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Luis Felipe Henao Cardona

COLOMBIA - Real Estate & Construction

Impressive Indeed

Minister of Housing, City, and Territory, Colombia

Bio

Luis Felipe Henao Cardona was born in Medellí­n in 1979. He has a long history in academia and has written various texts on penal law and justice, as well as serving as a Professor of Disciplinary Law at the University of Medellí­n. In his career as a public servant, he has also occupied posts in the ministries of the Interior and of Justice. He has held the position of Director of the National Institute for Penitentiaries (INPEC), and the National Directorate for Narcotics (DNE). Following becoming Vice-Minister for Housing in May 2012, he implemented the Free Housing Program.

"We have implemented very important investments in drinking water infrastructure."

The construction sector grew 10.8% from January to September 2013. How would you assess the development of the sector regarding public infrastructure?

The figures are quite impressive indeed. We finished 1Q2013 with over 10% growth, followed by more than 8% in 2Q2013, and a unique 24.8% in 3Q2013. These impressive figures made the construction sector the leading economic engine for the country during this period. For example, in 3Q2013, the second fastest sector in the Colombian economy was agriculture with over 6% growth. In this context, housing played a very important role. Colombia generated attractive incentives for companies, ramped up investment, constructed over 100,000 free housing units, and reached 1.4 million workers in the sector. Colombia’s construction sector is now positioned at the forefront of the region and positively contributed to lowering unemployment in the country. In fact, Colombia has generated the most employment in the region on a per-capita basis. During Pastrana’s administration, the country built 280,000 housing units, while during Uribe’s first administration it built 340,000, and in his second administration 560,000. With Santos, we plan to finish with 920,000. This represents an 80% increase compared to the previous government. In 2013 alone, we built 260,000 housing units, representing an all-time record for the country. This activity has not only contributed to the development of the construction sector, but other related sectors, too.

What are the government’s plans regarding free housing?

We have an integral housing strategy reaching all levels of society, especially the low-income segment, where informality is still high and poverty, although reduced, is still a major issue. The current level of informality in our economy has reached 49%, and that means that millions of people do not have access to formal credit lines. Our government offers these people real possibilities to access the housing market through the free housing units program. In 2014, we will complete 60,000 housing units for this segment of the population. Additionally, we have set up a parallel program for families that have between one and two salary sources and are still vulnerable in economic terms, despite their formality. They receive a subsidy of around Ps15 million, plus another one linked to the interest rate, meaning that we assume between 30% and 40% of the interest generated from a mortgage for these families. Finally, we have also developed plans for the middle class, especially linked to, again, the interest rate and lower tax payments for those who purchase a housing unit. We have noted that such policies have contributed to further boosting activity in the construction sector. We have seen the sector developing positively and believe it has a bright future.

“We have implemented very important investments in drinking water infrastructure.”

How have public-private partnerships (PPPs) contributed to this strategy?

When developing our strategies and subsidy programs, we aimed to make both buyers and constructors feel comfortable, making sure that they realize we are on their side by reducing bureaucratic processes, among other things. For example, in the 100,000 free housing units, the investment is 100% private and we choose the developers based on their proposals. We select people that fit the parameters for access to this kind of housing and we offer guarantees to constructors. In the second program, we again choose developers and they are also the ones who decide on the final buyer based on their economic background. With such projects, we have boosted the number of PPPs.

How would you assess the work being done to improve access to drinking water?

We have implemented very important investments in drinking water infrastructure and, today, thanks to our work, 4 million more Colombians have access to drinking water for the first time. Now, we need to further invest in rural aqueducts to increase access to drinking water, while also improving sewage systems across rural areas. That would also boost industrial activity in many areas and create more jobs.

How well shielded is Colombia from a real estate bubble?

We do not have such a deepening of the mortgage credit sector as, for example, Spain, a country that suffered from a real estate bubble. Our deepening of the mortgage credit sector stands at 5.1% of the country’s GDP, while in Spain that figure reaches over 50%. Also, Colombia enjoys excellent risk management standards as compared to other countries, and we do not give mortgages to those people who have to allocate more than 30% of their income. In addition, we only concede mortgages between 50% and 70% of the value of the property. We also have to mention that, in Colombia, we only construct housing projects when all the units have been sold. These are just some examples. Additionally, Colombia’s credit default level stands at 2% nowadays. However, we see an increase in prices because of the rising purchasing power of Colombians. Also, the increasing number of foreigners willing to purchase a house in our country is leading to higher prices in the market.

Where would you say lie the best investment opportunities for foreign developers and constructors?

I think the fact that both Colombian and foreign players compete at the same level is a clear tool that attracts foreign companies to the sector. That has led to a current scenario in which many foreign companies develop construction projects in our country. In fact, I think housing, port, and tourism construction are very attractive sectors with great development potential.

How are increasing levels of security contributing to the revival of certain areas such as La Candelaria in Bogotá?

Public security for our citizens has positively increased during both this government and the previous one. Additionally, more employment and higher investment in security, health, and education have also contributed to reducing poverty and violence. In this context, Colombia has come a long way and, although we still have a lot to do, we have to be very proud of what we have achieved.

What is the level of commitment of the Ministry to further generate more employment opportunities in the sector?

In December 2013, we reached the highest number of employability in the sector ever, at 1.4 million people. If we take into consideration the 21 subsectors that benefited from the growth of the construction sector, the figure goes even higher. As investment continues to flow, and as transparency and formality levels continue to increase, so will employment opportunities. Also, we are working to further strengthen the real estate service sector and formality levels in it, for we have already achieved a great regulatory framework.

© The Business Year – April 2014

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