Tag Archives: environment

The New Frontier of Real Property Valuation

The real estate landscape in the Philippines is evolving. Value today is no longer measured only in square meters or location premiums—it now includes environmental quality, ecosystem services, and sustainability performance.

This shift is driven by two landmark developments:

  • the Philippine Ecosystem and Natural Capital Accounting System Act (PENCAS, RA 11995), and
  • the Sustainable Forest Land Management Agreement (SFLMA) recently launched by the Department of Environment and Natural Resources (DENR).

Together, they introduce a new economic reality: natural capital has measurable influence on land value. And while the RESA (RA 9646) confines appraisers to the valuation of real property, it also empowers them to consider external factors—economic, social, and environmental—that materially affect value.

From Real Property to Environmental Influence

Section 3(g) of the RESA Law defines appraisal as the act of estimating the value of real property as of a given date and for a specific purpose. This legal limitation means appraisers do not value ecosystems directly—but rather, the way ecosystems and environmental conditions affect real property value.

That connection is best understood through the concept of external obsolescence or external influence to value.

External Obsolescence as the Link

In appraisal theory, external obsolescence (also known as economic or locational obsolescence) refers to:

“A loss—or sometimes a gain—in property value caused by factors outside the property boundaries.”

Environmental and ecological conditions perfectly fit this definition. They are external to the parcel but have a direct market effect on it.

Examples include:

  • flooding, erosion, or landslides (negative externality);
  • improved forest cover or mangrove restoration (positive externality);
  • new zoning restrictions under PENCAS-based environmental plans (neutral or negative, depending on use); and
  • inclusion in SFLMA eco-management zones (potentially positive due to tenure and investment security).

Thus, the appraiser’s function under RESA remains squarely focused on real property, but one that fully recognizes environmental influences on value.

The Role of PENCAS and SFLMA

 PENCAS (RA 11995)

Institutionalizes natural capital accounting nationwide. The PSA, DENR, and NEDA are mandated to compile data on land cover, ecosystem services, resource depletion, and environmental quality.

For appraisers, this means access to measurable environmental indicators that can be analyzed as external influences—for example, changes in flood risk, air quality, or land productivity affecting market behavior.

SFLMA (DENR DAO 2025-22)

Streamlines forest tenure instruments (IFMA, SIFMA, CBFMA, SLUP, etc.) into a single long-term, renewable agreement. It formalizes forest-land rights for sustainable and multi-use purposes—such as agroforestry, eco-tourism, and carbon sequestration.

Under this system, the appraiser values the real property interest—leasehold, usufruct, or management rights—not the forest resource itself. But the environmental context of SFLMA areas (restored ecosystems, carbon-credit potential, reduced hazard exposure) can enhance or diminish land value, thus affecting appraisal outcomes.

Environmental Influence and Valuation Practice

Environmental ConditionValuation TreatmentEffect on Value
Mangrove degradation or deforestationExternal obsolescence (negative externality)Decrease due to higher flood risk
Mangrove or forest restoration projectExternal influence (positive)Increase due to improved safety and amenities
Designation as protected zone or watershedLegal restriction (external factor)Limits Highest and Best Use; may reduce market value
Forest tenure via SFLMAInstitutional improvementEnhances value through investment and tenure security

Here, PENCAS data quantifies what was once only qualitative: land condition, ecological function, and exposure to climate risk.

These data can now be used as objective evidence for adjustments related to environmental obsolescence or enhancement—making appraisal analyses more defensible, especially in litigation, taxation, or policy work.

Anchored on Standards

Both Philippine Valuation Standards (PVS 105) and International Valuation Standards (IVS 105) explicitly require appraisers to consider:

“All external factors—economic, social, and environmental—that materially affect value.”

Therefore, recognizing environmental obsolescence or benefit is not optional; it is part of the appraiser’s professional duty of care.

This aligns seamlessly with the PENCAS mandate to integrate natural capital information in economic planning, and with the SFLMA’s goal to attach measurable economic value to forest stewardship.

Professional and Legal Integration

Legal/Policy FrameworkHow It Affects Appraisal
RESA (RA 9646)Defines scope as real property but allows inclusion of external (environmental) influences to value
PENCAS (RA 11995)Provides ecosystem and natural-capital data relevant to external obsolescence analysis
SFLMA (DAO 2025-22)Creates new forms of real property interests (management rights, eco-tenure) subject to valuation
PVS/IVS StandardsMandate consideration of environmental, legal, and economic factors in market analysis
RA 7160 / RA 8974Require fair valuation for taxation and just compensation, both affected by environmental quality

Real Property and Environmental Responsibility

While the RESA limits the appraiser’s work to real property, it does not prohibit analyzing external environmental influences that shape that property’s market perception.

In today’s world, ecological quality is not merely context—it is economic reality. Flood resilience, forest conservation, and clean water access are all capitalized into property prices.

Thus, the appraiser’s task remains the same:
to estimate the value of real property—
but with a more comprehensive understanding of what drives that value.

The environmental-economic dimension of valuation is not beyond RESA’s mandate; it is embodied within its principles.
PENCAS and SFLMA do not redefine the appraiser’s jurisdiction—they deepen it by quantifying the external factors that have always influenced value.

When an appraiser measures depreciation due to flood risk, or premium due to green infrastructure, they are not performing ecological valuation. They are performing sound, modern real property appraisal that recognizes external obsolescence and environmental influence as integral forces of the market.

In short:

We still value land—but now, we value it with eyes open to the living systems that sustain it.

On BBM’s Right of Way Policy Proposition

President BBM’s recent proposition to return to a previous system for handling right of way issues, where the government would pay only 15 percent of the property value upfront and resolve any subsequent valuation disputes in court, has significant implications not only for landowners but also for the general public.

Key infrastructure flagship projects currently facing right of way (ROW) issues include the Cagayan de Oro Diversion Road Extension, the Davao City Bypass Construction Project, the Samal Island-Davao City Connector Bridge, the Light Rail Transit-1 Cavite Extension Project, and the EDSA Greenways Project.

One of the primary motivations behind President BBM’s proposal is to expedite infrastructure projects. Projects could proceed without delay by taking possession of the property with an initial 15 percent payment and allowing valuation disputes to be settled later. This could lead to quicker completion of essential infrastructure such as roads, bridges, and public utilities, benefiting the public by improving transportation, connectivity, and access to services.

However, this expedited process might come at a cost. The reliance on courts to resolve valuation disputes can increase the judicial system’s burden, potentially causing delays in other legal proceedings. Additionally, the cost of prolonged litigation could ultimately be borne by taxpayers, increasing public expenditure.

The public perception of the government’s commitment to fair and just practices could be affected. If the policy unfairly favors infrastructure development at the expense of property owners’ rights, it could lead to public dissent and erode trust in government institutions. Ensuring a transparent and fair process is crucial for maintaining public confidence.

Efficient and timely infrastructure development can have positive economic impacts, such as stimulating investment, creating jobs, and boosting economic growth. Improved infrastructure enhances the overall business environment, making it easier for companies to operate and expand. However, if the process is perceived as unjust, it might deter investment, particularly in real estate and property development sectors, due to concerns about property rights and fair compensation.

The rapid acquisition of property for infrastructure projects can lead to community displacement. This has social implications, as displaced families and communities may face significant challenges in finding new homes, jobs, and adjusting to new environments. Ensuring that displaced individuals are adequately compensated and supported through the transition is essential to mitigate these impacts.

A system that prioritizes quick project completion over fair compensation may disproportionately affect vulnerable populations. Lower initial compensation could exacerbate the financial instability of low-income families and marginalized communities. Ensuring equitable treatment for all property owners, regardless of their socio-economic status, is critical for social justice.

Therefore, President BBM’s proposal to modify the right-of-way process has the potential to accelerate infrastructure development, benefiting the public through improved services and economic growth. However, it also raises significant concerns about legal and financial burdens, public trust, social impacts, and equity. A balanced approach that maintains fairness, transparency, and support for affected individuals is essential to ensure that the benefits of infrastructure projects are realized without compromising the rights and welfare of property owners and the broader community.

Paradise Panglao

Every appraisal assignment gives me an opportunity to visit beautiful places of the neighborhood and nearby tourist spots. This is Panglao island, recognized as one of the premier tourist spot in Central Visayas.

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Took oath anew as Court Commissioner

11150573_1061342033884038_5252473516736476044_nAppraiser Gus took his oath last Friday, September 11, 2015 as one of the Commissioners of a Regional Trial Court in Cebu City. As one of the Commissioner, his duty is to aid the court in determining the exact property affected area and the amount of just compensation to be paid.

“Congratulations to all of you”, the lady judge happily greeted them after the oathtaking ceremony in her office. The other oath-takers were the City Assessor of Carcar, Cebu City and the Clerk of Court.

“I thank the lady-judge and the lawyers who trusted my capacity and chooses me as one of the Commissioner.” Appraiser Gus exclaimed. “With the present composition of Commissioners, the court could render wiser judgment aided by the report of each and everyone of us as Commissioners.”

Appraiser Gus was also chosen as Commissioner by the regional trial court of Lapulapu to determine the fair market value of a property in a dispute. Previously, he also served as an Associate Appraiser in Zonal Revaluation of the BIR Technical Committee in Cebu City.

Metro Manila Appraisal

It was an honor and privilege to be invited by a prestigious and one of the top appraisers company in the land to join their team in appraising property in Metro Manila.

Truly it adds value to my appraisal skills and in running an appraisal company.

Great experience.

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No two properties are alike

marketvaI have a client who asked me if I am using the same appraisal report format in my practice.  I quickly replied no. Why? Real estate properties have different appraised values depending on how you intend to use the appraisal. For instance, valuation for insurance may be very different than the value in the market, estate tax, property resale, or insurance. Other assigned uses include investment, liquidation, price confirmation, equitable distribution, loan collateral, retrospective value and many more.

Qualified and educated appraisers understand the many different types of values, assigned uses, and market condition in an specific area. He or she works with client to choose the proper type of value so that they can use the appraisal correctly and effectively.

Whenever there’s a question about the value of your property, there’s also a risk involved. It may be the risk of selling too low, or of paying too much: the risk of being under or over insured; the risk of not getting your fair share in a division of property; the risk of incurring tax penalties or being audited when calculating estate taxes.

A professional appraiser helps you manage these and other such risks by providing a written opinion of value upon which you can base your financial decisions. Rather than being just an “educated guess”, the professional appraiser’s value conclusions are based upon prescribed methods of valuation, research and report writing.

Bankers, investors, insurers, brokers, trustees, lawyers, judges, government agencies – ALL are dependent upon the knowledge and expertise of the appraisers, and so are you. Too often and too late, people find out that the appraisals they have are inaccurate or misleading, resulting not only in greater risk to themselves, but also a waste of millions out of their pocket.

No two properties are alike, no two appraisals are alike.

Appraisal services with a government institution

Appraiser Gus Agosto has just rendered appraisal services to the University of the Philippines, Cebu Campus. “It is an honor to be awarded a contract and appraised properties of a prestigious institution like U.P.”, Appraiser Gus Agosto shared.

“Government institutions and agencies are good market for real estate appraisers. Appraisers can explore and participate in government bidding and contracts.” he further said.  Last year, he was also part of an appraisal team that provided appraisal services to the Cebu Appraisal Technical Committee on Zonal Valuation of the Bureau of Internal Revenue (BIR).

To succeed, Appraisers should have working knowledge of the Republic Act 9184 or the Government Procurement Act. Every branch or agency of the government through the head of a procurement entity forms a bids and awards committee (BAC) to conduct competitive and transparent purchases by means of public bidding. There are also alternative ways government can make purchases like limited source bidding, direct contracting, negotiated procurement and shopping,

“In winning a government contract, offering the lowest price is not the key. It is knowledge, appraisal experience and excellence in appraisal that matters,” Appraiser Gus ended.

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