MRT Line 7 Update (Quezon City and Bulacan areas)

I wrote about the proposed stations of the MRT Line 7 last October 2012. It’s now June 2014, so what are the updates? If you have a property in Quezon City and Bulacan, did you notice any increase in market values since then? Anyway, read on to see the updates… 

MRT 7 Updates

According to this article, the construction of the MRT 7 and its road component has not yet started because the Department of Finance (DOF) has not yet issued a performance undertaking.  A performance undertaking, according to Businessworld, refers to a

guarantee from the government that it will finance the project should the proponent be incapable of funding it.”

The said performance undertaking, according to Malaya Business Insight, is required for the financial closure of a project that would be funded by official development assistance.

Last February 2014, DOF Secretary Cesar Purisima said that they already wrote to the Office of the Executive Secretary months prior. It thus appears that the only cause of delay is the approval/signature of the President on the performance undertaking. Once the performance undertaking is approved by the President, the processing of the financial closure will be initiated and is expected to be secured within 2014.

After the financial closure is done, construction will start and the estimated completion date is after 42 months – that is, 3.5 years or within 2018 if the timeline is followed.

According to Business Mirror:

The rail component of the MRT 7 project involves the construction of a 22.8-kilometer rail-transit system that is envisioned to operate 108 rail cars in a three-car train configuration with a daily passenger capacity ranging from 448,000 to 850,000.

It will have 14 stations, starting at the North Avenue Station on Edsa passing through Commonwealth Avenue, Regalado Avenue and Quirino Highway up to the proposed Intermodal Transport Terminal in San Jose del Monte, Bulacan.

The road component of the project, meanwhile, involves the construction of a six-lane access road from San Jose del Monte to Balagtas, Bulacan North Luzon Expressway Exit.”

As you may know, people riding the MRT 3 are really encountering hardships daily because of the lack of an adequate number of trains (and in my opinion, it’s also because the time for going to and leaving the offices and schools are the same). The transportation problem really needs to be addressed as soon as possible, just check out the video below.

Recently, it was reported that the chief of the MRT 3, Mr. Al Vitangcol III, was relieved of his post. He has been hounded by allegations of impropriety and extortion. I hope that the MRT 3 problems will be solved soon, and that no similar problems will affect MRT 7.

The ease of transportation that will be brought about by the MRT 7 and its 44-kilometer road component will surely have a positive effect on property values once completed. The downside, of course, would be significant traffic problems during the construction period.

What are the issues?

Kabataan Party-list representative Terry Ridon called for a review of the net revenue sharing arrangement under the concession agreement. It appears that under the concession agreement, Universal LRT Corp. (ULC) [partly owned by SMC] will receive 70 percent of net revenue and the government will get 30 percent if the return on equity is below 11.9 percent. If the return on equity is between 11.9 to 14 percent,  ULC and the government will have 50-50 sharing.

Another issue is the proposed fare. For a single journey in the MRT 7 from North Avenue to San Jose del Monte, Bulacan (14 stations), the fare shall be P38 for the first year of operation, increasing at a 5-percent rate per year for 25 years. Thus, the P38 fare will increase to as much as P128.68 at the end of the concession agreement (after 25 years).

It seems to me that the remaining issues can be resolved through careful negotiation. I understand the President’s hesitation in signing the performance undertaking since there will be a government guarantee, and there are still pending issues.

For ULC and SMC, I believe this is a safe investment because of the government guarantee and the profit sharing arrangement in their favor. For the government, it’s also good since the infrastructure will be provided to the Filipinos under a Public-Private Partnership (PPP) program whereby the project proponent is the one who pays for the cost. So, it’s just a matter of balancing the interests of both the investors and the government.

What’s in store for real estate investors in the areas near MRT 7?

I believe it’s but natural for property prices to improve once infrastructure that improves transportation is in place. I have visited the Quezon City and Bulacan areas recently and I was really impressed by the marked improvement in the road networks there. For sure, the MRT 7 will further add value to properties there.

In fact, Ayala Land is investing P6.8 billion in San Jose del Monte, Bulacan, in anticipation of the benefits from MRT 7 and related road networks. If a giant real estate company like Ayala is investing in Bulacan, I guess that’s a good indicator of the future of that area. Surely, they would not sink in that big amount without a projected handsome return.

If you are interested in Ayala properties in the area, let me know through the comments. If you want to see available properties in the Bulacan area, click on the following link: Foreclosed properties in Bulacan.