Republic of the Philippines

DEPARTMENT OF FINANCE
Manila
LOCAL FINANCE CIRCULAR NO. 1-97
April 10, 1997
SUBJECT:

Guidelines for the implementation of Sections 7, 20, and 43 of

R.A.7279 otherwise known as the Urban Development and
Housing Act of 1992; and to supplement Local Finance
Circular No. 3-92 dated September 11, 1992.

TO

All Regional Directors, Bureau of Local Government Finance

(BLGF); District Treasurers and Assessors of Metropolitan Manila
Area; Provincial, City and Municipal Treasurers; Provincial, City
and Municipal Assessors; and Others Concerned.

Sections 7, 20, and 43 of R.A. 7279, otherwise known as the Urban

Development and Housing Act of 1992, provide as follows:
SEC. 7. Inventory of Lands. -- Within one (1) year from
the effectively of this Act, all city and municipal governments
shall conduct an inventory of all lands and improvements thereon
within their respective localities. The inventory shall include the
following:
(a) Residential lands;
(b) Government-owned lands, whether owned by the
National Government: or any of its subdivision,
instrumentalities, or agencies, including government-owned or
controlled corporations and their subsidiaries;
(c) Unregistered or abandoned and idle lands; and
(d) Other lands.
In conducting the inventory, the local government units
concerned, in coordination with the Housing and Land Use
Regulatory Board and with the assistance of the appropriate
government agencies, shall indicate the type of land use and the
degree of land utilization, and other data or information necessary
to carry out the purposes of this Act.
For planning purposes, the Housing and Urban
Development Coordinating Council shall be furnished by each
local government unit a copy of its inventory which shall be
updated every three (3) years.

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Sec. 20. Incentives for Private Sector Participating in

Socialized Housing - To encourage greater private sector
participation in socialized housing and further reduce the cost of
housing units for the benefit of the underprivileged and homeless,
the following incentives shall be extended to the private sector:
x x x;
(d) Exemption from the payment of the following:
x x x;
Transfer tax for both raw and completed projects; and
x x x;
Sec. 43. Socialized Housing Tax. Consistent with the
constitutional principle that the ownership and enjoyment of
property bear a social function and to raise funds for the Program,
all local government units are hereby authorized to impose an
additional one-half percent (0.5%) tax on the assessed value of all
lands in urban areas in excess of Fifty thousand pesos (P 50,000).

For the proper implementation of this foregoing provisions of law and to

supplement Local Finance Circular No. 3-92 dated September 11, 1992 with a
view of further clarifying the implementation of Sec. 13 of the said. R.A. No.
7279, the following guidelines are hereby prescribed for the information and
guidance of all concerned.
Sec. 1. Scope. This Circular shall govern the conduct of an Inventory of
lands pursuant to Section 7 of R.A. 7279; the exemption from the tax on transfer
of real property by the private sector participating in socialized housing under
Section 20 of this Act;
and the imposition of an additional one-half percent
(0.5%) tax on the assessed value of all lands in urban areas, in excess of fifty
thousand (Php 50,000.00) in accordance with Section 43 of the same Act.
The said additional tax is intended to provide local government units with
sufficient funds to initiate, implement and undertake social housing projects and
other related preliminary activities in their respective jurisdictions.
This Circular also aims to supplement the Guidelines for equitable land
valuation for socialized housing (Local Finance Circular No. 3-92), insofar as
valuation of blighted lands is concerned.

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Sec. 2. Definition of Terms. As used herein, the following terms shall

be construed to mean
(a) Act refers to the Urban Development and Housing Act of 1992;
(b)
Private sector/ project contractor shall refer to persons, natural
or juridical, participating in socialized housing and/or community mortgage
programs as provided for in the Act; or a re engaging in slums improvement or
the development of resettlement areas or new sites or other areas that may be
identified by the local government units as suitable for socialized housing
projects;
(c) Raw lands refer to lands already classified in accordance with the
classification of lands under Title Two, Book II, of R.A. No. 7160 but which are
undeveloped or do not contain the necessary physical infrastructure for viable
urban habitation, such as roads, water supply, sewerage, etc., which are covered
by contract or agreement for development, partition and sale as a socialized
housing project;
(d) Socialized Housing - refers to housing programs and projects
covering houses and lots or homelots only undertaken by the Government or the
private sector for the underprivileged and homeless citizens which shall include
sites and services development, long-term financing, liberalized terms on interest
payments and such other benefits in accordance with the provisions of this Act;
A socialized housing unit, which shall include both the house and lot, shall
not exceed P150.000.00 or such adjusted amount as may later on be determined
by the Housing and Land Use Regulatory Board (HLURB); and
(e) Underprivileged and homeless citizens refers to individuals or
families residing in urban and urbanized areas whose income or combined
household income falls within the poverty threshold as defined by the National
Economic and Development Authority and who do not own housing facilities.
However, such individuals must:
1.
2.
3.

be a Filipino citizen.
not own any real property whether in the urban or rural
areas.
not be a professional squatter or a member of the squatting
syndicates.

(f) Urban areas refer to all cities regardless of their population density
and to municipalities with a population density of at least five hundred (500)
persons per square kilometer;

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(g) Blighted areas - refers to the areas where 50% of the structures are
dilapidated, obsolete and unsanitary, tending to depreciate the value of the land
and prevent normal development and use of the area. The blighted status of the
area shall be certified by the LGU concerned thru its assessor.
(h) Assessed value is the fair market value of the real property
multiplied by the assessment level synonymous to taxable value.
Sec. 3. Incentives for Private Sector Participation in Socialized Housing.
To encourage greater private sector participation in socialized housing and
further reduce the cost of housing units for the benefit of the underprivileged and
homeless citizens, the private sector shall be exempt from the payment of the
transfer tax for both raw land and completed projects; Provided, however, that
such exemption from payment of transfer tax on acquisition of raw land may be
realized only upon completion of at least fifty percent (50%) of the project as
scheduled or in accordance with the program of work submitted, which shall be
verified and determined by the assessor concerned.
The local Treasurer, therefore, should initially collect the transfer tax due
on all transactions involving the acquisition of raw lands by participating private
sectors like any other transactions requiring the payment of such transfer tax.
However, the same shall be held in trust which may be refunded to the payor only
upon certification by the assessor that the fifty percent (50%) completion
requirement has been complied with, and the corresponding Certificate of
Transfer Tax Exemption is issued by the Bureau of Local Government Finance
(BLGF), otherwise, the tax collected shall be transferred to the general fund of the
LGU concerned.
The BLGF Certificate of Transfer Tax Exemption shall be required in
order to avail of the herein exemption for completed projects.
Sec.
4.
Requirements/Conditions
for
Availment
of
Tax
Incentives/Exemption. As an initial step in the availment of the herein tax
incentives, a written application for Certificate of Transfer Tax Exemption shall
be filed at the Office of the City or Municipal Assessor concerned to be submitted
subsequently to the BLGF together with the following documents:
a.

Certified true copy of the Deed of Sale;

b.

Certified thru copy of the TCT/s;

c.

Approved socialized housing development plan;

d.

Certification from the assessor that the area being sold

consists of raw land to be utilized in the socialized housing
project; and

e.

Certification from the Population Commission (POPCOM)

that the area is urbanizable.

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The Sellers Taxpayer Identification No. (TIN) should be indicated in the

application.
Within fifteen (15) days from the date of submission of the application and
supporting documents, the assessor concerned shall, after due verification of the
documents submitted; and conduct of an ocular inspection to determine whether
the project has, at least been 50% completed, forward the application for transfer
tax exemption, together with the Certification as to the project accomplishment,
vis--vis the approved socialized housing development plan; and all the foregoing
documents, to the BLGF.
Applications for transfer tax exemption covering raw lands shall be acted
upon by the BLGF within a period not exceeding thirty (30) days upon receipt of
the application for transfer tax and the Certification by the assessor concerned that
the project is already fifty percent (50%) completed and the same is in accordance
with the schedule indicated in the development plan. Thereupon, the BLGF shall
issue the Certification of Transfer Tax Exemption and notify the treasurer
concerned for the said issuance, with instructions that the transfer tax initially
collected should be refunded within a period of not exceeding five (5) days upon
receipt of the BLGF notice.
The socialized housing development plan, shall be registered with the
HUDCC, which, in coordination with the local government units, shall design a
system for the registration of qualified program beneficiaries in accordance with
the National Urban Development and Housing Framework.
Sec. 5. Conduct of an Inventory of Lands. For the proper implementation
of Section 7, all City and Municipal Assessors are hereby instructed to conduct an
inventory of all (a) residential lands; (b) government-owned lands whether
owned by the National Government or any of its political subdivisions,
instrumentalities, or agencies including government-owned or controlled
corporations and their subsidiaries; (c) unregistered or abandoned and idle lands;
and (d) lands which may be declared as suitable for socialized housing, including
buildings and other improvements thereon, within their respective jurisdictions,
providing the following information:
a.

The name of the Owner and/or Administrator as appearing

in the assessment record on file;

b.

The classification and actual use per assessment made of

each land parcel;

c.

The actual condition/status and the degree of utilization as

verified in the field, vis--vis the records of the HLURB
(and other appropriate agencies of the government) and the
LGUs Zoning Ordinances, if there is any;

d.

The Tax Declaration No. and the TCT No. if titled;

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e.

The land area (and floor area, in cases where there are
building(s)and/or other improvements; and

f.

The market and assessed values of the subject lands.

All City and Municipal Treasurers are hereby enjoined to provide

information to their respective city or municipal assessors relative to the real
property tax delinquencies, if there are any, of all lands included in the inventory.
The initial inventory shall be conducted during the current year 1996, and
for this purpose, all City and Municipal Assessors are hereby directed to divide
their respective localities into two (2) or four (4) districts or zones depending on
the number of land parcels. The completed inventory for each district or zone
should be submitted to the HUDCC, thru their Regional Offices, beginning
October 1st of the current year up to March 31st of the following year, which date
is hereby prescribed to be the deadline for submission of the complete or total
inventory for the entire city or municipality. All Provincial Assessors are hereby
instructed to guide and supervise their Municipal Assessor in the conduct of this
activity.
For purposes of monitoring compliance herewith, all BLGF Regional
Directors are hereby instructed to submit a quarterly progress report relative to the
activities of the City and Municipal Assessors within their respective Regions
concerning the foregoing instructions, and to see to it that the first progress report
is submitted not later than December 31, 1996. Subsequent reports should be
submitted within ten (10) days following the end of every quarter.
While the law requires the updating of land inventories once every three
(3) years, it is hereby instructed that any additional or revised listing be prepared
and submitted to HUDCC on an annual basis, on or before December 31st of each
year.
Sec. 6. Responsible Agencies and Guidelines in the Implementation of
Sec. 43.
6.1

All LGUs with identified urban areas based on the National Urban
Development and Housing Framework per Section 6 of the Act,
shall inform the DILG, HUDCC and this Department of their
intended action relative to Section 43 of said Act, which shall
include such details as:
(a)

the commencement and termination of its implementation

and imposition of the Socialized Housing Tax (SHT);

(b)

the projected generated income;

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(c)

and the prospective projects to be funded by the tax.

However, the imposition of the additional one-half percent

(0.5%) tax on the assessed value of all lands in urban areas in
excess of fifty thousand pesos (P50,000.00) shall require the
enactment of an ordinance by the Sanggunian of the LGU
concerned.
1.
A province or city, or municipality within the
Metropolitan Manila Area involved may impose an
annual Social Housing Tax of one-half percent (0.5%) on
the assessed value of all lands in urban areas in excess of
fifty thousand (P50,000.00) in addition to the basic and
Special Education Fund (SEF) taxes which the said local
government units (LGUs) are authorized to impose under
Section 232 and 235 of the Local Government Code of
1991 (R.A. 7160)
All provinces and cities, and the municipalities
within the Metropolitan Manila Area imposing the Social
Housing Tax (SHT), shall have to enact their respective
tax ordinances for this purpose.
2. The proceeds of the SHT actually and directly
collected by the city or municipal treasurers shall accrue
to their respective General Funds, under a Special
Account to be established for the purpose. However,
proceeds of the SHT collected by the Municipal
treasurers outside Metropolitan Manila Area shall be
apportioned between province and municipality
concerned as determined and approved by the
Sangguniang Panlalawigan on the basis of their
respective urban development and housing programs.
3. The SHT shall accrue on the first ay of January of the
year following the commencement date of the program
implementation and may be paid without interest in four
(4) equal quarterly installments; the first installment to be
due and payable on or before the Thirty-first (31st) of
March; and the second installment, on or before the
Thirtieth (30th) of June; third installment, on or before
the Thirty-First (31st) of September; and the last
installment on or before the Thirty-first (31st) of
December, in line with the provisions of Section 250 of
the Local Government Code of 1991.

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The tax ordinance imposing the SHT may provide tax

discounts for advanced and prompt payments in accordance with
the provisions of Section 251 of R.A. 7160 and Article 342 of the
Implementing Rules and Regulations (IRR) of the said Code.
However, failure to pay the SHT upon the expiration of the
periods aboveprescribed, shall subject the taxpayer to the
payment of interest (penalty) at the rate of two percent (2%) on
the unpaid amount per month or fraction thereof, until the
delinquent tax shall have been fully paid: Provided, however,
that in no case shall the total interest on the unpaid SHT or
portion thereof exceed seventy-two percent (72%).
6.2

6.3

6.4

The LGU shall utilize the Social Housing Tax (SHT) for an one or
a combination of the following projects or undertakings:
1.

Land purchase/Land banking

2.

Improvement of current social housing facilities

3.

Land development

4.

Construction of core houses, sanitary cores,

medium-rise buildings and other similar structures;

5.

Financing or joint-venture agreement of LGU/NHA

with the private sector.

The Assessors office of the Identified LGU shall:

a.

immediately undertake an inventory of lands within its

jurisdiction which shall be subject to the levy of the Social
Housing Tax (SHT) by the local sanggunian concerned;

b.

inform the affected registered owners of the effectivity of the

SHT; a list of the lands and registered owners shall also be
posted in 3 conspicuous places in the city/municipality;

c.

furnish the Treasurers office and the local Sanggunian

concerned of the list of lands affected;

The Treasurers office shall:

a.

collect the Social Housing Tax on top of the Real Property

Tax, SEF Tax and other special assignments;

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b.

6.5

report to the DOF, thru the Bureau of Local Government

Finance, and the Mayors office the monthly collections on
Social Housing Tax (SHT). An annual report should
likewise be submitted to the HUDCC on the total revenues
raised during the year pursuant to Sec. 43, R.A. 7279 and the
manner in which the same was disbursed.

For this purpose, the HUDCC, through its regional office, and the
NHA are hereby enjoined to:
a.

make recommendations to identified LGUs feasible social

housing projects within their jurisdictions to be funded by the
SHT;

b.

enter into joint-venture agreements with the LGU concerned

for the development of projects to be funded by the BHT;

Sec. 7. Determination of Market Value of Blighted Lands As

supplement to Local Finance Circular no. 3-92 (Guidelines for Equitable Land
Valuation for Socialized Housing), the market values of sites which are already
occupied by program beneficiaries where the land is considered blighted land,
as certified by the LGU concerned thru its assessor, in coordination with the
National Housing Authority, shall be computed primarily on the basis of the land
market value determined or arrived at in accordance with section 3(1) of the said
Local Finance Circular, which states:
Section 3. Land Valuation x x x
(1) As a general rule, the zonal values shown in the
approved zonal valuation of real properties for the area or locality
applicable to the corresponding period shall be used as the basis
for computing the fair market value of the subject land.
(2) Where in the approved zonal valuation of real
properties covering a city or municipality, no zonal value has been
prescribed for the particular land, the zonal value prescribed for
similar land located in the adjacent area or barangay within the city
or municipality shall be used in arriving at the fair market value of
such lands.
(3) In the absence of zonal valuation in a city or
municipality, the market value shown in the latest tax declaration
on file in the Office of the Provincial, City or Municipal Assessor
concerned shall be considered the fair market value of the land:
Provided, that when the subject land has no tax declaration, the
valuation thereof shall be computed on the basis of the applicable

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Schedule of Market Values of the city or municipality in force

during the corresponding period: Provide, further, that if no unit
base market value has been fixed in the Schedule of Market Values
for that city or municipality, the unit base market value fixed in the
Schedule of Market Values for land of similar conditions within
the city or municipality located in the adjacent area or barangay
shall be used in determining the fair market value of the subject
land.
x x x
Thereupon, the market value of blighted lands may be determined by
applying any or a combination of the following downward adjustment factors:
a) Depth or Distance from main roads or streets by
using the stripping method, where a strip
shall consist of not less than twenty (20) meters
from the main road or street for the first strip
and not less than ten (10) meters for each
succeeding strip 20% for the
first strip and
10% for every
other strip
b) Low or sunken area easily flooded by high tides or
occasional rains
Not more than
20 %
c) Congestion, or inaccessibility of the area even by
non-motorized pedicabs or animal-driven vehicles
like calesas Not more than
10 %
d) Unsanitary or squalid condition of the area due to
lack of basic facilities such as water supply and
solid waste disposal systems, streetlights,
etc
Not more than
10%
Altogether, the resulting or final market value of any blighted land or
area shall not be less than thirty percent (30%) nor more than sixty percent (60%)
of the market value of such land or area as may be initially arrived at as discussed
in the foregoing provisions of this Section.
The resolution or final market value of blighted lands or areas shall be
determined by the City Assessor, the Municipal Assessor in the case of
municipalities within the Metropolitan Manila Area, and by the Provincial

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Assessor in the case of municipalities outside Metropolitan Manila. At his

discretion, the City Mayor, the Municipal Mayor of the municipality within
Metropolitan Manila, and the Provincial Governor, as the case may be, may
convene the Zonal Appraisal Committee to review the valuation arrived at by the
Assessor concerned for the Committees comments and recommendation.
Sec. 8. Effectivity. This Circular shall take effect immediately.
The Regional Directors of the Bureau of Local Government Finance, and
the District Treasurers and Assessors of Metropolitan Manila Area are herby
instructed to disseminate the contents of this Circular to all Provincial, city and
Municipal Treasurers and Assessors within their respective jurisdictions for their
information and guidance.

(SGD.) ROBERTO F. DE OCAMPO

Secretary