Real Estate & Construction

Homes for All

Housing Reform

The government, in a bid to boost the real estate and construction sector, has implemented a new financial regulation on public interest housing.

In April 2015 the Regulatory and Monetary Council established a new financial regulation that opens up opportunities to the real estate and construction sector. This regulation implies the compulsory reduction of the interest rate in loans regarding “public interest housing.” The eight biggest banks of Ecuador, Produbanco, Pací­fico, Guayaquil, Pichincha, Internacional, Loja, Rumiñahui, and Bolivariano will have to reduce the rate from 10% to 4.99% and the Bank of IESS (Biess) will reduce it from 8½ to 6%. Other banks can voluntarily opt to introduce this new regulation. This reduction is applicable to houses of public interest, that is, houses with a maximum price of $70,000 or $890 per sqm. Previously, loan applicants had to have 30% of the house price as a requisite to apply for it, but now private banks will only request a maximum of 5% and Biess will request none. Both private banks and Biess will increase the loan periods up to 20 and 25 years. This reform on mortgage loans is only available for new houses, with the exception of the Biess, which can also offer them to second-hand houses under certain conditions.

In recent years, the real estate boom has been focused on the upper middle class segment, but the government wants to turn the eyes of developers and investors to low to the lower middle class segment. The relation between demand and offer in the upper middle class segment is very well balanced, on the other hand, Ecuador has a deficit of 70,000 houses, mainly in the low and low middle class segments. Santiago Ribadeneira Troya, board member of Proinco, stressed the importance of this regulatory change because “this segment is integral for Ecuador to overcome the housing deficit.”

According to the magazine Lí­deres, in Ecuador, 80% of houses are divided between Quito and Guayaquil. Around 63% of the houses offered in the capital and 55% in Guayaquil had a value of under $70,000. Furthermore, some institutions are implementing other changes regarding time efficiency to help speed up the process and get residents in their homes as soon as possible. Biess is already reducing the time in which they give houses to buyers. Similarly, Ciudad Jardí­n has one of the shortest times of hand overs. Eduardo Crespo Correa, Representative of Ferroinmobiliaria, when talking about the buyers who choose their company said, “they select their house, display identity documentation, hand over two or three documents required by the bank, and we take care of the entire process. In some cases, we give the keys of the house with the deeds and the credits to the buyer within 30 days, which is a national record.”

Ciudad Jardí­n is the biggest project in Quito within this segment, but there are also other companies that are actively engaged in public interest housing. In the case of Mutualista Pichincha, it has projects that perfectly fit this segment. It has a project in Guayaquil consisting of 1,600 houses and another south of Quito of 400 houses. Also, Proinco Inmobiliaria has a 40 ha project in Cayambe.

However, developers believe that constructing these types of houses represents a challenge. Citing high land prices and lack of infrastructure such as adequate sewage, transportation, and shopping malls René Cordero, the General Manager of Mutualista Pichincha showed his concern about finding the perfect land in Ecuador to develop this type of housing. “In Guayaquil there is plenty of land that fits the development of these projects, but this does not happen in other cities like Quito. In the capital it is difficult to find adequate land.”
According to El Telégrafo, Minister of Housing Marí­a de Los Ángeles Duarte anticipates 13,000 available houses within the program by 2015. This new financial regulation seeks to boost the real estate and construction sector, the economic activity of the country, employment, and family welfare.

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