their own
mortgage companies and enjoy direct access to the secondary mortgage market.
They are thus able to issue builder bonds and raise capital through public
offerings. Easy access to financing is a crucial factor since long term
"take-out" finance dictates the actual success of a project.
Small builders, whose strength has traditionally been larger
custom or specialty homes at the high end of the market, have successfully
adapted to changing economic and financial conditions because they have low
overhead and carrying costs.  Small builders increased from 57.6 percent of
NAHB's builder membership in 1969 to 72.9 percent in 1982.
M4edium-sized builders face the greatest challenge in the
decades of the '80s and '90s because they are competing for virtually the same
market as large builders -- without economies of scale, a strong competitive
footing in the financial markets and the resources to weather long downturns
in the economy. Unlike small builders, they are less able to move into
side-line construction activities when market conditions turn bad.
Medium-sized builders accounted for almost one-third of NABB's builder
membership in 1969; by 1982, they had declined to 17.6 percent. While
difficult market conditions undoubtedly forced many medium-sized builders into
the small builder category in 1982, the decline in the ranks of these builders
has been a trend for more than 20 years and can be expected to continue.
Although much interest has focused on builders' efforts to
raise capital to finance mortgages, less has been said recently about
builders' needs for their own operating and expansion capital.   Most building
companies are closely held companies, usually owned entirely by an individual,
a family, a holding company or a small group of stockholders or partners.
This may change, according to some observers.  Well-capitalized public
companies may well come to dominate the nation's housing industry in this
decade, eroding the number of small entrepreneurs engaged in home building.
The builder's role is evolving into that of a middle-man between financial
institutions and building contractors.
Middle-sized builders, particularly in ujrban areas, will come
under increasing pressure to focus on a special niche in the marketplace,
diversify into related markets such as remodeling or light commercial
construction, enter into joint ventures with financial institutions or do a
combination of the three. The future of midile-sized builders may depend on
their ability to diversify.
Deregulation and the evolution of America's financing system
have opened the door to direct involvement by financial institutions in the
business of residential construction. Although no firm figures are available,
it is estimated that financial institutions participated in the construction
- 10 -



of 20 percent of the homes started in 1984. Financial institutions could
double their 1984 participation share to attain 40 percent of the housing
market over the next decade.
For middle-sized builders in direct competition with large
corporate builders, sharing profits with financial institutions may be a fair
exchange for a more competitive financial position in the marketplace. But
the trend toward joint ventures or the direct participation of financial
intermediaries in residential development may have a negative result for small
and medium-sized builders who value their ability to operate as risk-taking,
profit-earning entrepreneurs.
Diversification of business operations has been a trend among
the nation's home builders since the mid-1970s. The sharp recession of the
early 1980s, coinciding with sweeping financial changes that favoredthe larger
builder, accelerated the trend toward diversification. lWhile builders who
build single-family homes for sale to the general public remain in the
majority today, increasing numbers are moving into other housing-
related enterprises, including custom building, commercial-industrial
construction and remodeling and rehabilitation.
C    Developing Countries
1.   Some General Comments
A general characterization of the housing development process
in LDC's Puast take into account the split between urban-rural and formal and
informal housing.
Although it varies from country to country, the share of the
housing supply produced which is in the formal sector; that is, produced by a
builder or through formal self help means in an urban setting with legal land
tenure, is a relatively small percentage of the units produced. Usually more
than half of a nation's housing is rural-based, much of it constructed
informally on a self-help basis.
In the urban areas, an often sizeable percentage is squatter
housing constructed on an informal basis or, in some countries, contractor
built housing on illegally occupied land without infrastructure. Because this
paper deals with the multipurpose national housing authority, it is focussed
on housing constructed legally through formal mechanisms but paradoxically,
not necessarily on housing conforming to existing law and regulations.
In this regard housing constructed by the private sector tends
to be for the higher income segmenit of the population.  This is primarily
because of the lack of long term housing finance or the terms attached to such
finance that is available i.e., high interest rates, high down payments, short
repayment periods so that large equity contributions by purchasers are very
frequent. Thus, the housing that is built is for families that can afford
such terms or, in the case of individually constructed housing, w-ho can afford
to pay cash. Another reason is that land owners often enter into partnership
with a developer or builder, bringing the land as an equity share in the
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project. Such participants do not want low income projects because the return
to the land is low and the profit on the land is often the dominant, if not
exclusive, determinant of a project's financial success. For the most part
developers will build for any market where the long term financing is
available on reasonable terms and produce an affordable house that will sell.
There are, of course, some countries where "affordable"
housing types may have some difficulty gaining acceptance. That leaves the
public sector, which usually includes national housing corporations or
authorities, which is the focus of this paper. Problems associated with the
multipurpose housing authorit:tes include inefficient operations, project
delays, cost overruns on projects, production of expensive units, too large a
subsidy component in sales prices, poor collection practices and various
others. The national housing authority's purpose is usually to address the
housing needs of lower income families but it often ends up producing, at
least partly, for the same market as the private sector. Yet one often finds
that the detailed analysis or appraisal of such an organization which is
necessary to make specific judgments or to recommend changes is lacking or
only partly done. That is one of the primary premises of this paper.
2.   The Philippines as an Example
To put the Philippines housing development process into
perspective it is necessary to look at the total production of housing units
and separate this into production by government agencies and the private
sector, a phenomenon that doesn't exist for all intents and purposes in, say,
the US.
In the Philippines in 1983, some 250,000 housing units,
Including upgraded units and serviced sites were produced. Of these,
government agencies produced and financed about 33,000 units, with the
National Housing Authority being the leading supplier. An additional 30,000
units were produced by private developers with long term financing provided by
the government. The remaining 187,000 units were built and financed by the
private sector. Many of the latter would, of course, be rural housing units.
Thus, despite significant government activity, almost 75% of
the housing units built in the Philippines in 1983 were built and financed
wvithin the private sector. lhen private developer built-government financed
housing is included the figure rises to almost 87% Further, there is a
gradual shift occuring from'direct production by government agencies to
production by private developers aided by the provision of long-term
government financing.
Historically, the participation of the private sector in
formal shelter produ t±-  b.i the Philippines has traditionally been confined
to the high and uppe - iddle income market which accounts for approximately
16% of the total nee( for shelter. Construction finance and long term
mortgage finiance hc3 tbeen both scarce and expensive. Government regulations
plus a fragmented, lengthy approval process resulted in unpredictable delays
and increased costs to private developers. In addition, the supply or
building materials was also unpredictable and their costs continually
- 12 -



escalating. Consequently, private banking institutions were inclined to lend
only to the "best" or ?qrnown" developers and only for high or upper-middle
income housing to minimize their short term and long term risk. Although
there were about 1000 private real estate developers in the National Capital
Region of Manila for 1983, very few were continually in the shelter buiness
due to these constraints.
Examples of government sector activity in the Philippines is
contained in the next section on the appraisal format for a NHA. This section
sets out the operations of a representative group of nine private developers
and is taken from a report "Manila Low Income Shelter Implementation Review:
The Private Sites and Services Project" by F.C. Terzo for the World Bank
(1983). The developers interviewed all had long experience in either sales,
development or finance and represented housing production volumes of from 400
to 1200 units annually. The market segments served were from P39,000 to
P350,000 but most were geared to delivering housing packages at the P100,000
levels. 1/ Three of the developers were affiliated with religious orders,
and wqere committed as part of their mission to deliver housing for low income
families.
Without exception, developers cited both the difLficulty of
obtaining development finance and the high cost of this finance as major
stumlbling blocks in the development process. Some development organizations
have interlocking directorates with financing institutions, thus providing
them with a ready source of funds. }lost go into the private markets and, at
that time (1983), paid rates of between 18 and 26% for development funds with
some as much as 34-36%. Banks wjhich provide such financing are generally
unwilling to look to the project itself as collateral. Instead, lines of
credit must be established in wqhich the leading institution is secured between
50 and 100% of the line, depending on the financial position and experience of
the developer.
The availability of land for development also poses problems
for developers. Landowners are generally unwilling to pledge their land as
collateral for financing and thus enter into arrangements with developers in
which the developer serves merely as a general contractor and marketing
agent. Profits are shared, but the business relationship is less structured
on the basis of mutuality of interest and more on the relative advantage that
the landlowner has in a market where well located developable land is in short
supply.
There was general agreement among the developers interviewed
that in Manilla the process of land development was fairly free of problems.
The process of subdivision review and recording did not appear to pose any
major problem, although all developers cited the significant bottleneck at the
Bureau of Lands, where titles are verified against subdivision plans and the
engineering geometry of the subdivision is checked.
1/ The exchange rate went from P 8.45 to $1 in September 1982 to P 14 = $1
in November 1983. In February 1986 it was P 22.05 = $1.
- 13 -



The existence of government programs for home finance has
appreciably affected the way in which developers indentify target markets.
Broadly speaking, all members of the government's compulsory savings program
are eligible for home financing, but in practice, develr=,ers direct their
efforts to the upper income households, and higher priced housing.
The government's secondary financing scheme provides for
financing at the rate of 48 times an eligible buyer's monthly income. It was
hoped that developers would program their projects on the assumption that two
eligible members, each earning P1000 per month, would be included in each
household, this yielding a financing package of around P100,000. Accordingly,
housing schemes would be formulated to maximize the profitability at these
levels, since to achieve a similar scale of profitability at a lower unit
sales price would require greater turnover in the number of units. However,
developers at that time, with few exceptions, did not produce at that level.
Delays in developer takeout appear typical in the sale and
title transfer process. Delays are also common in originating banks in the
disbursement of end user loan proceeds to the developer. This situation
further erodes profitability levels, since developers carry the completed
units on development loans until take-out. Marketing costs ranged between 5%
and 12% of sales price, depending on the market segment served, and speed of
sales. At the lower end of the income scale, the problem was less marketing
and more assistance with the documentation associated with the government
financing application.
The developers who expressed interest in and willingness to
participate in programs for the lower income groups were a) those already in
that market, i.e., the religious organizations wqhich develop low cost housing
as part of their mission, and b) the smaller development organizations which
experienced growth in recent years and were still searching for a profitable
formula to be followed in the years ahead. All developers seemed to recognize
that time will force them down from the narrow and saturated upper end markets
to lower cost schemes. The key issue is whether developing at the lower end
can be made profitable. In this regard, there is a perceived shift in the
development community from large scale, long term projects to smaller, less
risky, short term projects that can be completed rapidly so that profits can
be quickly reinvested in subsequent schemes.
There is clearly capacity to develop for the lower income
levels, if developers can be convinced that their low cost stripped down
products will sell. The various problems wvith costly financing and delays in
processing generate unnecessary cost to the developer, which is merely built
into the final sales price. If these stumbling blocks can be removed, then
sales prices can be lowered.
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iv.   THE ANALYSIS OF MULTIPURPOSE NATIONAL HOUSING AUTHORITIES - AN
APPRAISAL FORMAT
Annex B provides an outline of the appraisal format that is being
suggested. This section of the paper expands on that outline and indicates
the type of information and analysis that is required wqith some explanation.
Using information made available from a number of World Bank reports
concerning the Philippines National Housing Authority over the past several
years as a typical example, it seeks to-highlight the problems and attempts at
solutions often encountered with national housing authorities. This is by way
of illustration and does not mean to imply that this is an actual attempt to
definitively appraise the performance of the Philippines NIIA.
An Appraisal Format for an NHA
A.   Legal Status and Ownership
1.   The Legal Framework and Forn of Organization
In addition to the legislation establishing the
institution, it is necessary to examine other laws, regulations and decrees
which bear on its operatLons. This would include factors affecting such
things as land use, land transfer and titling, mortgages, interest rates, etc.
Assuming that the institution being examined is a
government agency, government-owned corporation or predominantly
govertument-owqned corporation the exact form of its organizational status needs
to be determined.
That is, does the institution have the status of a
government ministry, a department within the ministry or a para-statal
corporation? It needs to be established wqhere the institution fits within the
government hierarchy, what its authorities are within this hierarchy and what
freedom it has for independent -.tion.
Illustration: In the case of the Philippines, the
National Housing Authority (NHA) is a government-owned corporation created boy
Presidential Decree in 1975. The Authority took over the functions of six
existing but separate housing agencies.
However, a Ministry of Human Settlements (M4HS) was
created in 1978, also by Presidential Decree.  The NHA was one of a number of
government agencies placed under its jurisdiction.  Thus the MHS became an
even larger "umbrella" agency, "in a sense repeating the process which
surrounded the creation of the NHA in 1975."  The MHS has a presidential
mandate to coordinate all aspects of housing production in the Philippines; in
reality it became the nation's "national housing authority." The NHA had its
"responsibilities narrowed to implementing only low income housing programs"
although, in fact, it proceeded to implement commercial and industrial
developments, market rate apartments and economic or moderate income apartment
and row housing.
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2.   Capitalization and Ownership (if a corporation)
Is the institution formally capitalized and, if so, what
is the authorized and paid-in capital, types of shares and who holds them?
What is the capacity of the institution to increase its capital? If there is
some private owinership, how was this determined and what rights do the private
shareholders have?
To what extent would NHA managers be concerned with
financial structure and, if so, why? Does financial structure, for instance,
limit the organization's ability to borrow?
If the organization is a government ministry, department
or para-statal not formally capitalized, what is the basic financial
underpinning and how is it determined or modified? lWhere does it fit within
the overall public enterprise sphere and how do the possible financial
deficits of these organizations in total affect the NHA?
Illustration: An initial capitalization of PSO was
authorized for the Philippines NffA be subscribed by the Government.  P50
million was to be released on final approval of the agency and the remaining
P450 million released equally over nine subsequent fiscal years, The assets
and balances of the absorbed agencies were transferred to tie Authori-y.   In
addition the NHA was authorized to issue bonds and other securities valued up
to a maximum of ten times its paid in capital and surplus, with the Social
Security System and the Government Service Insurance System absorbing all or
part of these.
A later Presidential Decree in 1978 increased the
authorized capitalizaion of the NHA to P2000 million. This amount, also to be
subscribed by the Government, wqas to be paid in an initial subscription of
P200 million with the balance paid over nine years.
Total government interest in the NILA as of December 31,
1982 amounted to P1940 million comprising the paid in capital of P1265, direct
payments in the form of subsidies for special projects (P433 million) and the
surpluses taken over from agencies absorbed by the NHA and its own retained
earnings (P232 million).
3.   Board of Directors or Equivalent
What's the composition, how are they selected or iho
appoints, how frequently does it meet and what's the term of board members?
What is the authority of the board and how much direction does it provide. If
the board is perfunctory where does policy direction come from?
Illustration:  The Philippines NHA is governed by a Board
of Directors with the iIman Settlements Minister, the wife of the current
President of the Philippines, as its chairperson. The remainder of the Boarfd
is composed of the Minister of Public Works and Highways as Vice Chairman, the
Ministers of Trade and Iildustry, Labor and Employment and Finance, the
Director-General of the National Economic and Development Authority and the
General Manager. It is not clear from available World Bank, re?orts exactly
- 16 -



what power the Board holds. Although the NHA has come under the jurisdiction
of the MHS, it seems to have a good degree of autonomy. The exact
relationship between these two identities is not clear from the information
available. Nor is their individual or combined status (or "clout") clear
vis-a-vis the hilippine government hierarchy as a whole. Such information is
necessary if recommendations concerning change are to be made Concerning any
NHA.
B.   Background of the Institution and Its Place in the Shelter
System
1.   Underlying Rationale for the Institution's Existence
A typical NIIA is often a consolidation of various
government bureaus, programs or a predecessor agency. As such it may be a
stage in the evolution of public sector shelter policy. Therefore it's
necessary to look at the current stated or implied rationale of the
institution and that underlying its creation. For instance, was there some
perceived gap in the provision of low income housing, a need to consolidate a
proliferation of agencies or functions, or a need to abolish an inefficient
agency that provided the basis or impetus for creating the NRA. Depending on
the age of the agency, the analysis might include an examination of
predecessor agencies, if any, or functions and the process of evolution that
resulted in the creation of the NHA.
Although the analysis of today's situation is clearly of
paramount importance, a good historical perspective may be extremely important
in determining the constraints on what can be recommended to improve today's
operation. This is amply demonstrated in the case of the Philippines.
Illustration: Between 1947 and 1970 in the Philippines,
none of the seventeen national development plans addressed housing needs, and
as a result, housing production by the government was negligible. The
construction and financing of housing was left to the private sector which
almost exclusively benefitted upper incorme households. Regulatory agencies
and public corporations concerned with shelter sector problems were
established on an ad hoc basis, rather than in response to a coordinated and
articulated public policy. Public agencies did not focus adequate attention
on the housing needs of lower income families, and in fact, the government's
intervention in the low income sector was largely regulatory and evern
punitive, primarily characterized by slum clearance and forced relocation of
squatter families.
By 1975, the government's housing policies began to
change. The overwhelming number of families living in impoverished
conditions, and their growing demands for basic services and land tenure,
brought about the establishment of the National Housing Authority (NHA) which
represented the first effort to rationalize the existing bureaucracy and
reorient policy with regard to low income households. Six housing agencies
were consolidated by the NRA which began to coordinate, plan and implement a
wide range of shelter related activities. Government policy shifted away from
slum removal to on site improvements, and low income settlements were expanded
through planned sites and services projects.
17 -



In 1978, greater priority was given to the housing sector
with the establishment of the Ministry of H-uman Settlements (MHS). All
government functions related to housing were placed under IES. MvHS formulated
a more comprehensive approach to the entire shelter sector, giving particular
attention to the potential of mobilizing private sector resources and
utilizing market mechanixms to stimulate housing pro(-,ction. By 1980, MHS had
developed a long-term housing strategy embodied in its National Shelter
Program and established an institutional delivery system for its
implementation. New housing finance institutions were created to fill
functional gaps in the overall delivery system, complementing the activities
of existing agencies. In contrast to the situation prior to the mid-1970's,
the responsibilities of the different housing agencies were clearly defined,
and in the process, NHA's responsibilities were suipposed to hla-re been narrowed
from a broad coordinating and policymaking role to only the provision of basic
services and housing for lowq income families. In fact, NHA's responsibilities
did not narrow.
2    The Current Government System for Shelter
It is necessary to include a section on the overall
government shelter system sufficient to set the context within wqhich the
national housing authority operates. This should include the policy
framework, regulatory and supervisory function, the overall coordinating role
and the other key agencies of production and finance.
A description of the government shelter system in the
Philippines highlights its complexity and underscores the necessity to
understand such systems if an analysis of an NHA is to be complete.
Illustration: In the Philippines the MXinistry of Human
Settlements' broad areas of responsibility include environmental management,
town planning, land use planning and shelter s5ystem development. In addition,
MHS established as its objectives the production of low-cost housing on a
large scale, the generation of long-term funds for housing finance and the
creation of a secondary mortgage institution.  Under MHS, housing production
should be integrated with other shelter-related services, such as water, power
and roads; in practice, there are operational difficulties which affect PNHA's
performance. Prior to the establishment of I1S, public sector housing
initiatives had been concentrated in Metro Manila, and the creation of tins was
intended to coordinate and target housing resources to other areas in the
country. In practice, however, the ovenwhelmiag need for housing and related
services in Manila has meant that most assistance continues to be focused in
the metropolitan region.
14S performs a central planning, policymaking and
coordinating role. Substantive functions are delegated for the most part to
other corporate entities or agencies. By 1980, the Mlinistry's three-fold
objectives of increased housing production, generation of long-term finance
and establishment of a secondary mortgage mlarket had become the key elements
in a National Shelter Program. Underlying the National Shelter Program is a
recognition of the need to expand the output of lower and middle income
- 18 -



housing by the private sector. To impleriient this program, MRS formed the
National Shelter Program Secretariat with represenLatives from seven key
housing agencies. These agencies cover three major functional aspects in the
provision of housing: financing (Home Development MIutual Fund, Home Financing
Corporation and National Home Mortgage Finance Corporation); production
(National Housing Authority, Human Settlements Development Corporation and
National Housing Corporation) and regulatory (Human Settlements Regulatory
Commission).
By establishing these functional divisions, with clearly
delineated responsibilities for each agency, MiS laid the foundation for a
rational housing delivery system. The National Shelter Program Secretariat is
supposed to function as a committee to facilitate coordination and information
sharing between shelter-related programs.
To address deficiencies in the availability of finance in
the shelter sector, N4IS established a new finance system centered around the
introduction of a secondary mortgage institution, which is intended to
leverage long-term financial resources from the private sector and provide a
permanent incentive for housing production at lower costs. With the exception
of NIA, all of the housing agencies represented in the National Shelter
Program Secretariat play a role in this new finance system. The provision of
low income housing remains the sole responsibility of NI-IA, and to date it has
not benefitted from MHS' initiative. MI-A's exclusion from the new finance
system results more from the fact that the system has been in a start up or
developmental period, during which it has strived to achieve certain initial
objectives which have not given priority to the low income shelter sector,
rather than from a concious decision to limit NHA's accessibility to its
resoulrces over the long run. A major challenge presently facing '1-{S is to
create mechanisms whereby NHA's low income consti.tuents have access to the newq
finance system's resources to ensure that the intitutional framework becomes
responsive to their needs.
Outside of NSPS's network, two other governmental
institutions, the Social Security System (SSS) and Government Service
Insurance System (GSIS), play significant roles in housing finance. SSS and
GSIS are both provident or retirement funds for formal sector employees which
offer housing loans to their contributing members. Prior to the advent of
MHS' new system, these two funds, together with the government-owned
Development Bank of the Philippines, represented the major solurces of mortgage
financing in the Philippines for moderate and upper-middle income families.
Annex D contains an organizational chart of the
Philippines government shelter system.
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C.   Policies and Operating Guidelines
1.   Statement of Policies, Goals and Objectives
Are there a clear set of written policies, goals and
objectives contained in the legislative framework, the national development
plan or national shelter policy? This is important in that it defines the
framework against which the institution's performance can be measured, not as
to efficiency, but whether it is carrying out its mission. Is the national
policy framework reduced to a specific set of policies to govern the operation
of the NHA? How are these policies developed and how can they be modified or
changed? Are they widely disseminated so that it's clear to everyone what the
policies of the institution are? Are the policies subject to outside
pressure, i.e., outside of the board of directors?   lfhere does the policy
direction come from?
Illustration: In the case of the Philippines, a
comprehensive, articulated national housing policy had not been developed
prior to NIHA's establishment. With regard to low income settlements,
government intervention consisted of slum clearance and forced relocation of
squatter families, and did not encompass any comprehensive approach to meet
their growing needs.
The creation of NHA represented a shift in government
policy.   IA was explicitly mandated to undertake programs to upgrade slums
and marginal communities, and to develop sites and services projects,
signalling a change in policy away from slum removal in favor of on site
improvrements. When the Ministry of Human Settlements wvas established in 1978,
NHA's responsibilities were narrowed to implementing only low income housing
programs and away from a policy-making role.
Stated policies, goals, and the objectives of the
Philippines NHA are contained in its "institutional profile" (similar to an
annual report) and for the most part are taken from the Presidential Decree
that established the agency in 1975.  According to this decree, the NI-A was
set up to "establish, maintain, and ensure adequate social services in the
field of housing. . . to guarantee enjoyment by the people of a decent
standard of living."  Specific objectives and NHA's approach are clearly
spelled out.
2.   Operating Guidelines
What are the operating guidelines used to implement
policy? For instance, precise income levels to be served, housing standards,
use of private contractors, types of programs to be developed, collection
guidelines. Wqho develops these guidelines, influences them, what are the
procedures to institute change?
Is the institution to be profit-making; that is, will its
operations envision some return on investment or is it to operate at cost
only? Are subsidies to be provided, if so, at what level and how are they to
be determined. How does this factor tie-in to overall government budgetary
- 20 -



considerations and what would be the impact of gevernment budgetary
constraints if applied. These elements obviously relate to capitalization,
resource mobilization and the financial analysis.
Illustration: No specific information was made available
on the detailed operating guidelines which implement policy for the
Philippine's NHA. The available analysis covers such things as affordability,
cost recovery, return on investment etc., but doesn't indicate whether the NHiA
is operating against a specific set of guidelines. Nor does the available set
of reports contaLn guidelines or operating procedures covering such things as
land acquisition, contracting, administration of rental properties, etc.
although presu,ivably such guidelines/procedures exist. There is, for instance,
a Manual of Operations for the MH{S Private Sites and 5-ervices Project.
D.   Description of Activities Carried Out by the Institution
1.   The Institution's Programs and Functions
This part of the appraisal should contain programs or
functions carried out by the institution on its own behalf; that is, by type
of activity. Examples are listed below:
(a) Land Acquisition and Assembly
How is land acquired, is it government land, by
expropriation, by market purchase, etc? W}hat is the inventory compared to
annual use?
Illustration:  For instance, the Philippines NHA
conducts its own land acquisition a-nTdassembly program in order to carry out
its major programs. However, "land acquisition in the public sector is a
major problem. NHA has considerable difficulty in acquiring land, despite
having the powers of eminent domain and the willingness to use them.    It is
constrained 'oy existing laws, by government regulations and lack of sufficient
funds. Before any land can be purchased, NHA is required to obtain the
approval of its Board and of the Executive Committee, a cabinet level
committee that must approve government land acquisition. Present lawis and
regulations require NH1A to acquire land by first negotiating and then, if
necessary, use eminent domain powers." The process is often a lengthy one.
Securing public land has also proved to be time
cons.nning. Presidential action is required at two stages both of w^-hich
require Bureau of Lands' clearance which takes a long time.
(b) Program and Project Development
Does the institution undertake to provide
infrastructure itself as part of its overall project development or to
directly provide serviced land as an independent program?    Does it engage in
upgrading programs?
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What kind of projects does the institution build;
residential projects, completed units, core units? Does it provide community
facilities as part of its projects? Does it develop and invest in commercial
properties? Does it undertake both design and implementation functions?
How is program and project planning carried out? Is
such planning supported by studies? Are projects started before studies are
complete because of political pressures?
Illustration: The MHA's primary objective in the
Philippines is to provide housing for lower income families. Therefore its
projects focus on this objective.
Shelter projects fall into three categories:
upgrading of squatter areas; provision of serviced sites; and construction of
completed units. Its housing programs are adequately described .n the many
reports.
However, in addition to its primary objective of
housing, NHA carries out several other programs. First, it conducts a
"Livelihood Program" which aims to provide employment opportunities to
residents of its upgrading and sites and services program. The program
includes small business loans and job training in cottage and light industries
as well as building materials loans to complete housing.
Finally, to generate income for the Authoricy and to
creat economic opporunities for the beneficiaries of the various projects, NHA
developes, markets and operates commercial and industrial estates. The intent
is to utilize profits from this endeavor to cross-subsidize low cost
residential areas to make them more affordable.
In summary, slum upgrading which in 1980 accounted
for over 40% of total activity slipped dramatically to just over 20% in 1982.
On the other hand the activity on the squatter relocation program increased
significantly from 5% of total capital outlays in 190 to 25% in 1982.
Investments in sites aAd services housing increased steadily throughout the
period although its share of total investment declined marginally. In total,
social housing programs accounted for just over three quarters of capital
outlays with the Joint Venture, Commercial and Industrial Development and the
Economic Housing programs accounting for the majority of the remainder.
The geographical concentration of the capital
program is predominantly for the residents of lietro Ianila, about 80% of
investment is for projects within Metro Manila and for the relocation of
squatters from the National Capital Region. The share of investment placed in
the regions is decreasing in proportion and amounts.
It is essential in appraising an NITA to obtain at
least four years of good data of the kind cited above so that trends can be
ascertained and analyzed.
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(c) Studies and Research
In considering the capacity of an NHA to play a role
in the policy process, it is necessary to examine its internal capability to
undertake studies and generate data. The type and quality of such work needs
to be evaluated early. If the tNU does have this capacity, what is it used
for? A research and studies department clearly can be rmore than a market
survey department. For instance, an NHA can often control or strongly
influence building standards by virtue of its research work.
In many NHA's the research and studies department
plays a major role in the speed of implementation and the efficiency of a
project. Quite often the review of a poor project will indicate initial
project studies that were incomplete or poorly done during the design stage.
Illustration: There is a Research and Analysis
Division in INHA which apparently carries out studies and research on housing
needs on its own. For instance, within the past several years it made an
independent analysis of the housing needs of the low and marginal income
groups of 73 urban centers. The survey concluded that the need for housing in
those communities during the next 10 years to be approximately 600,000 units,
most of it for upgrading existing units. Sites and services solutions were
recommended to accommodate the families that were to be displaced during the
process of upgrading, as well as provide solutions to satisfy population
growth. These estimates identified a need for an average output of close to
50,000 units per year for the low and marginal income families of the selected
73 urban centers, wihich cover an estimated 26.5 percent of the total
population in the country. This study formed the basis for the preparation of
NHIA's Five Year Plan.
(d) Production of Building Materials
Is the NHA a fully integrated operation, producing
its own building materials or producing for the 3arket?
Illustration: In the case of the Philippines, the
NI-A does not produce any building materials itself. Within the government
system, building materials are produced by the National Housing Corporation,
one of the agencies under the Ministry of Human Settlements.
(e) Technical Assistance to Purchasers of Housing
Solutions
This is an important aspect if national housing
authorities are to engage in successful low income programs.
Illustration: There was no information available in
the existing reports on whether the Philippines NHA provided technical
assistance to the beneficiaries of is upgrading or sites and services programs
although building material loans are made.  The latter are made "in-kind"
rather than as cash loans but no information wvas available on whether help in
their use is provided.
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Apparently job training is provided, however, as
part of the "Livelihood Program" described earlier and in conjunction with
small business loans.
(f) Marketing and Sales
Does the institution develop and build projects and
then turn over the projects to other agencies or does it carry out the
function of marketing and selling the plots and units as well?
Illustration: Information on how the Philippines
NHA markets and sells its own production also was not available although the
presumption is that it does.
(g) Residential Rental Properties
Does the institution maintain and administer a stock
of residential properties for rent? If so, how is it administered, how are
rents determined, what is the collection rate?
Illustration: In the Philippines, there was no
discussion of NHA rental properties in the available reports although the
Financial Review and Plan prepared by consultants indicates NHa was carrying
on its books rental properties of some 1500 units. No information as to
rental charges or how such charges wvere determined was provided although
figures on overall return on rental properties is provided in the above
report. That report also makes the recommendation that NMI divest itself of
its rental properties.
(h)  Commercial Activities Other Than Housing
Does the institution invest in commercial activities
such as hotels, independent contracting activities, and operate commercial
properties? Does it construct other than residential properties?
Illustration: It appears that NHA develops, sells
and operates commercial properties and industrial estates as part of its
housing projects for purposes of cross subsidizing low income beneficiaries.
It's not clear, however, whether it intends to operate such facilities on a
long term basis as part of the on-goina operations of the Authority. As far
as the reports indicate, M-E does not invest in hotels or in the general
contracting business, endeavors that do attract national housing authorities
in othler countries, often to the detriment of their housing activities.
2.   Activities Carried Out for Other Agencies
Does the institution do work L-or other government
agencies? That is, does it construct water and sewer facilities for a WYater
Board as part of its project or land development activities? If so, wlhy? Do
procedures differ? How is this work paid for and hlow is it coordinated?
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Illustration: A significant portion of tIHA investment in
projects is for components normally falling under the jurisdiction of other
agencies, in particular water and sewer systems, community facilities and
major infrastructure development. So far, NHA has been slow to recover this
investment from the agencies concerned. Too often facilities are turned over
for maintenance and operating purposes with no provision made either to assure
maintenance responsibilities or to pay for them. Firm rules and procedures
should be established through the NII and the concerned line agencies
concerning financial and maintenance/operating responsibilities for specific
components in all projects. Deeds of Turnover of these facilities involving
the transfer of all assets and liabilities should be prepared and speedily
execuited.
3.   Financial Activities
(a) Mobilization of Resources
Does the institution engage in the mobilization of
its own resources, i.e., sale of bonds? Does it have borrowing authority,
capacity to obtain, say, construction financing or does it rely on government
appropriation or some combination of the above? Are profits a factor in
financing future programs or does it cross-subsidize between projects? hihat
is the degree of dependence of the NHA on multilateral and/or bilateral
financing?
Illustration:  The Philippines NI-A, in addition to
its capitalization which is being released in annual increments, also receives
government budget appropriations on an irregular basis and loans for special
non-programmed projects. Loans are normally related to World Bank-funded
projects.  Recently (1983) NHA was authorized to issue up to P150 million in
government-guaranteed bonds and has also gradually extended its credit lines
with private banks to about P200 million.  As discussed in the following
section, INHA wants to be able to sell its beneficiary loans to the NIIMFC so
that its development funds mr- be constantly rolled over.
The goverment has a shortage of funds to invest and a
number of competing priorities from other sectors. The budgetary process
itself is lengthy, requiring that budget submissions literally be made one
year prior to the first funds being released. Often the release of funds does
not coincide with the Philippines' dry season when NHA attempts to do most of
its construction and site development.  At other times, NHA's appropriation
has only been partially released by the Treasury.
With the uncertainty attached to government as its
primary source of funds and with part of its capital tied up in long term
loans extended to is beneficiaries, it is incumbent on NHA to increase its
flow of receipts through prompt sale of its projects, elimination of rental
properties, a good collection record on its loans and collection of amounts
due by other government aaencies.
In addition to the unpredictability of government funding
NHA has other problems with resource mobilization. It now finds itself unable
to meet the debt service requirements of any substantial future bond issues.
Better achievement on collection of receivables, quicker turn-over of
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completed works to local authorities responsible for infrastructure
maintenance, the prompt recovery of costs incurred on behalf of other agencies
-- these and other measures might have avoided this particular constraint.
(b) Long-term Financing
Does the institution provide long term financing to
purchasers of its housing or serviced sites?    That is, does it originate
mortgages (or housing loans), service these loans and hold them.
Illustration: In the Philippines, the NHA provides
long-term financing to buyers of its units from its own resources, thus, tying
up these resources for a long period of time.   By way of example, NHA makes
home improvement loans at 12% over ten years in one of its upgrading projects
up to a P3000 maximum. In an adjacent sites and services project, loans up to
P15,000 are offered at 12%, 15 years.  Although no other specific figures were
cited, the 12% rate appears also to be standard for loans for new construction
but with longer reyayment periods.  As a comparison, four-fifths of the
mortgages the government's National Home MJortgage Finance Corporation (NHMFC)
buys are made at 9%, the remainder at 16% (as of 1983).   The current market
rate at the time was 26%.
The NHA apparently would like to use its funds only
for development purposes and, consequently, has been attempting to negotiate
the sale of its loans to NHMFC.  This twould enable it to increase Troduction
because it would not have its funds tied-up in long term loans. In general,
though, NHMFC sees purchasing loans made for home improvements in slum
upgrading areas or for sites and services units as premature at this time
becauise of very limited experience to date on repayments and the effect such
loans in its portfolio might have on sales of its mortgage-backed securities.
In any event NHA would probably have to sell its loans at a considerable loss
on their book value because of their low interest rate and, in some cases,
delinquency.
Finally, as mentioned earlier, NHRA. is also m,laking
loans to small businesses in its projects but no indication was given on the
terms of these loans.
4.   Competition or Overlap
This relates partly to section 2 above. What does the
institution do that other government agencies or the private sector also do?
Why? Is there a clear delineation or is there overlap and competition? For
example, is there more than one government agency doing residential housing or
upgrading, including municipal housing authorities doing the same kinds of
programs?  Is the institution in direct competition with private developers
for certain types of housing?
The appraisal should ascertain the rationale behind the
program activities. Is there a conscious policy to enigage in commercial
activities as a means of cross-subsidizing or obtaining profits to undertake
other programs? Is there pressure to expand into a larger organization, a
- 26 -



need to keep excess staff employed? Are there pressures by staff to engage in
more grandiose projects? Again, the answers to this part of the analysis will
help structuire feasible recommendations.
Illustration:  In the Philippines, the NHA, the Human
Settlements Development Corporation (HSDC), and the National ilousing
Corporation (NHC) all under the AIHS, share responsibilities in the production
of shelter programs. NIHA is by far the largest of the three institutions and
although it concentrates its programs at the lower income levels, both NIA and
HSDC undertake "economic" housing projects in the form of 4-story cluster-type
apartments and row houses affordable to high and middle income groups. The
NHC produces building materials and also some pre-fabricated housing.
In addition, N-A and 14-IS overlap their efforts in one
part of the sites and services program. The NHA has a large sites and
services development program as part of its activities. The Private Sites and
Services Project (PSSP) is being administered directly by the MHS and has
gotten more emphasis with the recent move toward public/private sector
co-operation.
5    Coordination With or Approval By Other Government Agencies
Ascertain what goverrnment regulations, federal and
municipal the institution must comply with which affect its operations:
building codes, compliance with master plans or zoning regulati-ons, etc.
What role has the NHA been playing in improving the
regulatory framework? Is it just a passive user of special waivers? Is it
actively involved in producing better regulations for affordable standards?
Illustration: "Inter-agency coordi.ration would seem an
advantage of the public sector but in the case of the Philippines, experience
has shown that an agency such as NHA has little leverage over other involved
agencies with regard to meeting their responsibilities for on-site and
off-site supporting infrastructure, particularly for large-scale projects."
Tondo Foreshore, the first and largest of the slum
improvement projects, although now complete, was adversely effected by the
delays in water supply provision, construction of a sewverage outlall and the
delays in construction of trunk roadways. Dagat-Dagatan, a large sites and
services project has also been effected by delays in t4ater supply and trunk
water mains, trunk roads and major river (drainage) improvements.
Coordination is particularly iLi,portant for larger projects, wdere major
off-site works are required to complete the project. These delays not only
delay project implementation, but also effectively delay cost recovery and the
sale of commercial and industrial serviced land. The provision of the
National Shel-ter Secretariat is intended to improve some of these coordination
problems.
The NHA is also undertaking projects as joint ventUre
partners with local governments. For instance, within the National Capital
Region, NHA, through its MIetro M'anila Projects Department (I.WD), undertakes
slum upgrading projects in coordination with and on behalf of the local
governments and the Metro M4anila Commission (14E). The local government role
- 27 -



is presently limited to participation in project identification and community
development. Upon completion of each project, its assets and liabilities are
turned over to the local governments concerned, who are then responsible 2or
estate management and cost recovery under the general guidance of the MMC.
E Organization and Operations
1.   Organizational and Functional Descriptions
This section should lay out the complete organization of
the institution and provide a functional statement for each major
organizational unit. This section should look at the activities described in
Section B. 4 and relate these activities to the organization and functional
statements.
Illustration: Below board level the Philippines NHA is
organized as shown in the chart contained in annex E. Its staff functions are
handled in five grouips:
(a) Executive Services - including Corporate
Planning, Monitoring and Evaluation, and the Corporate Secretary's Office.
(b) Project Technical Services - including Physical
and Socio-Economic Planning, Engineering and Architecture, and Contracts
administrationi.
(c) Project Support Services - Community rKelations
and Livelihood Development.
(d) Corporate Support Services - Personnel, Legal
and General Services.
(e) Financial Services.
NHA's line functions are organized broadly by client
groups - for local government projects, for private sector involvement
projects (joint venture programs and commercial and industrial estates), and
for NHA's own construction projects.
Within the Local Government Projects Group there is a
iMetro Manila Projects Department (MIvD) wqhich operates four District teams to
undertake slum upgrading projects in coordination with and on behalf of the
local governments and the Metro M4anila Comission (MSlC). For sites and
services, projects are undertaken directly by N,EA through the VMPD Site and
Services Division. On the other hand, the initial slum upgrading and sites
and services projects are being implemented directly by Special Projects
Departments within INHA's In-liouse Projects Group.
There is a certain amount of overlap of responsibility
among the several departments, but this is not uncommon in an institution as
large and diverse as the INHA.  In the iNHA this overlap has not been identified
as a problem. None of the reports reviewed provided any details on the
specific duties of the individual departments.
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2.   Operat'.ons
This section should describe how each of the activities
is carried out. For instance, how is land acquired, what's the process, how
are project approvals obtained, what kind of market analysis is done, how are
cost elements developed, is design done in-house or contracted out, is
construction done with force account or contracted and, if the latter, is
there competitive bidding or direct negotiation, is there an overall
feasibility plan for a project, how are housing units marketed, applications
appraised, mortgages serviced? In summary, for each activity performed by the
institution there should be a complete description of how it is carried out.
In the case of the Philippines NHA, there was no
information available on how each of its activities is carried out.
F.   Management
1.   General Management
Specific attention should be focussed on management
and its effectiveness. For instance, does the institution decentralize
decision making or is it highly centralized? Is there a branch structure and
what degree of autonomy do the branches have?
Illustration: According to one consultant report,
management of NHA is centralized with little or no delegation of authority or
responsibility taking place. Such centralization of all decision-making can
erode the level of responsibility of technical staff and particuarly middle
management levels, slowing down decision-making, delaying projects and
programs.
A broad delegation of authority and accountability/
responsibility. is necessary if operations are to be expanded and the speed and
volume of shelter delivery increased. NHA's centralized management system and
consequent lack of staff accountability has effectively prevented
regionalization of its activities and resulted in delayed decision-making at
each stage of the project cycle including land acquisition, project design,
bidding, occupancy and cost recovery.
2.   Corporate Plan
A corporate plan is necessary if an NHA is to be
able to objectively evaluate its success in achieving some agreed upor. goals.
Such a plan permits an assessment as to how realistic the assumptions are
which underlie the plan. If the plan is properly developed and discussed, it
enables other affected agencies an opportunity to provide their inputs. It
should also be consistent with overall government activities and policies in
the shelter sector.
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Illustration: As an example, an abbreviated
Pnilippines NHA Five Year Plan covering the years 1983-87 was reviewed as part
of the preparation of this paper. According to one consultant's report,
"Based on current experience and the acceptability cf its product, NHA has
drafted a five-year national program that targets 8,,500 plots for upgrading
and 197,200 plots of sites and services in Metro Manila and the regions over
this period. The program would require some P1 billion pesos per year to
achieve and is highly optimistic. Based on NHA performance to date (thru
1982) of 12-14,000 units per year this program, averaging 38,000 units per
year appears highly optimistic.
Apparently planMing involves preparation of a plan
by the Corporate Planning Office based on estimates provided by individual
departments of their programs. Such figures tend to be optimistic when
combined as a whole. The Financial Management Department then reviews the
plan for funding sources. As set forth above, the cost apparently
significantly outstripped likely resources.
The conclusion would appear to be that the process
requires some considerable revamping to be useful.
3. Staff and Personnme Analysis
This analysis should include staffing patterns,
numbers of people by function and skills, a judgment as to the overall quality
of the staff, salary levels, experience, rate of expansion and turnover rate.
Are support (administrative) staff growing at a faster rate than are total
personnel? This analysis should be compared, where possible, to similar types
of organizations in the private sector. Is the institution able to attract
and hold good people? How does it recruit? What kind of in-house training
does it provide? Does it lose people to other government agencies or the
private sector and, if so, why?
Illustration: According to a consultant's report in
1983, NHA has suffered from a high turnover of its best trained and
most-highly skilled staff to the private sector and has had difficulty in
recruiting. With a less experienced staff but accelerating programs and
projects, it was difficult for NHA to maintain productivity and program
schedules.
A more recent report, however, notes that NHA's
personnel resources appear to have improved.  NHA has been assisted by a
review done in connection with the current five-year program which set
personnel levels for the Authority's different departments. The task of
manning the various departmernts has been simplified byr a policy of matching
personnel strength to construction workload. NHA is seriously concerned about
the development of its manpower, and runs a large number of programs for its
managerial, professional and support staff.
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4.   Management Information Systems, Controls and
Procedures
What type of management reporting system is there
and what is its quality? Does it provide for the key information that is
necessary? How timely, detailed and reliable are periodic reports and what
areas do they cover? Has the institution developed any measurements by which
it monitors project performance, and are there additional such measurements
which the appraisal indicates could be applied?
The ability of an NHA to present its operations
clearly and consistently from year to year is one indicator of the quality and
stability of its management.
Illustration: There have been a series of outside
consulting reports of the PNHA (see also Section H, Financial Analysis)
financed by the World Bank, either exclusively concerning the PNHA, or where
the PNHA has been part of the report.
There was no information within the material
provided as to specific means that PNHA has developed to monitor performance.
It is also not clear what type of a management reporting system is used.
A persistent criticism of NHA, particularly in
recent years, has related to repeated time and cost overruns on projects. In
fact, serious delays have themselves contributed to financial problems,
firstly because of high interest costs during the construction
period;secondly, because of sharp inflation, leading to contractor demands for
escalation in agreed rates and prolonged disputes; and thirdly, because
construction delays hold up allotments to beneficiaries and therefore recovery
of their dues.
Chronic time overruns can be a symptom of inadequate
systems and procedures. For instance, so far as construction is concerned,
according to a recent review of NHA, the preparation stage, the acquisition of
land, the monitoring, the settlement of bills for work done - all need to be
carefully studied and improved. (See earlier section on Studies.)
For example, much of the work in infrastructure
projects is repetitive, and therefore lends itself to standardization of
designs. NHA has standardized designs, but does not apply them widely.
Secondly, schedules of rates need to be prepared and adopted for composite
construction items that include both materials and labor; this speeds up the
preparation of contract documents and restricts the scope for malpractice.
Thirdly, contract documents themselves need to be reviewed, and provision for
items like automatic rate escalation with price inflation introuced. Fourth,
the procedures for payment of contractors' bills need improvement. They now
can require nearly 15 clearances, with review by as many as 27 employees.
Besides being enormously wasteful, this results in inflation of rates by
contractors, to offset delay in the receipt of their dues and their consequent
interest costs.
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In fact, tae systems in use throughout the Authority
need careful review, to remove the built-in factors and practices that make
for delay, waste and high cost. The Financial Review and Plan states that
"The current operating expenditures are high relative to output with the main
office costs increasing significantly".
Although improvements have been made with the
allocation of operating costs between projects §ince the introduction of a
Project Accounting system in 1981, the real costs of administration and design
and supervision remain high and are likely to remain so unless a greater
productivity is achieved.
G.   Specific Programs and Projects (As distinct from Section 4,
Description of Activities.)
There should be a detailed description and analysis of all
major programs and projects, by program and project, being carried out or
completed within the last couple of years. This should be comprehensive in
nature e.g., types of units or facilities, costs, income levels or market
being served, geographical locations, how well the project was received, how
the project compared with original plans as to types of units, costs, and
time, status of project if still underway, how the project fits into the
announced policies and goals of the institWtion.
For instance, was there a feasibility study of the project?
What is the internal review process? What kind of project implementation
management is there? Is there a reporting system for management? Are the
projects consistent with the policy statement of the organization; with its
corporate plan?
Illustration:  The Philippines NHA utilizes a number of
different programs to carry out projects involving its primary functions of
slum improvement, sites and services development and construction of new units.
Slum improvement projects car. include upgrading, sanitary core
houses and even some row housing units and vary from the huge Tondo Foreshore
project in Manila to individual smaller projects.
The latter include a series of slum improvement projects in an
overall program known as the Zonal Improvement Program (ZIP). In this program
the NHA plays the role of developer.  After completion, the projects are
turned over to local governments who assume all assets and liabilities and
responsibility for reovery of costs from beneficiaries, repayment of these
costs to NHA and maintenancy of the projects. This program assumes a larger
role for local government and community organizations.
There is also a Regional Cities Slum Improvement and
Resettlement (SIR) Program where INHA on-lends funds to several cities for
project implementation. A small number of rural projects completes the
upgrading category. These projects are intended to give tenure and upgrade
the facilities of tenant-farmers residing on estates owned by private
landowners. The sites and services program is composed of a series of fifteen
projects in urban areas concentrated on eight sites.
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NHA tends to classify its projects by source of funding (which
could suggest low levels of financial management): those which are assisted
by foreign lenders, primarily the World Bank but including some German foreign
aid funds; those which are joint ventures with local governments; and those
which are funded solely by the NHA itself but in cooperation with other
government agencies involved in housing development. Such a classification
usually arises because of the impact of the financing agency's requirements
and specific rules relating to such things as procurement, reporting, etc.
Finally, NHA has a small joint venture program whose main
objective is to encourage and promote private sector participation in the
housing effort. The NHA has five sub-programs in this category: construction
of apartnient units; construction financing on individual houses in
NHA-identified sub-divisions; sub-division development, dormitory housing for
students and private sites and services projects.
Annex F provides a list of projects with units constructed or
upgraded from 1975-84 by program category to provide an overview of the mix of
programs.
H.   Financial Analysis
1.   Financial Statements
A review and an analysis of balance sheets and operating
statements for past five years.
2.   Financial Plans
Is there a financial plan? How far out? Is this based
on an overall corporate plan and, if so, how are they coordinated? Where are
the financial staff located organizationally? What role do they play in the
decision process?
3. Accounting
How up-to-date is the accounting data? Is it
comprehensive?  Does it provide management with information that it needs on a
timely basis? Is accounting computerized? How is data obtained?
Illustration: With regard to financial statements and
plans, the only detailed study of the Philippines NIA by outside consultants
which appears to have been done in the past five years was a Financial Review
and Plan done in early 1983 which examines data for FY's 1979 through 1982 and
projects a plan period through FY 1988. The balance sheets and profit and
loss statements for both periods are contained in Annexes G and H. A Source
and Application of Funds projection is contained in Annex I.
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The report draws conclusions and makes recommendations
which appear to have been utilized by follow-on consultants. It also suggests
that the Plan should be a "rolling" plan; that is, it should be updated each
year. There is no indication that this has been carried forward. One point
which the consultants make is that the NHA needs to prepare a complementary
physical plan which should be better related to the development of the
financial plan.
The report's summary of findings and recommendations are
contained in Annex J. Highlights of the findings are contained below.
4.   Cost Recovery
An NHA basically recovers casts through sales of the
housing uniits it produces. It can do this either through cash sales or by
engaging in long term financing of the units.
An analysis of this aspect of an NHA is obviously
critical to any overall appraisal of the institution.  If the NHA is not
recovering full production costs, it will clearly need to be subsidized by
government. If it is making mortgage loans and its collection record is poor,
it will also need outside infusions of money. If this is not forthcoming,
then the institution is in financial trouble.
Illustration: Cost recovery in the case of the
Philippines NHA has not been given the support from management that is has
needed. Collections from projects and loan repayments are too small and costs
incurred on behalf of other agencies have not been reimbursed.
More efficient recovery of costs needs to be instituted.
A Cost Recovery Action Plan was developed in 1984 to improve the pace of
recoveries, but it needs systematic direction and follow-up. In addition to
direct recovery from individual beneficiaries, there is a serious problem
which arises out of the somewhat complex financial arrangements made with
local governments under the Zonal Improvement Program (ZIP).
Finally, there are delays in payment for work NHA does on
other agenices' behalf. Project agreements must be reached with all line
agencies concerning the recovery of costs, ownership and ongoing maintenance
and operating responsibilities of facilities to be constructed by the NHA but
normally falling under the jurisdiction of these agencies.
I.   Major Issues and Recommendations
This section should contain the overall appraisal of the
institution based on the information obtained under Sections A-H above,
identify the issues needing resolution and make recommendations. Suggested
issues that will need to be dealt with include: Multiplicity of role -
inefficiencies, conflicts, impact on financial viability.
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Productivity - comparison with private sector, single purpose
agencies.
Actual role in sector vs. mandate - performance in markets
assumable by private sectors.
Potential for scaling up - growth potential with or without
unlimited funds, need for focusing role, separating functions.
Increasing financial leverage - cost recovery/recycle,
mobilization of housing finance, secondary markets, private participation.
Overall management capacity
Illustration: The consultants engaged to undertake a
financial review of the Philippines NHA and prepare a five year plan for the
future identified a series of issues and constraints arising out of t1"
financial review. These are summarized below and listed in detail in Annex J:
-- The NHA continues to experience funding difficulties partially
as a result of low corporate receipts and through the uncertainty in the
amount of Government support and the timing of its releases.
-- The real costs of administration and design and supervision
are high in relation to output.
-- Cost recovery has not been given the support it has needed.
Collections from projects and loan repayments are too small and costs incurred
on behalf of other agencies have not been reimbursed.
-- Obligations for debt servicing are projected to increase
significantly during the next five years over the past levels. Over P150
million per annum will be needed to service all current domestic and foreign
obligations from 1985 onwards.
-- Projections of financial resource availability indicate that
between P787 million and P1178 million could be raised in 1984 with the high
estimate based on the assumption that Government support for the Authority and
its programs is given and that there is a significant improvement in the
corporate receipts of the NHA. Under the same assumptions the available
resources are estimated to be between P582 million and P1199 million in 1988.
-- The total capital program, representing the sum of the
departmental programs, has been estimated at P1471 million for 1984 rising to
P1773 million in 1988. With the addition of the projected debt service
requirements and administration, maintenance and other current operating
expenditures, the total financial requirements are projected at P1820 million
in 1984 increasing to P2188 million in 1988.
-- On the basis of past performance and in view of the current
implementing capacity it is unlikely that the NHA can in the future obligate
more than P800 million per annum for new capital works thus requiring
reductions to the capital programs to reduce the resource gap.
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In a situation as complex as the Philippines it is beyond the
objective of this paper, given the timeframe, to make very informed judgements
as to the proper role of the NHA in this system.  Thus, a summary of
recommendations from the various reports -is provided in this section and
represent, for the most part, a consistency of views. Although there has been
general agreement that NHA has a number of shortcomings and has not reached
its potential, there is also agreement that it has demonstrated its capacity
to produce a significant amount of housing. Further, it should be noted that
there is an on-going effort in the World Bank recently to examine in
considerable detail the role of the NHA and its effectiveness.  One set of
views has emerged that, given the context in which NHA has been operating,
i.e., the political/bureaucratic environment with the always highly
politicized nature of housing and a revamped shelter system with new agencies
and new program, NHA has done a  reasonably good job.
Perhaps a better understanding of all of NHA's operations and
programs and a more careful review and anaysis of the climate in which it
exists would have led to this conclusion sooner. Such an analysis should
result from carrying out the appraisal format proposed. It is not covered,
however, in the existing studies, with the possible exception of the Financial
Review, although World Bank project personnel undoubtedly are (were) aware of
the kinds of problems which clearly affected NHA's capacity to function
effectively.
What conclusions can be reached relative to the available
information and a test of the appraisal format. It appears that the
institutional organization of the system is reasonable. There are clearly
some areas of overlap. For instance, it would appear more efficient to have
only one government agency involved in the production of housing, no matter
what the income level cutoff the government aims at. In the Philippines you
have several. It would also appear that it might be more effective if the NHA
could divest itself of its mortgage servicing function and even the
origination function. That is, stick to development and production of shelter
and get out of the banking function. Another observation in this regard is
the production of infrastructure facilities for other government agencies
which should probably be avoided.
With regard to spinning off to the private sector those
activities that the private sector can do, Philippine shelter strategy already
appears to be headed in this direction with its HDMF/NHMFC secondary financing
program for mortgages originated by private insitutions financing certain
levels of housing built by private developers. In addition, the Ministry of
Human Settlements' Private Sites and Services Program is aimed at private
developers.  At some point the NHA might continue to contract its efforts to
even lower cost programs but this element appears to be about where it ought
to be at present. There is, however, another area where MiA is carrying out
functions that should be discontinued which is industrial estate development.
It would also appear that improvements in NHA's management
operating effectiveness are clearly possible and a more in-depth analysis
- 36 -



could point these up. What shows up in the available reports are statements
such as even with a concentration of "managerial resources on fewer tasks"
which "is badly needed", "more managerial talent may be needed, especially in
making sure that collection efficiency is adequate." There is no detailed
analysis, however, of how loans are originated, the selection of borrowers,
and ultimately the collection process and what delinquencies amount to. That
is, why is the problem there?
Relative to personnel, one report states that "although jobs
are secure, low pay scales, unclear career paths and the lack of other
incentives results in a high turnover of the best trained and most-highly
skilled staff who can easily find more rewarding opporunities elsewhere,
particularly in the private sector". A later report suggests there is no
problem. It would appear that more detailed analysis and specific
recommendations are needed if the problem is as serious as is implied.
Following is a summary of recommendations made by the reports
which dealt with NHA in some detail.  Because the Finar.zial Review and Plan
contained the most detailed examination of NHA, the major recommendations of
that study are set forth first. Following this, recommendations are set forth
which are additive or modify the first set. However, as mentioned above,
there was a significant consistency in recommendations by the various
consultants.
The major recommendations contained in the NHA Financial
Review and Plan, July 1983, are listed below. The more detailed
recommendations are contained in Annex J.
-    The NHA should request the -Government to increase its
authorized capital and obtain assurances that regular annual subscriptions of
at least P200 million are made.
-    The NHA should reorient its activities to those of a real
estate developer and reduce its role as an end financing agency.
-    Regarding the Financial Plan itself, the NHA should
prepare a complementary physical plan and update the plan annually.
-    In planning and budgeting, the first year of the plan
should form the basis of the annual budget proposals for that year.
-    Corporate receipts should be increased by the following
means:
(1) improvements in productivity and output,
(2) prices to be charged for the benefits should be the
maximum possible so long as basic affordability criteria are satisfied for
social housing lots;
(3) collection efficiency must be improved,
(4) the NRA, with government support, should actively
pursue the recovery of costs incurred on behalf of other agencies;
(5) project agreements with all line agencies should be
entered into to recover costs made on their behalf prior to development;
(6) speed-up the turnover to local governments of roads,
footpaths, drainage, public open-space and community facilities on all
completed projects for maintenance and operation;
- 37 -



(7)  the NHA, supported by the MHS, should make
arrangements with the NHMFC for the purchase of residential mortgages on all
sites and services and joint ventuire projects;
(8) bonds 6Am_ul1d be used to fund development where
outright sale is proposed or short term credit is to be provided;
(9) the outright sale of economic or open market
residential lots, commercial and industrial land should be encouraged;
(10) subsidized interest loans to beneficiaries should be
phased out;
(11) disposal of the properties held for rent should be
encouraged, but where this if not possible the introduction of economic rents
should be undertaken;
(12) active steps should be taken to recover the costs
invested in the resettlement program.
Among the other consultants there appears to be major support
for having NHA concentrate its activities on slum upgrading and sites and
services and divest itself of its economic housing (new construction)
programs, industrial estate development and other side activities, e.g.,
operating a rental housing program.
There was also general agreement that the government should
commit itself to the regular provision of funds, particularly its commitment
to equity capital until NHA can get its cost recovery up, both from
beneficiaries and other agencies for infrastructure. This recommendation is
tied in to making these funds available even at the expense of Human
Settlements Development Corporation which is developing programs at higher
income levels.
Although dependent on improving collections and perhaps
getting interest rates up or recognizing a loss, there is also general
agreement that HMFC should give serious consideration to purchasing NHA loans
so that NHA becomes a development agency only and not a long term financing
agency with its capital unavailable for development of new projects.
Procedures and implementation capacity need to be
significantly improved to cut down the back log of projects underway and
enable the funds tied-up in the fashion to be productively employed. Related
to this is this need to streamline land acquisition procedures and the need
for shelter coordination mechanisms with other agencies, both local government
joint venture partners and agencies providing infrastructure.
Overlying all of the above is the quality of management. Most
of the consultants concluded that an upgrading of middle management, both in
the extent of training and in the degree of responsibility delegated is
esselntial to more efficient program and project execution. Decentralization
of authority and responsibility across the board appears needed.
NHA should adhere to its policy of full cost recovery, and all
costs not reimbursable from other agencies should be identified as recoverable
costs, including administrative expenses. To the extent that administrative
- 38 -



expenses are excessive, as a result of such factors as a highly centralized
bureaucracy which delays decision making, then changes La its operations
should be implemented to lower these expenses in order to keep project costs
within the affordability range of low income families. Moreover, the
government should ensure that other government agencies reimburse NHA in a
tirlely fashion for those project costs which are their responsibility.
V.    CONCLUSIONS
The Philippine shelter sector, both programmatically and
institutionally, is a very complex situation. Reviewing the available
literature, mostly in the form of various reports, typically commissioned by
the World Bank and attempting to do a sample appraisal of the NHA, is a
difficult task.
One conclusion does emerge, however. Most of the reports/studies, etc.,
tend to deal with the Philippine shelter sector programs across the board;
that is, with all of the agencies or with those agencies most immediately
involved in a project and were done in 1983. Most are not completely self
contained in that they assume the reader is very knowledgeable about all of
the players in the game in the Philippines (this is not necessarily a
criticism but rather an observation).
Of the reports that were provided, only three focussed primarily on the
NHA and, as mentioned previously, one of these was a detailed financial review
and plan. Two were done in 1983 using 1982 data and one, more of a summary of
existing work, was done recently.
Nowhere is there one comprehensive report or study of the NHA that comes
close to the appraisal outline of this paper. The only study which devotes
itself exclusively to the NHA, the NHA Financial Review and Plan by Kinhill
Pty, Ltd. in July 1983, concentrated on financial analysis although the report
drew some broad-based conclusions and made related recommendatio21s based on
that analysis. Most of the analyses, observations, comments and
recommendations concerning the NHA are usually included in reports dealing
with the Philippine shelter sector in a broader context. The question is
whether this is a shortcoming.
This paper has accomplished several objectives:
- it has proposed a systematic outline to be used in analyzing an NHA
- it has illustrated this outline with examples
- using the Philippines NHA as a typical example it demonstrates that
many NHA's operate under serious constraints.
(1) the decision making environment is often complex and
unstable; there is a need to clarify housing policies of
government
(2)  internal information systems are often very poor
(3) there is poor financial structure and performance
(4) there are complex and overlapping functions leading to
programming/operational constraints
- 39 -



But the paper also demonstrates that this environment and internal
operations can probably be improved. Such things as more definitive
responsibility and accountability and greater managerial autonomy and
stability can be made more explicit. -
- 40 -



.innex A
Bibliography
The lHA - An Institutional Profile (as of end of 1982)
NHA Five Year Plan (1983-87)
NHA Financial Review and Plan, Kinhill Pty Ltd., July 1983
Financial Review (1979-82), Budget 1983, Financial Plan (1984-88)
Manual of Operations, Private Sites and Services Project
Ministry of Human Settlements (World Bank Urban III Loan)
(Project to begin 1981 over 3/4 year period)
"Low Income Urban Shelter Implementation Review Manila Case Study",
prepared by Operation Review and Support Unit, UDD, World Bank,
June 1983) - Following six reports
Low Income Urban Shelter Implementation Review - Background & Work
Program - September 9, 1982
Urban Shelter Implementation Review Meeting - May 3, 1983
Memo summarizing Manila Case Study FirAings (Memo 5/25/83)
Philippines: Manila Low Income Shelter Implementation Review
Back-to-Office Report - February 28 - March 10 mission (5/12/83
Private Sites & Service Project Urban III - Review of project -
(5/12/83)
Manila Low Income Shelter Implementation Review: The Private Sites
Services Project by Frederick C. Terzo - 4/23/83
Philippines - Manila Low Income Shelter Implementation Review by
H.B. Henward (1-11-83)
Haldane - Hicks memo dated 12/29/84, subject: "Philippines - Public
Investment Review - Shelter Sector
Patterns of Housing Quality in Developing Countries: Manila and Davao,
Struyk & Wessell, Urban Institute draft March 1984
The Philippines Housing Finance System: Current Status, Renaud and
Sengupta, (May 1983), the World Bank
The Philippines National Shelter Program: Case for Mid-Course
Corrections, Struyk, The Urban Institute draft, December 1983
Shelter Sector Assessment: An Update, National Council of Savings
Institutions for AID (June 1984)
- 41 -



The Joint Venture Housing Program   A paper prepared by the National
Housing Authority (no date).
Mission Report on National Housing Authority by J.B. D'Souza (5-31-83)
- 42 -



Annex B
OUTLINE FOR
THE TERMS OF REFERENCE FOR ANALYZING A MULTIPURPOSE
NATIONAL HOUSING AUTHORITY
I.    Legal Status and Ownership
A.   The Legal Framework and Form of Organization
B.   Capitalization and Ownership
C.   Board of Directors
II.   Background of the Institution and Its Place in the
Shelter Sector System
A.   Underlying Rationale for the Institution's
The Current Government System for Shelter
III.  Policies and Operating Guidelines
A.   Statement of Policies, Goals and Objectives
B.   Operating Guidelines
IV.   Description of Activities Carried Out By Institution
A.   The Institution's Programs and Functions
1.   Land Acquisition and Assembly
2.   Program and Project Development
3.   Studies and Research
4.   Production of Building Materials
5.   Technical Assistance to Purchasers of Housing
6.   Marketing and Sales
7.   Residential Rental Properties
8.   Commercial Activities Other Than Housing
B.   Activities Carried Out for Other Agencies
C.   Financial Activities
1.   Mobilization of Resources
2.   Long-Term Financing
D.   Competition or Overlap
E.   Coordination With or Approval By Other Government
Agencies
- 43 -



V.    Organization and Operations
A.   Organization and Functional Descriptions
B.   Operations
VI.   Management
A.   General Management
B.   Corporate Plan
C. Staff and Personnel Analysis
D.   Management Information Systems, Controls and
Procedures
VII.  Financial Analysis
A.   Financial Statements
B.   Financial Plans
C.   Accounting
D.   Cost Recovery
IX.   Consolidated Evaluation of the Institution and Major
Issues
X.    Major Issues and Recommendation
- 44 -



ANNEX C-I.
PRICE   i RAT  WIOC11t~3fl NM F II E RATIONI0L
NATIONALtIHOMES NHXE              3ECE     3     NERf(T1ftNF "EAIE       fW,
,I, 305 243   4 3   .0 4 5  56  5 0  5 5  4 4  39  2.9  4 6  75  IO  5.3  1986  1387 8   .9
15.4  72 2216  00 20   1   19  3.6  2.8  2.3  1.9  1 8  2.0  9 3 8  2.5 _ 3'Fbiay  95'''e'
2                   .          u7...-                 .-                 TIMELINESS
_-20 , %,                                                 ,  h,iltr_
L4 1471  I  I, 18:igd.OSa d.97tl
9'a80             18   2.7  d.9  41  4                                d.15..   W  SIETArnni.er  AJ  40
2.32a00 0    I a0010  3.0311 .0~  31 1.8  --  '  -1.00.4  -  -1-       -     lee/a          .
to-uy     I 2L'~'        ~    -    -  -
c. 19 8. mil1 ¾   u.db.(96 ) call197abl7 1973 .1 7  d1975  1927619.77   1973~  d975  1980  19.1  1982  19  19 dl.  9'l.  1. P0fi uSfN  t  3.089
510.85'  con.9 int 43o 8  4,8 24.7101co41n. s1e.0a17.741.50.  18 - 1 .28 I22  1 -1  71' 9411.5 -aW   h  35
PusseU 5iiy  '  mil 0n 5 .  .  80  787.2  .2272 32?03.'  251407 I3:   3N.5  34.5  Di d L oeg..n d evbt (Sid) I'  3i0
5159.2 .29 mI 1.6  138 £~ i  49.834 .3  3.5  319 43.92  33.1  3280  19.82i3201 291 7.5 LS 19.  Net Vaili Sue   23.0s
NI:N    F  N  ..  EffeT554J1i
Tso ek S7/54 r74niii.. Dully diitad Ysharemill NMF NMF NM3194I37% i0NMF INMF NMF NM'~F NMF NWF .NAM opriRetarn toCom q.?3
Cs) Asse5cov.ito  . 2. 0co .7 s i.at S4 'UN1NtlnlHms  oprtoni50edigmn.an  eletae  ao  coat abo t 1%o  aes  8
lReceS6 ivlel.. cap11i138talized   arct((..aiedsngo  admlt4m,y pecaio  att29%  stmtd  lntae:rum~.Ha  0
Curn  ses  87. 2.   2.2TttsatoteokMuta  .od.4Urian'8.9  7ncrpraed  Idin.S  Laddes  al  vnea  ac
35. aybe 47  .   .  C9lp  and0 opeate  reotad  eieen  omniis Sret  .fyea  niaa494
Osb Du     9.7ota  8,1n14.8rNationa LoSeswillalmo2.cerainl     unier''t housin uong-Tos buil las,era
Other  26.5                         572  32.5I327.84
Saes -1.5r-7.%   5
CUarNinT POTO                                                          NMN- NMF1 t eiP 1       i
CDsvidetds  2-,   .    Nil sao   atioynwakoe Courthperaiod i probablyg rinothn hoesl could wLlbo dent deandoat Noationa'9 ls
C. QiaRsRL SALES (1.7ll  1ull faufrou rthfqabrterossi qunaited inely. Nn nlifml  rcationrale mu9. stimuied panothaer2 revenueHs S
inentory(MIFO31 Jne3  120 De.16.0e Thes stringt hofe deficites haretldt soappeuid. smpoycei it72 ishtorodDrcoson1% compeeefetvl
492.    231497.81 Natiwhoneahsufi.LNatincistopraengthrpan1972,in move stokCheirma-toP Flyea,r. Preriod.ents assaysice
1983en 11.3t  2 8.1 2U 14.3-.  394'S   as ofadlngthrebtck ountamin.Sldl6o82 AntseendS Ingortorbed soldiasna Adrshles:EfeAnu totsmallanes-
19843 Y13.6l," 195 38.815.  209 Deeopsthe Spepatembresr qandretiermeat yomntear Stors aentbearticularlyeproducti479e4
19b5 Due1 15.7" 1. 14.4 .8 National' eHuits wasl8milont craindit andvewould beolssiso uifthe bitreasury'ar 1as
repANIG E SAE~-      or&teitrm de trwasig33 milinn.uWe raeficit tlaxhltr were psd(not as succedsfun ous prti
19i{.-'.8~.3          for 184, ad it tntetok oenth)intheasetya12 yers Natio, nald assumena auouts $20bmllion in
ANNUAL    ~2  .~'~d1-1d.1W     simt    aina    illg nte, newTrealPestatesand reeuacostrutio
Es3 d2'05 .0K'd.07  &2 Thleiompanylhd adeficitthofyashWe think revenues,. ancasurtaiont that' no athae
18 d.5.8d7      SNtos.willm. behoperatingein ao thoe- assured. nskyNatioal shaxres,n o whchornk
1985nings .6  -7   .NAof   busoidn  nvrnet lgtly weakerut pro poal nth.3 (Avera couldiwelldntemand arent curientl'y
U. IQ UARTERLY SAL1ES (S Aill)FD 4afut-ure os sqielkl.       Ntoa musbulantervne
endsr' iM v31 lue3 W. 3 3v- 31 YO  ah yeariago hofwefe aicithasmsargpes w sllrecmendfedti to copt effectivel
191 4  2.7 2.3 14.9 7. Natbeneit fromshttcial sthenLaaytheI 19d2- over_the_3 to5 _er _e_o_It_ ssy
1982 I    1.      I T. .   a8nth coplant late laet weort and moving ioper into CASH OSIgIoffc condosi'andrenal' 92054
18 1. ".030 r,4,1. 6.  Narosnects forit wthe Natmilion aldiaan ol bbejless soa Lifbffie Trasrys%a
vid)ase on MweragJue shaes IncLu30Des3 Yows jain  any C (7L.owes8t. f12. 84.nancialerSinrsnsthrldemectie.nsIL.sOdur.1ompany' FinanialtSonnstr or
from discontVnue dgea1ins d7.1 51l.09: Eanldesh satnkon reprchse) ofdor Saety ad Juy1.17.(ionamllons atmusmrie Sabolut 52 ilini
134.in eExcludes                      ligtl eektrthaordinverge)fo Tieliesseae nt crretl
FactMarl 31 mi'a 30 Soota.i30 Di'o 3,'c Y   to a ya agio;s. h.ntow evr NaIStio'ad.  magn wi  recommende.L!-  A..1IHS9
'tfrm hutein 45e Laaeten



ANNEX C-2
r  i ~RECENT                            P               tn 30    RELATIVE          l DIY 0 .
PULTE HOnuM EYSE.PHM                       PRICE    20 RATc2 3.8                    2~ ' RT.1 6'Y.              %I
!3   , 1.       1 4   08    3    13 33  3a  o a   1.2   2 0  3J 7  A3   1 94  .37 5  27 0 _
Lo.o-  I10  04    08a  06 a  0.1   0.1   0.   0.2   0.5  06a   0 9   1 1   2 8  3 2   7 8  10.1-
ecso.    19854                  -        -                                 or--* ---
A S 0NOIJ FMA MJ      J A S   O
0nu  10301 00 010 1 0 003.         ..*   .0__
Institubonal Decisions             -*--        *--     ----        ________9
B~uy     is        '6   IS             --20                                                       15 Febrary ,1, l   Vatus .
w Sa      I6   1     1   23    1 201    _________
MaaOO42101 1  4046 4012 As617                            A ~p.J.pf I.u15m           \ t          TIMELINESS
- -----                                                  -'---cm--_ &a I an Next 12 hi
.05 Oaiii Fi.w'"
4               . _  _  _  _  _  _  _  _  _  _ _fi"                      ~ i6-..L            4 BETlA   1.36      M Nerut)
1968- 1969_1970__1971._1972__1973__1974.1975  1976  1977 1978 1979  1980  1961  1982, 196L3 1984 196!5 I            874-
1.90  2.13.07    3.27  2.29  2.21  3.48  5.85 IJ8.74 I12.56 114.33 l118.70 20.36 136.73  X71111 34.25 lies w sh  44.25
--  04   04   081   .04  .02 ~02     .11 j.31 I48 1 .85     58)  .491 1.001 2.18!  ANI tN   CasAFWr'prs      iss.6
-- .03   .04  .071  .02  - -   .011  .09' .231   421  571   47' .381   ,78  1.841  .655  1.  smpes       A4i
------I-            -    -                .021  03    .051  .0   06   I0.12 1     .121 Div'd Dsd'd pw%AIj  .15
~         7    53   591   59   80   .81   .721  951 1.401_912.7I281        37    5.0 115'73fSekVdeNt               27
-- --I 16.40 22.95 i12295 I24.3S 1t24.39 24.9 124.43. 24.47 23.28 ~23.42 22174 22.96 23.50 23.50 2U.NO 23.UJ Com' m M 5 tam0tstgFr2.4
-- -- 23.5  30.0  137  16.8  45.017.1  4.5 I 2.81  3.0!  2.86  5.0  TFi7 f. 14.7 24.71       1 Avt Ara.iPFE ftW 13
I  -I   --_ .    - 1   --         1..I   1.3              9%   1,4% t%          7           v 8%)  Div' ri
-  .9  .2    .4   1.6634 1.%                       2.2% I 98   1.3    6114231            1h %         ~     71
55hLSRUTRE"              8: 53:.8    84.1 J138.31 ~203.4 1294.1 325.8 '383.5 478.5 883.3 i____I tw u
LT tD* =& mIL    DsLTI S2rSl.4milL  1.S%  2.6  66.9% 10.1% 18.9% 1 5.5%   1.8   64    3    20% i S.r%OAute              *
LIA,twiiS2.4 milL.  -   I`511.8% 491%46.8% :2.9 I3.%148             4.%48       WN   uW7
(LT inteee earned: 2.0x totalin     .1    .3   2.41  5.9  1o.sI 14.5  11.9  9.60 22.0{ 48.91  17.31 361S Not"Pef (Sw) . 9(
Gay" 5    i 17x)      (14% at C&Pl)  .2% 1.5% 2.8%  4.3%1 5.2%; 4.9%  3.7% 2.5%  4.8% 15.7% 2.1%; 112%  Rd Pro& M!5e   .5
PuaeLJMI~No.il~3VNIWfl2  5.  3. {9.j   41        70.6  8864  9418 184.9 1113.8 1IaeIwu(m
2171 -            i8.91 30:1 J~24.9 1.L..LL..
21.722.119I 32.4   1 91.     111.2 1102.7' 108.31173.01  II#  NItsWerng Cap($I 44)
10.0  10.01 10.0  14 .5  29. 0 39.1  48.7) 28.912.  26.4 ji 22.5  *  LowTeq Do(SlI)  it
14.5  14.8  17.5  23 22 32.6 _L6.4 L.56.1 I6468 8..72 1)1L1. 1to  i  Not NW* (3ulim
COMM 55k 23.50,M       llill Uof C.ep') 2.2%  3.0%I110.6% 117 2% '18.5% 19.2% 0138% '16.5% :20.1% 31.3% I19.5% 173J'S Eariad to Tetia 11.5
211LS mU. primary slie  jv1  I                  .    1                     15%19       EriNtet         15
' .8%  1.9% !13.4% :24.7% ,31.1% ;29.7% ~19.514 i13l1% 23.8% 13. S .% 17Y.5% I S MuiaWto Camm"ER i
CURNWETP0TWM  i=     Is    91      -- --   - --      3%!  4% I 5% !   9% ) 12%   6%      j 18%1 9%I- AMllWwds 4NePMe  .1%
asth AsaseU   5.4.   61.7     as.' WiU5111111 Pulte Horne Corporation is a major builId-or of sidiary, Pr'ovidee mnoftgage firnancing. 'w de~ecaation rate:
Recaivvat,l    2.0~.  S'      5.2 lingi..family homes and developer of residential sub- 14.4%. Hee 1.700 employees; 2.101 shareholders DIrectors
Inventory lot  107.2  ¶75.5  IUJ   divisa.one. The company operates In 10 states through two control 68% of tde outstnding stock. Incorpnorted;, Deai.
otire          44 .  1 i.8    7.1 regional off ices leastarn and westeml. Singlefsmrrl de- ware. Chairman and Chief Exacutrre Officar: Jamnes Gross.
Curr.int Assets  168.1-- 253.4  249.2 tecited homes provide 88% of total settlements. Sold 1 1.006 tlId. Preaident: Roy F. Krag. Addras.: MOO Farmington Road,
2AtsP'al  .2  3.6          units in 1964. 1CM Mortgage Corp.. a wholly.owred sub.. Wet Bloornfield, Michigan 48033.
Debt Due       8.1    7.8       5  Pulte's operating margin wnidened in         However, other majors lie Ryan and Ryland
Other         25.5   39      47.2Z.  the Decemequre,fmlestn1%                   hv   alom     ednoteeraket,              -
Current Uab.  59.1   90.4     90.9merql"ter                  m   lesta      %   hvalomvdioteemrks,ce
ANNUAL RATI  Pst   P               in the furst nine months to 3.9%. The im- ating more competition for available buyers.
atchanga4mshl t0oY,  5      .,,.   provement stems mainly from      stringent We look for only a moderate reduction in
Sales      24 0%  33,0%     105    cost-cutting measure.s taken during te      buydowns for Pute in 1985, when we fore.
~Cs ?W 3.%33.0%        14~    year, especially in the third quarter.  hat's cast that conventional mortgage rates will
Earnings   38,5%  32.0%     '11--1  when Pute closed its Seattle and Orlando    average about 100 basis points below the
8ook Value  21 5% 320        10    operations and decided to cut back or close  14% loKged in 1984.
cl  QUARTERLY SALES (S mill.)  Fu  divisions in Detroit, Pennsylvania, and  We estimate Pulte's profits wifl recover
anda 1 Mar. 31 June 30 SaVL 3@ De-.31 Yw  Puerto Rico. Pulte begins 1985 with 15 on- to$1.30asharehisyear,rnainly because
1i6.  0.  035190335ging diivisions (vs. 24 in' early 1984) and       of the coat-cutting measures citedabove. The
1982  8 2.0 102.3 127.3 186.8 4785  about 20% less employees than a year ear- slide in mortgage rates since mid-1984 has
1983 1155.0 210.9 219.? 278.0 863'3 lies The cost savings will be reflected in  not been reflected in a quickening of new
19841193.5 214.0 203.4 228.2 839. 1better operating margins in l985. We believe  orders. They totaled 2 ,171 in the fourth
1 965 1145  "-       - 2U  a      the numiber of sub-divisions, a key element in  quarter, 23% below the year-ago leveL We.
ca.  , ARMIN 3 PE  9JO . (A) ulge5 rtn   sales, isnwntsubstantiallyexctnwodrfrPuein18                        ofUw
oWsd kMa. 31 June 38 Sa. 31 Do. 31~ w y below t.he year-ago level..~. -  .    the national experience and be down mod-
1961. .03it .JS. w. .03- .17- x' .33  However, buydowns continue to weigh      estly. PUlte St.arted 1985 with a backlog o
1962 d.05 .i.11 rr 24..r- 4V -.78  heavily on erig,diespite the drop of, 1,559 units, 29% below the year-apoamount.
1962  .31   .47-  .53' , 532  1 84  about.200 basiS point.. (two percentage. Wet estimate Pulte will deliver at least
.64 .06.  .12 i.1   .29    .55
1961s .15   -S     *    'So .  1.3  points) in conventional mortage rat-es since  10%-15% fewer homes this year than last,
Ci-   QUARTERLY DIVIDENDS PAID 5Fuii  midi-1984. Buydown.s (payments to home - PUlte sh.areu,now selling at 23.8 times ean
andy Ma. 31 Jum 30 SopL30 De 31  s  buyer. to reduce their mortge rte) cost ings, appear to discount thefprojected reco-
Tiiui .012- .012  .012 . .012 T05  Pulte about 250 a share in tJheTfort quarJ" ery in net. Owr estimates for Pulte do not
19m  .012, . 012  .012  .012 I.05  ter, not too much fess than the 304 in the.. assume passage of the Treasu.r;y's tax sim
193.17~ .017  .025  .2    0    thirdt quarter. Pulte emphasizes large      pliication plan, which,' uopnin, woul
i   .025., .03.  .03 nv,6 I ~15 S  gowth markets in the South and Southwest bea negative for housing initially.
195                       othe company ca    anefcece        fae.                                 AK.KB.IH.S.K
(.A).Prinaay earings. Neat earings re1Crt peyneri osee: Aar. 2. July 2. Oct. 1, Dec. fust a timing ditisrenca First quarter, I t6 carry's~ Ftnancial Sveraqtn  B.;
due laet Apr. Excludes nonracriing gan 27(C) In millions. iidpAxtod for stock Iis  Id paid on Dec. 27. 1564.  Stock's Price stability  I S.
'EL 134. (5) Next dMdend meeting about A dividernds. (0I Specrfic idemtification. 1E)       Earninegsott Prsdiciabnli   4
Mar. 5. Goes ex abo-ut Mar. 13. Dividewd                 so   _t__E_ri                               ________t_bi____
Facruse matw,ai .5 _ramsd hrom sour,ce. os4,w"d toa ruigabi but c.sstnoi  guarantsed
-46-



ANNEX C-3
RYAN HOM ES, INOC NYSE RECENT                           E8I'o17.2( Z              14. RI%156TI03.E%
i~ 13.1- 181 i28 8   34.A29 8     1a8  2286  25 8  20 0  2 38  2 54  30 0  28 9   48.0  50 0  J35.8      1386  1387  .988. 1989
LO-~    8.0  10 8  19.3  236   10.0   5.5  1 13  15.8  1 44  14 9  15.3  1865  14 8  1 2.0  30 0  i7.4* ~  ---------          128
nade  sion    196A              - -.                               ___.      .....                          --             8
ASONOIJFMAMJ JAS O
re *WY  1 3 0 1 52 12 a13 30     0        -.
to 50   4  1  3  2  Oj 1 2  1  1  1  0  o 0   0   I .0'                                                                          6
48
1111                                                                 . .  *.321Febcuery 1, 190         Valus Lr,t
7A                                                                            24 TIMELIESS     3
Z ', ,*-            p   7   TT      i          _         -     -      1'.     20            3~~mll.
-  2SAFETY
-  .*     .Sci                        kghssl to S  wull
I BETA 1.25  ~1.0 - W.u"u11
Institutional Decisions                                                                                       1u-m      cn  s
I4lesoCM 4857 4167  4444  3937  4211 I                                     'dJjrj                           _______________
1961I 1969, 1970, 1971- 1972  1973  1974  1975  1975  k977  1971  1979  1960  1961  1982  1963 1984 1985I     0    i- '.87-49E
1 1.85' 13.6 7  14.281.18.91 24.14.1 29.48' 30.86j 30.58: 35.31~ 47.601 61.57, 715.05; 64.79. 55.94. 59.44. 88.00 #S.u eaa  SAW,rs W, izesa
.47   .65~ .89j  1.081  1.381  148  1.61)  1.741 1.90  2.40  2.7 4 I3.431 2.71!, 1.181  1.511 13.44. 1.1  2.4OS "CaA FI'"pesh  5.25
.47   .501  .6   *971 1.261  1.42  1.48  1.601 1.74  2.23  2.49i 1.05t 2.321 1.721  .I 1.00 2.94    1.J15, Ea nts Dod trs  a 4 .s
-    -   .--   I   --         .20.201 .201 43          58    851  .5    123  130      5   I 0'10     1.iDvdDedp s        n    .J
2.19  2.791 3.73  4.091 5.241 6.57. 7.871 3.261 10.69. 12.431 14.131 16.26! 17.37' 16.80i'I I.'351 18.69 19.n9 2I7e Bok V prsh  I ci So
17.rTfl  TdI-F  1V    2. I-iI     Th~11.3i 11.9      5.' 7      6.21  10.1  29.'8.r3.4 i5:I          A 7   TP- 2I
1.01.041  1.48. 1.641  1.521 1.34  l.09j  1.511 1.52j .8  .0   .9j131      .0120       .3114           uiP/[1              1
__ __ --    -         1.%   1.7%I 1.1%! 2.1%~ 3.5%I  .%  5.5% I5.3%' 6.1%  56,25%1 4.1%l         AAw'Dv      il
CAPITAL STRUCTURE seatW3W            1960119.2W25.68.9      3saw V(53i7iw) TI.f
TsW NDMS104 miM.  DM in.SYrUGS.OfsuN.  9.9%1 10.5%l 9.5%  9.0%  S.1I.%   70       ,'  3      .IZOt38         91i
LT OeM 1195.7 mIll.  IT lawmM $1.3 milL                   I   .%1.%7.%.%l3l4.%25%1%1                                         _
lnl. S . 2mll. 8% debs. ('91) cailable at 10I M               4j5T5IW                               17f1      Ti   1   7     *
ev nt 279se.a 305.9.51 510.41 511.4           14.71  18.4j 20.51  15.51  4.91  7.5  20.91 Its IllNlfWSmI             n1.s
lnct. Sl1.O mill. capl'ized leames.  4.9%1 5.4%1 .1%   4.8%l 4.1%! 4.1%1 3.6%1 1.3%1 1.9%  3.5%;i 1.1%'1 Z3% NP MR U   -   1    S.%
(LT Interest earned: 24.5x: total Interest  40.3  38.81 46.4  68'i1  iIj--    -      --       j     ,     jHe.leMar (:am)
coveree: 4.7x)           % of1421                                            1      1               I      L.a) u9. I  eII  I __
40. .                       1.  4.71.1 190.  11.4  19.7  20.61  14.71 18.0  919.1  17.51  In 1 3s LW  Aq.Te ~(3*)    ye.
Pm.W UaMIy None ,n.'83 vs. None in ~    "'27'4.         84          711 5.     76.3' 191  126.115       11~aISu)~
PWdSke  None                         49.S  58.al 68.4  80.2t 91.7 06.0l 114.21 111.5 109.4I117.11  115  135 kNetNo%(Sii11I)    1i
15.2%. 15.5%! 14.9%1 16.5%l 15.3%1 16.8%) 12.4%f 4.4%  6.9%1 15.0%! Zs  .%SE.  .TwC01Is
'sSl    613.2134w IAL (%of C.A0') 19.21if 17.7%! 16.7%V 18.3%1 17.9%A! 19.3%~ 13.6%l__4.4  6.%I1j5%. LOW%19.9%  S %F.ud PeM "WeM  17.8%
MM________________1.%            14.5%1 12.7%1 13.7% 1 1.9%i 12.9%! 6.5%1 NMFI  .3%1 11.1%: 2.5%I  f £ Ai Rearoto C-nmEq' I2.#%
13Ypsmw                       %   18%1 24%, 25%T    34%!  3     52%i NMF    9 5 A 32i "%S     5#91jAN   das NtP?511  3o%
Ca1sh Asset    2..1s                  AIIII311: Ryan Htonw, Ime. is a mano buildwr ot single. 10O%.-m-ed suir  tvd  eteefinan n. I9
RIeceivablIv . 7.5   25.9      23.9 family~ and multi-famnily housing. Primary mar-kes: Wait.  deproeritlo ran, 7.2%L Rm-4,J9  emoulovea: 1,510 stwig.
Inventory si  114.5  117.75  137.1  D.C. ame. Ohio. Pennsiyivania. and New Yio&k Also ooatas. holderm Directors control 3% of ousamnding stoc, lntcor.
Othe          48.0   133.7     110.8 In indiana. Gwrgsa. K.entuu*y. Tennessee, Florida. Virginia. porsted: Pennsyvlvania. Chaurman &k Chief Executive Officer
Current Assets 17183  278.7   273.9  North Carolina and Texas. Single4famity detacheod homes  Malcolm M. PrnneL Presidernt: Steven J. SnmittL Address: 100
Accta Payable  22.2  23.1      25.3  account fofr 52% of unit sales. Ryan Ffhancial Services.a Rvan Court Pittsburgh. Perirsyiventa 15206.
Debt Due      41.7   105.6     SIL3  An unexpected. sharp upturn in inter.          Also. buydowns tmortgag      ayments to cus-
Other         18.9    23.9     21.0O  est rates torpedoed net asAt year-, Ryan's tomners to induce the sale       should lessen.
Current Uiab.  to.8  152.8     134.8  deliveries were only modestly below      the   Indeed, in the fourth quarter, when interest
ANNAL1AT   Post  Pos  Emd'       ear-ago level. Mortgage interest rae,rs         ae      elndsharply, Ryan conceded
OfSalve     0  1 Ym  7.0 Yre a       about 200 basis points (two percentag          $1.54$2.0 million less in buydowns not'al-
"Cash Flow-   4.5%  -2.5%     1&5%   points) in 1984's first half, aLfter Ryan Finarn.  ready in the selling price than in the third
Earnings      2.5%  -6.0%    27.0%   cial Services had passed on to the parent      Quarter.
Dividernds   19.0%  13.0%     2.5%thtW                                                   siaeh
Bo-ok Value  12.5%  7.0%      7.5    compn       epcted brokerage income tat          e estmtetat Ryan's income will re.
Cl.&I.  QUARTERLY SALES (: mill.)  Fu  didn't materiaize. Ryan's equity in the net  cover to around $2 a share in 1985, al-
arAw Mm. 31 June 3o s.p. 30 Dw- 31 Y  income of its mortgage subsidiary fell by    most entirely as a result of margin im-
1931   90.8 108.5  89.1  83.0 -7.   two-thirc.s in the rirst nine months to about   p~vement. Ryan started 1985 with a back-
1932   62.0 104.8 103.6 127.2 3971.4  2 maillion. Also, gross margins at the home-  log,f that was 15%-20%  below the year-ago
1933  121.0 164.6 155.8 158,7 59&   building operations suffered. Ryan had to      level, in our estimation, and we look for 1985
1954  119.3 164.1 141.4 1±2   50 Sig as. on to customers an additional $2 mil-      delivries to decline 5%-10%. Revenues will
19515  135  1s#,  155 -17g S        tlion in mortgage points in the second and     be aided this year by deliveries from last
C4&. ,  EARN11NG1S PER SHARE  IAI Fl  third  quarters in    order to    remain, year's start-up oper-ations in Forida and
seiial On. 31 lot eN S~p. 1 D. 31 I ar  competitive.  ...       ,,                 Tea.Business will1 also be helped by the
1981   .27~  '33.  s1j. doe 0 T7 .7  We expect Ryan's nmagins to improv. introduction of newly designed facades (the
1962 d.44-.36w- .3       .85   1.10  consiclerably in 198. Mortgage rates are' American Portfolio line of homes), which
19433  .34'  1.03'. .77'. .78 I2.94  currently about where they were near the-' increase the curb appeal of Ryan's Northern
1934  .36 -.6      P3     4 AID     beginning of 1984. However, U.S. real eco- product line. We think Ryan shares wil per-
- ~ QATRYDVDNS      ir-nomiuc growth hsslowed since then, oe 0rm aswell as the aver-age stock inthe year
Av Mm. 31 Ju 30 4L 3.   D r, 314 Yew  ducin.g chatnces for another sharp upswingiM  ahead. They have considerable capital gains
m95 t.2  32  2  35~ortgage rates thiB year, in our opinilon. We            potential to 1987-89, buoyed by the comn-
iaI.2 .35 .5     .5    1.15  loo  or mortgage rates in 1985 to average. pany's use of industrialized construction
aim .25 -   25v  .25    .25    1.00  about one percentage point below the year- (which saves on costs), its sound capital-
194 1.25   .25.   .25   .25    1.0  ago leveL If we're right, Ryan Financial         iation, and expected continuedi expansion
iaIM .25                            Services' income will rise substantially.       into'the faster growing Sunbelt. A,K.B./N.T.
(A. Primary earnings. Next earnings report 126 Goes ex abou Apr. 3. Oividend pay- -79esh. 'DI In mitlIons. adiustad for stock compenY's Financial Strength  5.
dusearty Feb. Exci. nonrecurring Ios:'52.j mentdatin: Jan. 25, Apr. 27. July 27. Oct. splits and divtdends. IE) Specific Stock's PricesStability  3
I4* 0 Next dividend rreeting about Mar.26. (C) Indi. intangibles In '83 56.A mill., idenuico     Price Growth Perusiaane      25
44.Earrings PredicuabilIty                                                                             25
PcI.e ruatosue is btained from woume be4wevd to beo m4*bfie but cmatro be guwaanIa.d.
-47    -



A1NNEEX C-4
RYLAND GR0UPNYsr-_YL                          _ 24 '                        ILol35           k2.%
88 41.                            4        3   9 Z5 1  3 8 0   5 _ _ _ _ _ _ _ _ _ _
87   73    7   1 8       5      8   40   13 0    5  0    5 3  3 0  5
Insier Ocaofla  1984-               -
A SONOJ FMA MJJ A S       __    _   _   _  _   _ 0T~~eN
~'T~T,1g,'4--         ~                                     'J.4to.1acii1 ---1 9I TIEINS
IL  e                     SAF ETf       3A
4-, ..                                            '                                     ETA i.53  (I a- Norio
instItuticonl Oac1111ia41o"6n0
-                                 a- i  1 *4  Ue.w:9
5   10  13   10  -  7  1 1
mw   lo   63 2747  2740  3102  347'tae     .LJ                     L_-_________L__4                   ____OM __
1968 196   1970 1971 1971973 1974AZ~ 1975 1976 1377 '1971 1979 1960  1981 19621963 IN 1M  s85m.      um. ML~ 874
.273 .34              .47   41  .51 I  94  1.10 1~02  1.34  1.013  .57  .71271   319Zt   Cb i"wl        1.71
30               39 4- 3-.-              9 1.04  96  .24  1.0  .50   .70!  .2159    1.31 LUuNr .p'Asui
---                    -    04 1 .06  .13  . .21  .281 .301  36 .338  sB I60   .wD iw'du0Dm'd w i   .7
.11 .1     --0  '0WT  .3   .0 -:07   .05 r1T~..8          1.28r 1. ..M              s    Z
.4  8  .926    .33.93   4.871 5.72  6.72  748!i 7.51! 7,831 10.04~ 19.31' 12ii an     13w1.w i
5.5  554  15 5.0   13  i14TT7     8.51  6.18 i .3s.91  .97~  .3  .9    1~Cmb~g'
24.2 28.  1T37  6.1  9.5  8.4  8.4  6.0  4.4 . 7.4  15,8s  14.0  10.5  llsA    t ' P  "    1.
- j  : :L   1.55  1.93  1.35  95  1.27  1.03  .84  .82  .64 - 93  1.90  1.54 j  .89  1.51..1
- -        -      %   .-  - 1.9% 13.7%  4.8%1 3.9%  4.7%  3.8% j1.9% 3.iA Ao't Ow'd TY  v
CDIITU. ST1MflI - so wm          51   552   89.131 116.8 22~77 24560 251.0 2308  08  394.5  JW  43 us    .~.
TsW0~4513.1m4M  oeernsyraV.omul.  7,4%  8.7% 110.5% 1 9.3%  6.41% 8.3%1 5.4%  3.4%1 2.9% .% 4.9% AL*  4%  0pur.gMw
LT D* 513.1 milL " LTY I3m 51.0 miii.  *  -  -r*.~~4                     ~     ~     ~      J    ~    ~      .
Ind. S12.S miH. c.pitgi.Ieees 11.9    2.5' 4.7I  5.5  6.4  7.9' 6.6  3.0I         i 4.2,IL# 119  PN ',(S0 -' L :1.,
ILT rinterest earnod: 32.2x; total interest WWO.% 5!UiI 4 IWTTI rr,as 4112  SU% 48.5% 38.1% 44.1% 1415% E.%  lmie TM ~  49.%
(vrg:2.x¶.   .  17% of,.apll) 3.3% .4.4%  5.3%f 4.%23  2% 2%   13   2.0%  4.0% .1A4.%12    P-NW           %
A .     1127    14.8 1T.2~ 24.1 3.6.3 40.7 .44.3 40.6 46.0 .72.1  as9 MSu   o   oWl!  .,. 149
Md 3tor None                 - -   -     . 1 '.   i .I--  -  - --  3.5 : 7.2 1.2.53 119O  LIII-LqTom rW($11111 - A.s
P?R  oe.   ~       .Z:    I 13.7  15.8' 20.21 25.2 37.2 41.5  45.3 44 4  47,1  60.6  L 70P "S           115 ---__
14.0% 15.7% 23.5% 22.0% 11%3.%43%8.7%     1.2% 22.1% 1.% 14J%  %wd~CW         59
aie   6S.7 h.1%oapT    14.0% 15.7% 123.5% I22.0% 17.1% 119.1% 14.3%  6.8% 81.9% 2 ,19-iff~1Stw".d5%rm f
14.0% 1.4% 21.6% 119.4,% 13.5% 115.1% 10.1%  1.3%  4.2% j20.9%  L$%' 11I9  % tA C  15.5
CLIW   P311011! ow Is_saw         8%   8S  1 2  2.1%  21% 130% 172% 153%  19%  49%1 3J1% Al W,s to lPr@4 1 W0
Cash Asseu    1.5    1.2   143 54                t~            PmA    IANr~CIi ho nin
RacoVakws ,  .0  25   10 o41t5 cio4.KnxxIOr of gfg*14oo9Irmys1 ndw  eahd Crew Camersinid in 197L3.3 dercao rs, 3.414 Es.
Inlvelo,niOiry  53.1 .  4.  81.3 hmern. Also mnanutaaume  build ~Iir4 matanae wf4 urrmsin plum age: 2 yeams Mm 7Z swckhokler% 80 em.
Other         97    44.9   10.6 modular housing. Provides mortqg.e financing ttwowgh peoyee Dir~ore own 15.e% of stct. Chaarmia & Preag
Curemns Assets  66,3  115.1  105.6 wJuly-owned subidiarY. Ryliond MorlgageCornpear* Maicr dent CJ. Pewk Incorporstad: Mary4iod. ~Addree: 1=21
Act aabe 72  7.     16markets: Pennsyvavnia, Maryland. Washington Virgmini. W1naopmn Circle. Columnbia. MaiVland 210.
A18,2yalt 72    .      1..   hsya        od    mr      rms      o
Debt Due      138.6 2Ti1erhod5.eprms                                   o  Ryland's exp.aniolf last year into Atlanta,
Cuheran  b   18.7 -16     1-9 RyALsnd than 1984 At the beginning of last. Oklahoma Ci.ty, Phoex andi Boca Raton.,
4.   275year, Ryland, expecting rising housing operations that contributed negligible de-
ANNUAL AATIES Past  Paot  EW4 M.DO st.art,s, geared up t-o deliver 1,500-1,600 con-~ liveries in 198.4. Also, expected moderately
of cilafiW 1W diN 10 Y,a  S Ts  to U1111 vention.al units qu.arterly, a rate that didn't lower mortpage rates will encourage sam.Le-r
Sales     :9.0%  13 0%   73.3%ofRads
"~Casri Flow"' ¶ 30%  8 0%  la .%  materiali.ze. Overhead reductions during builders, purchiasersoRyads  modular
Earnings  13.0%  5.0%    i9.0h  1984 put Ryland in a leaner operatng ponl.. homes, to become more active. We estimate
is dent  1  1245%   I-O   tion at the beginning of 1985. Also, with that sales of Ryland's modular operationi,
C*  QUARTERLY SAM (S ala  Ful  rapidly rising mortgage rates last year, the commenced in 1982, will expand 50% to $30
NNdW !MN. 31 Ime 36 tep. 36 Der 31 Yew  compn  was forced to increase buydown.s... million this year, and that the unit will be-
T9ii  52.  51.  83. 53, 230    (up frntmrtgage payments to custwmers). corn, profitabl after loeing money in 1984.
1982  39.2  48.4.4  4  85 285beltweenthe contractsining and the clos- Ryland's modular homne o porations
1983  71-S5. 101.7., 118.1, 95.4 314.5 nfL&x risk hAving customersg walk awayj  a the cam  ayan  dded dimen.sion..
1984 .  1034 -i1134. Nj'n     o    TalTireilwith' real U.S, eco-,!.i buildar      isRladrqz rltvl
1985  75.0 1I'X 121  121  439  no=W growth ;oldofWpf (1.6% forecast v&- larg  su.bdi'visiomu in ordler vp operate *
CAI.  EWIM   PSn %WA3 , AFi 6.8% in 1984), we expect mortgage rates to,. ficieltlr. Withi ita mo4ula oPerations,
oadaf NW. 1 m   P.3     11Yes average about one porgenaw poin t w1nw    Ryl-zi4mp ~aLh in on Lbe s-al,oca buinide
1981  og        J     ofD  0  - 5  the 1984 level, and not to- .3  .0'a up aharply a,ark0*. Ryland. sells a local buildex the
1952  01 1i      201   .32  .70 dinghyes&lj          i                      4J4~n11m~4.as unit,, which is a lookalike for
192 3F.~  7:i       5   2.52 b,um wn at          iii    "    rftA1 illa~ ~d6nventional home. 'Ths s:ma.l
119"3.17  .4* 4    .411      W   mwwus t1a     018~KTr      -':~--bc   Yad
"__                      We .    timate,..Ryl~an&.ili      er     bide does the sitet work., erwut the unit
$1USEIY00I0   i          -*012O4 00 a share        an SM   d perfr  and sells it directy to the customer-.- -,
W"i Mw. 31 )ees 31 $"L 34 OeL .31j Tow  as well as moat stocks- inA the yeAr  Ryiav4 sharceshv  w'htl     aia
1981  05   Os   0s  .09   -3   Depiethe forecasted fowwr ratee, we I~   g~ain. ptentia to 1961-M when we estiV-
1,u  OS _ --.Os-  01  .0   16  for bsigsttsn.atinniwicd. to be a bi.mateth       compan-y will ear $3.50 a share.
19  15.16     2   .125  4   beo               lee   qrr~w            We poject there ea po.itive gwiug o(cbose
195.s .15  -                   at least modestly., They wilbenefit ftm  that ti1.naB.N1
WA Pnmary earninga. Exci. unusual gaui: 125. Goes ax sMu Apr. 8L Oivd paym't PAmili. d4. for stock sorti & diWde. (011 compamW FliUf 81iox
1954. 7.t. Next earnis reowt duei tat date: .Jan. 30, Apir. 30. Juiy 30,O=t 30. (c2 roa  mmtf  .  Stock (a Prics Stsahalt  1
Apr. (5) Hemt drvidoord meeong sacut Ma4r.                                                                    35. ne  rwtPaitn. .8
-48-



ANNEX C-5
11iri-   7  .   6  S.I 1  .3   0 5   3  .3   2 35  5'  8.9  I dA4 I  18   4 9  20 8  13,
1-37 36 74         -     08    I0   2,2  2.6   2.8   3.5   5 0  8.0   50o  10.0   5    .I                       0
.12
T,192                                                     18  19989
-*----  -.--  . 3SAFETY
__ __ _ __ _ __ _ _                  ~~/                            B ETA  i1.41  (I 00  *  Wsrs41)
Institutionl "ecisions1.5                                                                 I337-1 PIJECTIMU
to3      23.9    .7     34 71      .4    .7   56    67   .3   186    .2   .7    .77'6     49     3' Cs lw  ' pe sA0%  2.s
.2ig"10 .70  .393  .601  760.47   d1     .1   .4    .5   1.2  15    1.6   .4    .2   .0dl7      .0'En      esb     l12
-- -$..~-         05    0 5     4.0     .0    0     1    2     2     3    0     2    1    NLm Di'dDel per 3ik 9c%.
5436141    8 .701,1.28 45.83174.54 14.1614.06 1.3.97 1 4.3  .44365 3,74 85  31.38 2.64 93.37  1. ti  02 9 BS&Vuluewesh  ice jg.
6. e1 7.8 7 11T9 18.33 I 1T70f 20.04 21.18 2il .451 21.78 r26.39 125.59 28.85 31.49 1 32.48: 34.52, U.&#,134.UI 1Camow   SJtarsOu ss~I
17.8  19.4  15.4  99   144   T     --                    3.2*~71  13.4w  5.81  95  55  18.0 I -     Ang~ Pml/E Iii.   11.0
1,07 1 1,18  1,11  1.27  .99  .711  - -  1.85  .99  .71  .44 1 .49 I .77j  6.01 1 2.81l  1.52  --  I  JogP !Rpit      .9 '
____-                    _____-5% 1 K  .9  7  2.1% j2.1%  3.% 4.1%  2.9%' 2.6%  1.0%  2.2%' 1.____Avg  ________d_W  .
TAPITAL ST39C9UR miLO  r   Wr-I   308.3 r327.0 413.5  4 708.7 935.3 00.9 93825184.2 fiu               ai(mi)       .    2
LI Dee S278.S miil. LT I I ~I S 3 2  m,11  4,8%  7.%  8.8%  9.2% 10.6% 10.9%~ 9.4%  3.9% I4.5%  4.6% j        o       1194%
mnci S 4.7 mill. SYs% debe. ('ue; cadeanes.  -  1.4, 504  50.3 4%%[~3*j       29.5%     ' NM#W mANFI i stioTu A*e   7W.9
103.025. cony, into 41.70 she. at S23.97.  d3.0  4.2  10.6  14.7 I30.0  41.0 144.3  8.8  10 .1  27.6 1d4.3.9 1. PMPit ($,"MN  43.9
(LT Into  waer ded:; total interst cover-  NMF  1,3%  2.6%A 3.4%  4.2%  4.4%  4.1%  .7%  1.2%  2.4% NMUF  1A ±   PW  MN&J.
age: dell.)           (AV% of Capl 112.5  99.3 112.1 145.9 223.7 2.0321.7 190.3 203.4 273.2          Hems_ IRYntwy (W~lI)
-120.6 123.8 166.7 166.4 184.2 224.3 244.1 327.6312.7 315.11O I±M                          m
Pud.aIi~Nni'3aNmi~2     d30d43.7 d53.3    5.6 dI79   12.1 100.8  54.8  80.7  863i7.9   6.   erMC*pl(S4011)   9.
?dteNoe . ,     .         58.6  49.5  72.1 141.0  99.1 164.7 207.8 254.1 2313  2831  7l23    igee~S
89.5  95.2 108.5 119.6, 144.2 172.3 245.3 263.3 280.7 323.8  2711  M  NO Wert(S.mg)  6g
Ceeuw.Slecks. 0,ao102 hse. (51% of Cai), NMF  4.2% 17.6%  8.0% 14.2% 14.0% 12.6%  4.7% 15.6%  7.4% INMF; 3.95% 'SEMsW toteTOWadC&Os1 0%
meIi~NMF 4.4%               A1.0  12.3% 20.8% 23.8% I18.0% I2.6%  3.6%  8.5%  NMj   $%goE*dWiNO Wm"  12,.0
______________            NMF 4.0% 18.5% 11.0% 16.6% 120.5 % 1I5.0% INMFI 2.7%  5.6%  NFI 5   Retained to Commn Eqto 70.%
cuRWK!T bosnmowIfIOU  ISO  1111361g _NMF II%1 O%A12%     J11.L..214    N1_MFj_25%     35%            % All 'J  'ds to Me Pti J75
Cah, Aset     7.     0.       443E      : U.S. Home Corporations oHotwareUS     omecrsft Camp. in '76; Srigedier. intersutat in '. '83 de.
Rocsivales,   31.2   30,1     30,0 builders of singki..#miiy houaing. - well asmutti-famity precsiaon rat: 25.6%. Has 5.500 stockholders: aboul 2.000
Inventory p  203.4  273.3    279.0 reeidenmcee anid retirement communities. Also provides employees. Societ dets Maison Pt,enix owns 12.7%. Of corr,
Other         13.5    8.5      8.5  mortgage financing and manuifactres wood andi concrat. man stock; directors lees than 5%. Chairrman & C.E.O..
Currant Assets 265.5  322.   323,9 building m~ateils Mejo miowling markat: Florida. Texas, George H. Maears. President: i'obert J. Strudl*r. Inc.. Dela.
AccTs Payable  40.3  57.5     55.  Coloado, Atizona. Minnesots. and Now, Jersey. Acquired were. Adidresa: 1800 Weat Looo -South. Houston, TX 77027.
Debt Due      78.2   93.0    121.2  U.S. Home ha.s changed ita strategyr. The  its e,-ansion. At the end of 1970, the comn-
Ote     _6.3      821     66.3 co       I an 'sepnionr, specuaive stance    payhd$         ilo   ndebt, about 28% of
Current L.eab.                     paiu i7tu.9adxl         g   cu nlatioayttlaia.             eetmt      ogtrm debt at
1p48  3i7i4la on~           rn    the hi    vinfainr
ANNUAL RATES Post  Pas"  beg' ".   19709. Between 1970 and 1980, U.S. Home's   tendo194ws27mlln,about 50%
Sfcales     7.5%th 1  9.0%  IsF    sau les leaped over 1,000% to $1.08 billon and  oft tuta capital. T he company's $ 150 snii.on
"Cash Flow"  0,5 %-0.5%     12.5%  its income increased almost 860% to more ban.k credit line, which expires on June 30,
Earnings    -3 0%  -8.0%    la-5%  than $44 milion. However, this strategy, 1985, had about $75 million in unused credit
DiokVidue   15.5%  23,0%   -201%   which relied heavily on rapidly increasing  at year-end 1984. U.S. Home has reduced its
Caj. iQUARTERLY SALES (5 mdl.)  FIN  home and land prices, came a Cropper in the  need for cash by cutting back its operations.
wmmd ;~M. 31 June 30 Sa. 30 see 31~ last few years when high real interest rates Still, we rate the company Below Average
1919.v20828.       -9.  Ys   and slowly appreciating home values made (C0+) for Relative Financial Strength, and
1982 17.    2.   ~13263~          it far more costly to carry speculative      the shares Lowest (5) far Safety.
1983 259.7 310.5 21 7.3.. 284.3 115 1.8 inventory.                             Wetnaieyetmaeta                 ..Hm
1984 270.9 28a6.  21.4,11 2.81    U.S. Home. has. cut b~ack sharply. It re       etnatvl-simt            ht    ..Hm
1985 20 2   4f 39 2 V             duced its standing inventory by $1 15 millionwilm     ea    alprfti195Anhr
Cal. I -  EARNINGS PER $1NARt  ~~  between August and yearend, and the num-~ dericit in the March quarter is likely How-
md  MR. 31 Ju 30 SpL S     -w ia  ber of employees by 400 (20%). By Deebe   ever, U.S. Home's new strateg, and o~wered
1981  .40   .11'  06 -d.42   .24 31st, U.S.Home hiA.about 250 subdviions,cascUl            er-d.cn      r   t
1962 d.05   07'1 .11    19   .32 coprdihlateein                       ol"      ond haiL By 1987-.89 we project mncome of
1383-2     .28w    2..6 %8                                                     $1.25 a share, considermbfy below the 198.0
1984 d.01  VI1 d.67    d.35d1:27    et.(.rmnGy              do,woeg.           peak, but ufflcient to give these shares sub-
19_________Nil    __J __J_         met       "imn      u     Oo,woeg-           tata,abi        ihy speculative, capital
1al5  QURTRL DIVIDENDS            neered the expansion of the 1970., resigned, gtainsptenlalbetotatie
I UAdELYDIIEIDSPAD              e *Mattera, former President, be   gan    oeta tO    ntte.        AK    INT
mmdv Mar.31 June 30 Soot30 Dec. 311 Yew  can Chairman. U.S. Home took a write-of'f                            AKBN
1981  .08.. .09.  .0, -.045 I.31  of$2.mfinntfa..iteat.l                         AH~so                  .erAg     93S
1983  .02   .02 ,.02   .02   .08    $06mlin(e         y ae)i      h  a     W     AHPS045Ya vg                     S-o
1331.04  .08  .08   .01L  .28  for anticipated losses in connection with its  cufrren Assmu m oxrrei Laaibil 13%  3
138"  .08  .04   .0--         1   new look.i  .L    ;:    '                    Cah A Eatwv's ta CarTW Ua8'bec %2
19651                             U.S. Home b-orrowed heavily to fbiance         t~fi Cuotti I0sak:7                  1
(AM Fiscal year endis F.rb. 25 ort  7 timatad currnt. cma egaiash.:K3. 35s. (CI157eIafl. (i) Value Line classification. Comceny's Financial Strength  C -
(i) Primary earnings. Exclude etra- Dlidendwsapwx  starting Oct.'14.01IP()Soesrflcldert.CG)Fiecai'77,10moiths. Stock's Price Stability  15
ordinary los: '72. 20s, gain: 581, 1 It; '82. Incudes intangibles In 'U: 513.2 mniii.. (M InmrllkIonaM.adforatos:lift&dWVds. Eminge ProtPedsictebilit  75
64. Next ewmwngs report due lawe Apr. Es.
FaCoiii smateie ao oaned tram euxce bae&*el to be re"m bw mlaww be qu~
-49-



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Agencies luiplemlenlti k; tbe National Shkelter Program
MINISTRY OF IIUMAN SETTLEMENTS
Establishked 1978
Undertakes environusental management,
town and land use plannitIng, and
shelLer systeim development
Supervises all agenctes unsder Mlnistry
Formulated Natitonal Shelter Program
NATIONAL SIIELTER SECRETARIAT
Comprised of representacives from
seven key housing agencles
Coordinates activities of agencies and
facilitates i iformat lon-silaring
FINACE                                       REGULATORY                                               )
Nat ional lholue Mortgage     Ihoue I)evelopmntL            llumgan Settlements Regulatory       Na   a.   VA      auhotif,       luuan Settlements
FInance Corporationl          Miutual Fundl Commsissionb                                          tablshli4 I                    Development Corporation
Estabh lsbed 1979              Establishedt 1978            established 1981                      a4artaken low Jncaom hboin8     Establislhed 1978
Operates secondary mortgage    Operates provident fund for  Regulates all aspects of housing .9lq4Si. uprsia,d                    Develops neu communities
miizktkt for lume mortgages    forumal sector eimployeeg    development, except registration     o   i4    w-vJcm       Bcta      and implements urban
aind construction loans       Makes ho0me mortgages to      of land titles                      J     o    Wr    *a -             renewal projects
Serves as trustee for IIDMF    members                                                                                                    B
Provdesliqtdiy fo                                  -aaw ctaManages BLISS programs
ftiumds                       Provildes lIIqu Idi ty for                                          z.:
NIIHFC's seconudary mortgage                                         ' CIO.,
marker.                             A-$.f -
llume Fiialicilg Corporat ion oNatonal Hlousing Corporation                                                                       -
Established 1979                                                                                   Incorporated 1968
l;uarantees home mortgages                                                                         Produces construction materials
anid constructionu loaus                                                                           and standardized components



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" -Ai-; *. .ANNEX E
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SUMMARY OF NHA ACCOMPLISHMENT-S  ANNEX F-i
1975 - 1984.
-EARq
PROGRAM/PROJECT  1975  1976  1977  1978  19-79  1980  1981  1982 :1983 :1984  TOTAL
.SLUM IMPROVEMENT:
A.TONDO FORESHORE  :::4,042: 17, 613:   1,063:  -  :18,676
SANITARY CORE                     (CUM)1*32
HOUSES S83
ROW  HOUSING  UNITS:  : : ::  :::::170
BAGONG LIPUNAN
CONO.    ::::::                                    119
TULUYAN  APT  ::  :::::::60
COW't'L  BUS  ::  :::::1
B.?MM  URBAN  BLISS(ZIP) :  .. .   ..
I-JUAN LUNA  - :- :-  :-  :     52:  364:  234:  5:11:6666
2.LEVERIZA            :  - .              :  l~  87  : 202
3.BAGONG  BARRIO  : - : - . - . - . - . 532:  754  : 676  : 729  : 952  : 3,643
4.TARONG  :   :   :   ::      : 142:  222  : 42  : - : - : 406
5.TANGOS  :   ::              : 61:  30:  87:  135:  411:  724
6.HULO    . - . - . - . - . - . 97:  333  :  543  : 287  : 7  1,267
7.CAPRI   .   .   ....          - . - :  710  : 341  : 79  :1,130
8.SAN MARTIN  : - : - - : - :   :   : - :  509:  92:  -:  601
9. LANDLESS
* BARANGKA  -                              456:  9:  465-
10.MARICABAN  - - : - : - . - . 127:  159  : 559  : 236  :  301  :1,382
ll.CAA    : - . - . - . --    . 252:  209  : 526  : 54  : 68  :1,109
*12.TRAMO LINE!
F.VICTOR  : ...            ...           31  : 590  : 621
SU-OA(I): :1,263:2,071       :3886 :2,481 :2,515 :12,216,
r.MM' SPECIAL  PROJECTS : . ..     ..
l.TAMBUNTING  : - . - . - . - . - . - - . 19  :  12 5  3 1' i7
2.SUNOG-APOG  : - - -  -   -       -30     194  - * 2,'
3.BO.RODRIGUEZ  :.-
4.SITIO OLANDES : .           .-           -
5.NHA LRT  :                            ? 3  3 C308: 2
SUB-TOTAL(MMtSP):  ..   .   .   .:    432  : 990  : 288  :1,710
D.REGIONAL CITIES  (SIR) :  .
I.CAGAYAN  DE ORO  :  - .   .   . - . - . 364:  672  : 1,367:  898  :  120  : 3,421
2.CEBU    :  - : - : - : - . - . 507:1,430  :  359:  459  :  42  : 2,797
3.DAVAO   :        -   -  . - .  -  :1,584  :  475:  251  :1,438  3,748
SUB-TOTAL(SIR) :  :         :  871:3,686  : 2,201:1,60  :1,600  :9,966
E.TATALON ESTATE  :  -  : - :  : - - .  259:  -  107:  64:  135  : 1,739
F.BO.ESCOPA  POD  :  -  :  - : - - .   150:  . - . - : 10
*CUM -CUMULATIVE PRODUCTION AS OF YEAR INDICATED. .....
-55-



ANNEX F-2
YEA    R-                    OA
PROGRAM/PROJECT  195:1976  :1977  1978  -1979  :1980  :1981  :1982  :1983  1984
G.RURAL UPGRADING                 .
I.BO.HIPPODROMO  - :   -:                      619  : 362  981
2.PAOAY LAKE     -107                 -    --159
3.TOLOSA                                     :::         31
4.BO.MAIM'PIS  - . . -          . -    -259  :        : 259
S.SAN  FELIPE  .  ..                           364  : - : 364
SUB-TOTAL (RU)          17259                 986     1,794
SITES SERVICES
A.DAGAT-OAGATAN  :  : .           1,812  :4,933  : 567 :1,800:2,156  :9,456
(CUM)*
B.DBs                             :2,251  :7,284 : 992 :2,902:  245  :11,423
(CUM)*
C.SAPANG PALAY       .            .   :11,974:1,043  :  -  : - :13,017
(CUM)*
0.TALA ESTATE  : :   .                :5,800  :2,036  : 3,736:2,563  :14,135
(CUM) *
E.ANDAM MOUSNAG  :    315:                                315
F.TATALON  5.5.  : . .            .:    60  269  :  21:  -  350'
G.BULIHAN S/S(IN-HOUSE) - : - : - . - .  . -  :1,845  :2,310:  718  : 4,873
H..BULIHAN S/S(JOINT VENTURE)  - : - : - : ::      :1,740  : 1,740
I.GMA         -   -  . - . - . -  . - . - . -     -  225  :  225
J.SPRP:       - : --       -   -  :   : - : -  : - : - :  -
K.BO.  MAIMPIS  : - : - . - . - ...:        434  : 37:  -  : 47 1
L.B0.SUAREZ  ILrGAN  : - : - : - :   : - . - .: 408  : 228:  -  : 636
M.SIr S/.     - . -  . - . - . --     . - .    :  1,940:  780  :2,720
N. BAGONG  NAYON  II  : - ::: :       ::    606  : 349:  -   955
O..PASIG  S/S  : - - . - . - ....:               904:  1,816:  2,,720
COINST. OF NEW UNITS
A.NHA OWNED/ADMINIS
TERED PROJECTS
I.KABITBAHAYAN  : - : - .   . - . -- : 522  : -   - : - . 522
2.BLC  I TAGUIG  : - :   - . 513  : - : -   : -       . .513
3.BLC  I PAG-ASA  : - : -  . - . - : 336  :  176  : - : -   -512
4.MAH-ARLIKA VIL:  :232:           36: 53: 70: 12: -:403
(CUM) *
5.8AGONG  NAYON  : - : - : - : - : - : -   - : - :   :  260  : 260
6. BAL INTAWAK
TEACHERS  BLISS:  - : - : - : -   ::::        20:  -  : 220
7.TALA HOUSING
PROJECT  : - . -  .   ,       : 100  : - : - : -    :  100
-56-



ANNEX F-3
Y E A RTCA
PROGRAM/PROJECT    1975   1976   I977   1978  1979   1980   1981   1982 : 1983 : 1984  TOTAL
8.NHA APT                                                  49         :                49
9.TATALON ESTATE:     :      :      :      :               80                      :   80
(CUMI)*
10.TACLOBAN,LEYTE:
a.Tacloban Coastal Bliss                 ;                   ; 142 ,       ;     ; 142
b.Fishermens Village                 :      :                :         117          117
c.Palo Housing:                             :             :             8:       :    8
d.Tacloban Resettlement           :      :     :      :      :      :        400    400
11.NAGA HOUSING        :      :        :      :                     10 :     :      :   10
(MIA Teachers Bliss)
12.MIA MODULAR HOUSING  :            :     :      :      :      :   20 : 160:       : 180
B. JOINT-VENTURE PROGRAM
1.SUBDIVISON DEVT
a.PN Roa      :     :        :                     42 :   58:       :      :     : 100
b.Sunvar      :     :      :      :      :      :  55 :   56    :          :     : 111
c.Stanfilco   :      :     :      :                   : 105 :       :            : 105
d.NorthernHill:     :            : :               40 : 118 :    20 :      :     : 178
2.APARTMENT HOUSING   :      :      :    6 : 103 : 109 : 394 : 335 : Z44 :      75 :1,266
3. DORMITORY PROGRA4M  :     :      :      :     :      :
a.Diaz-Castellamante :     :      :      :     :      :      :      :  34 :      :   34
b.Unlad          :         :      :      :     :      :   61:       :     :          61
c.Halili      :     :      :      :      :      :     :  136  :  24    38        :  198
d.NHA-Ilagan        :      :      :      :      :     :      :      :   10:      :   10
e.R.LOPEZ     :     :      :      :      :     :      :      .      :         44:    44
f.Espino      :     :      :      :      :            :      :      :     :   54  :  54
4.INDIVIDUAL HOUSING             :     :      :         :      :    8:   17:       :   25
5.TACLOBAN HOUSING    :      :      :      :     :      :      :      :  14:    25:    39
C.PAMBANSANG BAONG NAYON(PBN)
1.CEBU         :      :      :      :     :      :30       32 :   45:-        -    : 107
2.LEGASPI       :     :      :      :      :     :-         -  :  81 : 121 : 100 : 302
3.MARAWI        :     :      :      :      :     :      :   -  :  30 : 383 : -     : 413
4.TAWI-TAWI     :     :      :      :      :     :46:       77 :  -   : -   : -       123
0. ACCELERATED BLISS
1.TONDO FORESHORE     :      :      :     :      :      :  39:    31 :   31 : 11 :112
2. DAGAT-DAGATAN      :      :      :     :      :      :      :  28 :   30:-      :  58
- 57 -



i
14
..
,
I N~-



ANNEX G-1
Table 3.1:  N-A COMPARATIVE BALANCE SHEET, 1979, 1980, 1981 AND 1982
-1979             19b0                 1981                 0812
PM     %      P P    %   Is rInc  DM     %   %Inc      PM     3,  %Ir. c
s               1194.0  100   1518.1  100   27    1943.3 -100   28-   2:635 .0  100  36
urent Assets          413.3   34    362.2   24  (12)    262.0   14   (28)    4*31.2  16   65
Cash                  204.9   17    108.6    7  (47)     73.3    4  (33)     80.0     3    9
Others                208.4   17    253.6   17   22     188.7   10  (26)    351.2    13   86
vestments             653.9   55   1046.3   69   60    1488.7   76   42    1957.5    74   31
Projects under
development(a)        453.6   38    704.6   47   55    1127.1   58   60    1506.3   57    34
Properties held
for sale/rent         130.9   11    185.7   12   42     152.2    8  (18)    142.4    5    (6)
Interest bearing
loans                  59.6    5    111.1    7   86     181.8    9   64     254.0   10   67
Others                  9.8    1     44.9    3  358      27.6    1  (39)     54.8     2   99
ocerty & Ecuimment     43.6    4     43.9    3    1      42.2    2   (4)     45.8     2    9
her Assets             83.4    7     65.6    4  (21)    1.50.4   8  129     200.5     8   33
ABILITIES             219.1   18    281.7   18   29     429.5   22   52     694.8    26   62
rent Liabilities      71.9    6    137.4    9   91     151.8    8   10     147.7     5   (3)
e,,   liabilities
-'lic debt)            69.0    6     94.5    6   37     170.9    9   81     412.0   16  141
her Liabilities        78.2    6     49.8    3  (36)    106.8    5  114     135.1    5   27
TY                  974.9   82   1236.4   82   27    1513.8   78   22    1940.2    74   28
id-in-Caoital         405.7   34    590.1   39   45     865.8   45   47    1265.5   48   46
bsidv                 330.4   28    425.2   28   29     418.6   21   (2)    442.9   17     6
luses & retained
inas                238.7   20    221.0   15   (7)    229.4   12    4     231.8    9     1
LIABILITIE
EQUITY               1194.0  100   1518.1  100   27    1943.3  100   28    2635.0  100   36
DICATORS
ent Assets/
ent Liabilities        5.75          2.64               1.73                    2.92
blic Debt/Equity         0.07         0.08                0.11                    0.21
uity/Total
bilities                445           4,39                                       2.79
(a) Comprises the Project Development Account and the TFDDP Special Financing Program
NHIA Annual Audit Reports, 1979, 1980, 1981, 1982.
-59



ANNEX G-2
Table 3.8:  STATLME.    OF INCOME AND  ETAI.NED EARNINGS, 1979 TO 1982
DEC. 31. 1980    DEC. 31.191     DE1C. 3L.'%
PM     16                      !I'M
RE   LINM                        31.92  100     46. 6  100       60.77. 100       1. 30  1 0
. Profits Realized               14.02  44     12.06   26       15.62   26      22.57   32
* Interest Eaxned                10.93  34     26.20   56       36.77   60      37.83   53
. Income from Rental             3.96   12      5.60   12        5.41    9       5 . 34  7
. Other Income                   3.01   10      2.70    6        2.97    5       5-.5    8
E:UE:JDI                         29.87  100     42.68  100      54.85 lO       69.00  100
* Ope.rations                   23.18   78     32.06   75       39.67   72      51-25   7-.
. Interest + Bank Charges        0.02    m      1.02    2        5.85   11       8.89   13
. Depreciation                   6.67   22      9.60   23        9.33   17       8.86   13
NET INCOM                         2.05    -      3.88    -       5.92     -       2.30    -
Net Income after provision
for tax                            1.41   -      2.80    -        5.11    -       2.27    -
Net addition to retained
earnings                          1.22    -      2.04   -        7.54    -       2.22    -
Retained earnincs (Dec. 11)      (7.33)   -     (5.29)   -        2.25    -      4.47     -
Net Income before interest        1.43    -      3.82           10.96    -      11.16
INDICATORS
Net Income after tax as
total assets                     0.12           0.18             0.26            0.89
. Income before interest
after tax as % total assets       0.12          0.25             0°56            0.42
Net Income after tax as % of
properties held for sale/rent
* other investnents               0.70          0.82             1.41            0.50
SOURCZ: INHA Annual Audit Reports, 1979, 1980, 1981 and 1982.
- 60 -



ANNEX H-1
Table 10.1: PRJECTED EALA.CEIC SHEZT, 1983 TO 1988 (P MILLION)
DEC.31 DEC.31, DEC.31   DEC.31  DEC.31   DEC.31
1983    1984    1985    1986     198,7   lq88
ASSETS
Current Assets
Cash                                 65      86     132     247     163      165
Others                              109     114     119      123    3,26     128
Sub-Total (Current Assets)          174     -200    251      370    289      293
Investments
Project Development Account       1,36z   1,409   1,32O   1,361   1,409    1,464
Properties Held for Rent/Sale       501     760     881     962    1,088   1,193
-Interest Bearing Loans             386      510     631     761     895   1, 03%
Others                               55      55      55      55     -55
Sub-Total (Investments)           2,304   2,734   2,887   3,139   3,447    3,747
Property and Equipment (Net)           43      40      37      34      31       28
Other Assets (Including ICR)          400     775   1,171   1,573   2,028    2,49:;
TOTAL ASSSEM                        2,921   3,749   4,346   3,116   5,796   6,563
LIABILITIS AND EQUITY
.LIABILITIES
Current Liabilities                 263     183     170     233      247     268
Long Term Liabilities -
Public Debts                      353     700     783     934    1,094   1,301
-Other Liabilities                   192     272     338     3q4     440
Sub-Total (Liabilities)             808   1,155   1,291   1,561   1,801    2,107
EQUITY
Paid-In-Capital                   1,434   1,872   2,212   2,549   2,919   3,294
Subsidy                             477     545     597     643     689     735
Surolus and Retained Earninas       202     1 77    246     363     387     427
Sub-Total (Equity)                2,113   2,594   3,055   3,555   3,995   4,456
TOSU LIABILITIES AM EQUITY          2,921   3,749   4,346   5,116   5,796   6,563
SOURCE: FM Calculations, July 1983.
@/J-



ANNEX H-2
Table 10.2: PROJECTED INCOME STATAENLNT, 1983 TO 1988 (P MILLION)
DEC.31  DEC.31  DEC.31   DEC.31 DEC.31   DF. -
1983    1984    1985     1986    1987    Vc
REVENUM
Profits Realized from
Collection of Ica                   31      68     192     260     123     129
Income from Rental                    8      12      14      13      15      -5
Int. Earned on Loans + Interest     54       49      60      69      69      An
TOTAL REYVENES                         93     129     266     342     207     227
EXEsYITURES
Operations                           64      68  *   74      77      81      E
Debt Service (Interest)              49      76      76.     75      79      70
Deoreciation                        lt:      10      10      1O      10      10
TOTAL  !EXENDITL=ES                   123    .154     160     162     170     165
NET 1CO1ME BiR: TAX                   (30)    (25)    106    .180      37      62
Provision for Income Tax (35%)         -       -       37      63      13      22
NET INCOME AFTE  TAX                  (30)    (25)     69     117      24      4C
RETAMED EAFLNIGS - BEGINN1NG            5     (25)    (o50)    19     136     160
RETAINED ZAJLR.IS - END               (25)    (50)     19     136     160     200
SOtRCE:  Flm Calculations, July 1983.
- 62 -



ANNEX I
NWA DRAFT FIVE HEAR FINANCIAL PLAN, 1984 TO 1988 (? MI'LION)
ITE.                                 1984     1985    1986    1987    1988
APPLICATION OF FUNDS
1. Capital Program
. Construction of New Units              80      85       85      90     100
. Sites and Services                    240      250     280     310     325
. Slum Upgrading                        240      250     280     310     325
. Resettlement Program                  120      130     100      80      75
. Private Sector/Joint Venture           75      78       83      87      91
Commercial/Industrial Estates           35      37      41       41      42
. Livelihood                             10      10       11      12      12
Sub-Total (Capital Program)                 800     840     880     930     970
2. Debt Service
Existing/Committed                    138     258     277     171      160
. New Borrowings                          IL     14      39      73      109
Sub-Total (Debt Service)                   139     272     316      244     269
3. Current Operating Ex.e:cL.tures
. Project Administration & Maintenance   28      32      33       35      36
. Other COE                              40      42      44       46      49
Sub-Total (COE)                             68       74      77      81      85
TOIAL APPLICATION                         1007    1186    1273    1255     1324
SOURCES OF FUNDS
1. Beginning Balance                       100     118      11      49        1
2. Credit Lines                             2 X40            -   C50         20
3. Corporate + Other Receipts
. Committed                             216     527     679     505      519
. Additional loan Funded
Projects/In-vestments                 -        -        3      12      54
4. Bonds                                   200      -        -       -      100
Sub-Total (Non Government)                 536     685     693     616      694
5. Equity/Svtzsidy                         234     246      24*6    246     246
6. GOP Reletses for Foreign
Assisted Projects                       89      103     171     170     180
Sub-Total (OEM)                            323     349     417     416      426
7. Foreign Exchange Component
. Coitted Loans                         225      77      51      35       4
. Additional Loans                       41      86     161     189      203
Sub-Total (FOREC)                          266     163     212      224     207
TOTAL SOURCES                             1125    1197    1322    1256     1327



II
Y                                                                                         C
lb')                                                                ()



ANNEX J-1
NHA Financial Review and Plan
SunwARY AN1D RFCOKIENDATIONS
SU:OAWRY
1. Total assets of the NHA as of December 31, 1982 stood at P2635 aillion
of which 57% or Y1506 million represents the value of projects under
development. Net income after tax for 1982 amounted to ?2.2 million
X P11.1 million before interest giving a return of 0.496 on total
assets. As of December 31, 1982, the total Government interest in
the NHA was P1940 million (including paid in capital of P1265 million
and subsidies of P433 million). The Authority also had liabilities
of P695 million including long term debt amounting to P412 million.
2. The NHA continues to experience funding difficulties partially as a
result of low corporate receipts and through the uncertainty in the
amount of Government support and the timing of its releases. Nevertheless
the Authority still continues to structure its budget proposals well
in excess of capacity to obligate and disburse the funds raised.
3. The proporti;,rn of payments made to the obligations incurred has
declined between 1980 and 1982. The payments for foreign a-sisted
projects actually fell in 1982 over the 1981 level. Too often there
have been excessive time differences between the allotment of funds
and the first payment to contractors followed by significant delays
over execution and completion of contracts.
4. The real costs of administration and design and supervision are high
in relation to output and are likely to remAin so until a greater
productivity is achieved or the total staff and administrative costs
are reduced or stabilised.
5. Total new allotments for the capital program amounted to P591 million in
1980 rising to P802 million in 1982. Payments for these years were
P378 million and P8O million, respectively. Three quarters of the
program has been directed to social housing with the remaining amounts
for economic housing and other programs. Over the period slum upgrading
programs have given way to those for the relocation of squatters. The
geographical concentrationof the program is overwhelmingly for the
residents of Metro Manila with the share of investment for the regions
decreasing in proportion and amounts.
6. Cost recovery from the projects of the Authority has not been given
the support it hs needed. Collections from projects and loan
repayments are too small, costs incurred on behalf of othL! agencies
have not been reimbursed, facilities have not been handed over for
tenance and operations once completed and pricing .policies often
involving subsidies at the outset have been imposed some for political
purposes others out of choice.
65



ANNEX J-2
7. Obligations for debt servicing are projected to increase signi-
ficantly during the noxt five years over the past levels. Over P150
million per a=um will be needed to service all current domestic and
foreign obligations from 1985 onwards. Additional resources will be
needed to service future borrowings.
8. Projections of financial resource availability indicate that betweenr
P787 million and P1178 million could be raised in 1984 with the high
estimate based on the assumption that Government suplorx- for the
Authority and its programs is given and that there is a significant
improvement in the corporate receipts of the NHA. The low estimate
&auses a continuation of present trends under which Government support
is diminishing and only minimaS-improvement in corporate receipts
expected. Under the same assumptions the available resources are
estimated to be between P582 million and P1199 million in 1988.
9. The total capital program ,representing the sm of the departmental
programs,has been estimated at P1471 million for 1984 rising to
P1773 million in 1988. With the additiorn of the projected debt
service requirements and administration, maintenance and other
current operating expenditures, the total financial requirements a-re
projected at P1820 million in 1984 increasing to P2188 million in 1988.
.O. On the basis of past performance and in view of the current implementing
capacity it is unlikely that the ZNIHA can in the future obligate mere
than P800 million per annum for new capital works.
11. Th* financial and adinistrative resource gap is such that the programs
of the departments are unlikely to be implemented in full. Reductions to
the capital programs were required to reduce the resource gap.
12. On the basis of a capital program of P800 million for new works in
1984, increasing at 5% per annum over the plan period, the projected
debt servicing obligations and the admir.stration, maintenance and
current operating expenditure estimates, the table below summar-ses
the draft plan:
- 66 -



ANNEX J-3
RECOtY^M  ATIOP.S
1. The NHA should request the Government to increase its authorized
capital and obtain assurances that regular annual subscriptions
of at least P200 million are made. With the addition of subsidies
and releases of local counterpart funds for foreign assisted projects
total government finazicial support required for the NHA is estimated
at P323 million in 1984 rising to P426 in 1988.
2. The NHA should reorient its activities to those of a real estate
developer and reduce its role as an end financing agency.
3. Regarding the plan itself, the NA should:
Ci)    prepare a coaplementary physical plan;
(ii)   submit the physical and financial plan to the NHA Board
for approval and transmit to the Ministry of Human Settlements
for endorsement as Ministerial policy; and
(iii) update the plan annually.
4. In planning and budgeting:
(i)    the first year of the plan should form the basis of the
annual budget proposals for that year;
(ii)   the plan should be prepared during July, August and September
consistent in tim.ing with the budget cycle;
(iii)  an Assistant General Manager should be responsible for the
plan supported by the Financia l Management Department and
the Corporate Planning Group of the Executive Staff;
(iv)   the means of funding the foreign exc.bange component of
foreign assisted projects requires review;
(v)    NHA should discuss with the Gover%ment the possibility of
reclassifying fund releases for works undertaken on behalf
of other agencies as grants.
Increasing Corporate Receipts is essential to the future of the NI?A,
to wit: -
Ci)   improvements in productivity -and output are needed;
Ci&) prices to be charged for the benefits should be the m 'mum
possible so long as basic affordability criteria are
satisfied for social housing lots;
- 67 -



ANNEX J-4
(iii)  collection efficiency must be improved throughout;
(iv)   the NHA with Government support should actively pursue
the recovery of costs incurred on behalf of other agencies,
particularly from the MPWH;
(v)    for future projects agreements with all line agencies should
be entered into to recover costs made on their behalf prior
to development; if not then costs should be charged to the
beneficiaries where possible;
(vi)   the turnover to local governments of roads, footpaths,
drainage, public open-space and community facilities on
all completed projects for maintenance and operation, should
be hastened; i f not then maintenance and operating charges
for these facilities should be imposed on the beneficiaries
until eventual turnover;
(vii)  the NHA, supported by the .S, should make arrangements with
the NOC for the purchase of residential mortgages on all
sites and services ard joint venture projects;
(viii) bonds s i.iuld only be used to fund development where outright
sal, is proposed or short term credit is to be provided;
(ix)   the outright sale of economic or open market residential 1ots,
commercial and industrial land should be encouraged;
(x)    subsidised interest ioans to beneficiaries should be phased out;
(Xi)   disposal of the properties held for rent should be encouraged,
but wher this if not possible the introduction of economic
rents should be undertakeh;
(xii)  active steps should be taken to recover the costs invested
in the resettlement program.
6. To improve corporate planning and performance the following studies
should be conducted:
(i)    a review and analysis of cost recovery from the resettlement
sites;
(ii)   the preparation of a long term Resettlement Program;
(iii)  a financial and economic evaluation of the Commercial and
Industrial Estates Development Program;
(iv)   a financial and economic. evaluation of the Joint Venture
Program.
- 68 -



ANNEX J-5
3. Although the program is assuned to match the Authority's likely
ability to raise funds, it must be emphasized that this Can only
be achieved if:
(i)    there is a significant improvement in the recovery of costs
by the NHA from program beneficiaries;
(ii)   GoverTment support is given through the continued release
of equity and subsidy at the 1983 and 1984 levels implying
approval being given towards increasing the capitalization of
the NA, plus the continued releases of local counterpart
funds for foreign assisted projects; approximately P400   .
million is needed each year;
(iii) the prompt and full payment by the local governments of all
obligations to the NRA;
(iv)   the reimbursement by the line agencies, in particular the
Ministry of Public Works and Highways for costs incurred
on works undertaken for components normally falling under
their jurisdiction;
(v)    the participation of the National Home Mortgage Finance
Corporation into the social housing sector through the
purchase of residential mortgages in sites and services
projects;
(vi)   further borrowings; and
(vii) agreeents being reached regarding the release or payment
of the foreign component of existing and future loans granted
by the international funding agancies.
The failure to accomplish one or more of the above would mean that
even the modest capital program proposed being further reduced and
jeopardizing the. future of the Authority as a corporation. It is
clear that the attainment of the plan not only rests with the
tGovernent conitting both financial and political support ro the
programs of the NHA but also with the Authority according a far
greater priority towards the recovery of all investments than it
has in the past. A cobination of these two would be successful,
the failure of one or both would be catastrophic.
- 69 -