FEASIBILITY STUDY

of

GamSol Real Estate and Development Corporation

In the business of Real Estate

Submitted to
Judge Florencia S. Abbu

Submitted by
Ruben S. Bance
Sittie Yahara Bantuas
Ronaldo Leoniv A. Diputado
Lord Rquin A. Gambe
Ivy Florence G. Rafols
Sittie Hadiyah Sarip
Francis Anthony P. Sealza
Shieryl T. Solatorio
Mark Dustin C. Urbina

EXECUTIVE SUMMARY

Real estate development, or property development, as defined, is a multifaceted business,

encompassing activities that range from the renovation and re-lease of existing buildings to the
purchase of raw land and the sale of improved land or parcels to others. Developers are the
coordinators of the activities, converting ideas on paper into real property.
Real Estate Development is a challenging venture which requires not only an enormous financial
investment but also conformity with environmental laws, including negotiations with the local
authorities. It may cover various fields such as construction, architecture, engineering, accounting,
legal matters and project management, among others. The success of this business opportunity lies
not only with the resources available but also with the good interpersonal and management skills of
the people behind it. In totality, real estate development paves the way towards socio-economic
progress.
This study resolves to identify various factors which may influence the projects and economic
attributes of the companys target market area.

I. INTRODUCTION
Census in Misamis Oriental, excluding Cagayan de Oro City, reveals that the population
within the province is ever so increasing that it said in its latest report (July 2013
http://www.census.gov.ph/content/population-misamis-oriental-increased-150-thousand-results-2010-census-

that the population in Misamis Oriental would double in 34 years. Meanwhile,

Cagayan de Oros population alone is pegged to double in 26 years. Increase in population
translates to an increase in household. The proponents of this study aims to provide a viable
catalyst to implementing the business operations of GamSol Real Estate and Development
Corporation.
population-and)

The scope of this study extends to the whole Province of Misamis Oriental, pinpointing
strategic locales with dense population for evaluation and analysis. Data gathered is limited on the
projections of the government Census and Population Commission, and to the latest trend of foot
traffic and economic growth all around the province, specifically eyeing Cagayan de Oro City where
the principal business of the corporation is located.

II. MARKET FEASIBILITY

The market of real estate in the said province is yet to mature, but its potential is limitless.
The micro-economy in Cagayan de Oro City ever so increases as capitalists from all over the
country, and the world, bullishly invest their equity in infrastructure and, consequently, real estate,
with the Ayala and the local Lim Ket Kai groups conspicuously flaunting its interest in this potential.
There is no better timing than to ride with the trend now.
Market Description
The Province of Misamis Oriental is one of the five (5) provinces of Northern Mindanao and
situated along the northern coast of the resource-rich Mindanao Island. It is bounded on the north
by Macajalar Bay, on the west by Iligan Bay; on the east by Agusan del Norte; and on the south and
southwest by the provinces of Bukidnon and Lanao del Norte respectively. It has two (2) major
bays- Macajalar Bay on the western part and Gingoog Bay on the eastern portion. Its strategic
location and large open bays make the province the principal distribution center of the region.
Being the gateway to Mindanao, it has become a major transshipment hub which justified the
approval of major transportation projects.
The province has two (2) cities: its capital, the charter city of Cagayan de Oro and its
component city of Gingoog. It has 24 municipalities: 14 on the eastern side and 10 on the western
side. The farthest municipality on the western side is Lugait and on the eastern side is Magsaysay.
Misamis Oriental has a total of 422 barangays.
The province has a total land area of 3,102.90 square kilometers. Claveria, the only landlocked municipality, has the largest area at 894.90 square kilometers while the smallest
municipality is Binuangan with an area of 30.00 square kilometers.
A. Topography
Misamis Oriental is characteristically rugged where mountains and hills occupy
approximately seventy percent (70%) of total land area. The highlands are punctuated by mountain
ranges, coastal plains and valleys are traversed by rivers of various forms and sizes that provide
underground water supply throughout the area. On the eastern portion of the province are two (2)

inactive volcanic cones - Mt. Balatucan, which at 2,560 meters, is the highest peak and Mt. Lumot.
The soil type of the province is predominantly clay, alluvium, shale, sandstone, corraline
and limestone, which are abundant in some municipalities.
The province is generally classified into forestland (47% of land area) and 53% are
alienable and disposable lands. But as of 1996, DENR-10 reported that forestland now occupies
only an area of 6,243 hectares.
B. Climate
The Province is blissfully located outside the typhoon belt and earthquake faults. The
coldest month is noted in January while the hottest is August. The dry season is from November to
April and wet season is from May to October. Average temperature is 27 Centigrade.
However, in the recent train of events, the province have suffered severe rainfall and has
been in the path of typhoons since 2011 with the yet-to-be-forgotten Sendong tragedy. A year
before that, Opol had experienced the wrath of these typhoons when its main bridge in the
Poblacion area was damaged.
C. Demographics
For censal Year 2000, the province registered the largest population at 1.126 million people
among the five (5) provinces of Northern Mindanao, with more or less 41% recorded as Cagayan de
Oros population. The residents of the province are a mixture of Maranaw, Spanish, American and
Chinese blood. (http://www.popcom.gov.ph/regions/10/Misamis%20Oriental%20Profile.htm)
Target Market
With an unemployment rate of 6.5% (based on NSO Cagayan de Oro City 2013), it can be
established that the community has a relatively high spending power. The target, therefore,
generally are the working class, specifically the B and the broad C social classes. The corporation
posits flexibility in its product offerings. Consequently, the chunk of the population belongs to these
classes; this renders the products fairly saleable.
The key locations for future projects then are Cagayan de Oro City, Gingoog City in the east,
and Opol in the west. Justifiably, Gingoog City has the highest population in the east and Opol in the
west. Fortunately, terrains in these three locations are favorable in defining and differentiating the
offers of the company.
Situation Analysis
According to the latest report (July 2013) of the Census, the average annual Population
Growth Rate in Cagayan de Oro is 2.69 and in Misamis Oriental, excluding the former, is 2.05. That
is 140-150 thousand in a matter of ten years, from year 2000 to 2010, and the growth rate is
forcasted to be exponential after year 2010. The important indicators in pushing through this study
are the population growth and employment rates of the market, as well as its demographics that
can support various analyses.
Misamis Oriental, then, expects an expansive growth of number of households and the
demand for property ownership increases with it. This expectancy have long been within the
foresight of the countrys leading developers such as the Camella and Ayala groups, as well as other
local developers like Kisanlu and Tuscania. Although the players in the real estate are relatively

knowledgeable since they have started earlier than the company, this is not so much of a threat as
there are emerging new trends that the company can bank on. For example, the market is more
inclined to functional and minimalistic design rather than ostentatious ones.
Moreover, the market shows that the average median age of Misamis Oriental ranges from
22 to 24 years old. That means that half the population is younger than 24 years old. The magnitude
of youth shall be the prospective pool of clientele by the time the project gets operational, given the
unemployment rate is relatively low (6.5%).
Records also show that three-fifths of the household lived in lots that they owned or
amortized. The remaining two-fifths is equally important in that this market could be tapped as
potential clients by providing them flexible payment schemes. There is also an exhibit of decrease
in dependency ratio, meaning, the working class (15-64 years old) outnumbers the young and old
dependents. Independence begets expense at an individual level, hence greater spending power.

III. PRODUCTION/TECHNICAL FEASIBILITY

The spear-heading project of the company is to offer subdivisions in three key locations-Cagayan de Oro, Gingoog, and Opol; no limitation as to the number of projects per location.
Subdivisions are widely accepted by the market. Compared to condominiums, the mind-set of the
majority is to acquire something tangible, preferring titled lot over titled space.
The possibility of constructing condominiums, however, is not set aside. While
subdivisions are offered within the short-term plan of the company, condominiums may readily be
offered during the mid-term, both low-rise and mid-rise, depending on the surfacing necessities and
demands by that time.
After introducing one or two subdivisions, the company may very well be underway with its
resort. Misamis Oriental is located north of Mindanao bounded by the sea. With the topography
given, the area gifted with sea coast and highlands, it is very ideal to construct either a seaside
resort or an upland vacation villa. With what promising tourism the country is experiencing, it is
best to delve in that business.
Materials and labor resources are not difficult to acquire since the key areas were chosen to
be such with dense population. This means that there is already an economic activity in these areas,
notwithstanding the pool of labor that are also readily available. One of the driving essences of this
project implementation is creating employment. In terms of materials, there is without doubt a
boom in the business of raw materials when the investiture in infrastructure spiked. Suppliers in
these locales are found to be flexible and with the right price are very willing to produce the
demands of the companys projects.
The most vital resource in this business is land. Acquisition may be coursed through
purchase of property from a private or public entity, or through biddings in foreclosure sales. The
land is much less of a worry when the land area of Misamis Oriental is 53% alienable and
disposable.

IV. ORGANIZATIONAL FEASIBILITY

This project will be headed by the Chairman of the Board of Directors. The Vice-President
shall be supervising the actual operations in key areas, supervising sites preparation and
monitoring the labor force, including asset management, research and development and finance.
There will be a legal team headed by a lawyer and some assistant paralegals to take care of the legal
matters such as registrations, as well as the compliance of government requirements. For the land
development, a planning team will be formed comprising of Architects and Engineers. Lastly, a
Sales force will be established once the project may be pre-sold to prospective buyers. The
organizational chart shall be as the one on the following page. Each member of the Board of
Directors will be given roles in the implementation of the companys projects.
There are also licensed Real Estate Brokers in the management team, along with Real Estate
Consultants and Appraisers.

Organizational Chart

V. FINANCIAL FEASIBILITY
Financial Scheme
Real estate properties are normally expensive. Funds will be sourced out to sustain
constructions, material purchases, renovation and maintenance costs. A portion of such
expenditures will be financed primarily by the capital investments of the investing stockholders
and a part will be funded by loans from financial institutions. Mortgage loans will be resorted to as
the need arises. The properties to which the funds are to be used will serve as collateral for such
loans.
The unissued shares will be opened for subscription to the public. However, the company,
through its Board of Directors (BOD), reserves the right of the existing stockholders to purchase
additional shares in proportion to their subscription before offering the unsubscribed shares to the
public. By way of a resolution, the BOD shall approve such number of shares as they may deem fit.
The stocks for subscription shall be listed in the Philippine Stock Exchange to facilitate trading. The
same may be traded in a primary or secondary market as the case may be.
Rationale of Capital
The capital sources will cope with the companys financial requirements in project
developments (buying raw materials, excavation, demolition, building construction, etc) , land
acquisitions, manpower (engineers, architects, designers, lawyers, staff, etc) remuneration and
maintenance outlays. The company would need a reinforcement from financial institutions since
paid up capital from the investors may not suffice the significant financial requisites of its projects
in their initiatory stages. The funds generated will also cover for other necessary costs such as preoperating and representation expenses; research and development; advertising expenses;
furniture, fixtures and equipment, and; purchase of properties from private individuals and/or
public auctions.
Sales Projection
According to the careful study and research of Colliers International, the countrys GDP
increased by 7.4% in 2012. The big factor for its increase is the very good performance of real
estate, comprising 18.9% of the total whole.
By most estimates, inflation is expected to stay at around 2-3 percent, while the Philippine
Central Bank (BSP) will most likely maintain its current interest rates for much of 2014. This means
a steady upward trend in consumption, real estate, and domestic investments.
(http://www.huffingtonpost.com/richard-javad-heydarian/philippines-in-2014-emerg_b_4521369.html)

The BIR has released Revenue Regulations (RR) No. 16-2011 dated October 27, 2011 which increased the
threshold amounts for VAT on the sale of residential lots and house and lots, the lease of residential units,
and the threshold amount for the sale of goods and services subject to VAT. Effective January 1, 2012, the
sale of a residential lot which is PHP1,919,500.00 and below (Current - PHP1,500,000 and below), and the
sale of a residential house and lot which is PHP3,199,200.00 and below (Current - PHP2,500,000) are
exempt from VAT.
The lease of a residential units which is PHP12,800 and below (Current PHP10,000) shall also be exempt
from VAT effective January 1, 2012. If a person's gross annual receipts/sales on the sale or lease of goods or
properties or performance of services other than those mentioned in Sec. 109 of the Tax Code does not
exceed PHP1,919,500.00, (Current - PHP1,500,000) he shall be subject to 3% percentage tax instead of the
12% VAT.

This tax implication will encourage a lot more households to consider real estate ownership;

thus, an increased sales.

The graph below illustrates a projected increase in revenue. Sales are expected to increase
from 15% to 20% based on industry average.

Return on Investment
The Philippine real estate condo is averaging 10-20% ROI every year.
(http://manilainvestmentproperty.com/2012/11/24/rrsp-or-real-estate/)

Philippine property appreciates at an average of 10% per year, which is higher than 3 to 6%
US properties get. This translates to a higher Return On Investment (ROI)
(http://www.surigaoislands.com/dreamhouse/why.html)

Based on industry average, ROI ranges from 5% - 10% per year.

VI. CONCLUSION AND RECOMMENDATION:

The gradual increase of population in the country, especially in Misamis Oriental, entails an
increase in households and a consequent demand of housing investments as potential buyers would
look and inquire into different alternatives in real estate ownership, considering that the market
has relatively high spending power nowadays. Pushing through of this proposal is high probable
and profitable. The demand will always be there. Lands are better developed earlier, taking
advantage of its uninflated value. Once it is developed, its worth increases. High revenue translates
to high profitability.