The Business Year

Jonathan Malagón

COLOMBIA - Real Estate & Construction

Projected Construction Growth: 3.7%

Minister of Housing, Cities, and Territories, Colombia


Jonathan Malagón graduated with honors from the economics faculty at Universidad Nacional de Colombia and holds a degree in business management from the University of London. He holds a Master’s Degree (MPA) in Economic Policy from Columbia University, a Master’s Degree in Finance from the University of Barcelona and a PhD in Economics from Tilburg University. Among other recognitions, he was one of the 25 global winners of the Eisenhower Fellowship Global (2017) and was selected as the best economics student in Colombia according to the Portafolio Awards (2006). He was Vice President of ASOBANCARIA, Director of Economic Analysis of FEDESARROLLO, General Manager of the COMPARTEL Program, Manager of Management Control, Assistant to the CEO and Head of Economic Studies of Telefónica Colombia, and researcher of ANIF. He has belonged to the boards of directors of the National Guarantee Fund, the Latin American Housing Union (UNIAPRAVI), the Latin American Federation of Banks (FELABAN), the Bankers and Employers Club, the Anti-Cancer League and the Council on Global Future of Financing for the Development of the World Economic Forum. He also worked as a consultant for CAF, the World Bank and UNDP.

“For the next four years, we have set the ambitious goal of reducing the level of outstanding mortgage credits to 8.5% of the GDP.“

The Ministry has stated projections of a 3.7% rate of growth for the construction sector. How does this compare to the rate of growth in previous years?

In the last 10 years, the construction sector in Colombia has grown at an average rate of 2.6% per year. Our projections for 2019 show the consolidated recovery process that the sector is experiencing, which is expanding at higher levels than the national economy. In fact, the Ministry estimates that the building sector will become an engine for productive activity which is expected to be 3.4% during the year. It should be emphasized that there are currently very favorable perspectives for the sector. It has experienced two consecutive quarters with strong signs of recovery. For example, the GDP of the building sector registered growth rates of 6.2% and 4.4% for the 3Q and 4Q of 2018, respectively, and the leading indicators, including employment and the willingness of consumers to buy houses, have shown positive growth rates in the first three months of the year.

In order to improve this rate of growth, the ministry has outlined a four point plan to boost the construction sector. This includes a plan to reduce the costs and time of licensing for construction projects. What specific reforms is the ministry planning to advance, and how will they affect the growth of the construction sector?

Our strategy to promote digitalization and technological progress needs to respond to present conditions, where the procedures for licensing not only increase costs, but also affect the transparency of the whole process. For example, evidence has shown that the time spent on the paperwork required to issue construction licenses can increase costs by up to 10%. However, the highest delay comes in obtaining the necessary certificates to apply for construction licenses, which, by law, must be issued in 45 days. The Ministry will ensure speed in this procedure through a transactional information system called Terra. This system will be the result of the application of technological tools and the improvement of inter-institutional coordination. Digitalizing the process will allow integrating the obtaining of certificates that are needed to get the licenses in a single system. However, the coordination between government entities becomes the key factor as this means to ensure that the information that lays in the System remains updated and certified. This is possible through the standardization of its contents and its inter-operability with other information systems that currently exist. The possibility of having standardized information, and a platform that allows to carry out the procedures will significantly reduce the time required to collect the necessary documentation to apply for the construction licenses. This time-saving will result in a reduction of over costs currently faced by project developers and, thus, increase productivity in the sector.

Another core point of the plan will be initiatives to foment the digitalization and technological advancement of the sector. How will the Ministry aid the technological evolution of the sector, and what results can we expect from these initiatives?

One of the core elements in our productivity strategy is digitalization, specifically, the application of Building Information Modelling methodology, which is currently implemented at a low rate in Colombia and with a limited number of projects at a limited. Whereas in the UK 74% of the companies of the sector implement it, in Colombia this percentage goes as low as 37%, ranking below Chile, which is a regional benchmark, with 52%, according to the IDB. The implementation of BIM translates into a reduction of times and costs in construction projects, and therefore in an increase of productivity. McKinsey Global Institute estimates that the adoption of good technological practices, including BIM, generates a cost reduction of between 4% and 6% and an increase in productivity between 14% and 15%. These gains are the result of the reduction of design risks and improvements in project planning, thanks to a flow of adequate information between the different phases of the project. Our goal is to encourage the use of BIM so that at least one third of the companies use the methodology in more than 80% of their projects. To reach that goal, the Ministry has defined two specific activities. First, to design and implement the BIM Colombia Strategy with different entities such as the Ministry of Transport, the National Planning Department and National Development Finance. This will result in the development of standards and protocols to be adopted by the companies. The second action seeks to reduce initial costs of adopting BIM in companies, through a line of credit. This line will be managed by Bancoldex, which offers specialized products for medium and small businesses.

Colombia’s Mortgage Portfolio rate is 6.5%, one of the lowest in the region. How is the Ministry working to improve access to Mortgage Credits and housing subsidies for Colombians who need them?

The mortgage portfolio in Colombia remains below the pre-crisis levels of the late 1990s (8.8%) as well as below the Latin America average. For the next four years, we have set the ambitious goal of reducing the level of outstanding mortgage credits to 8.5% of the GDP. Given that all government programs go through the mortgage portfolio, it is crucial to reinforce the ability of the financial sector to provide easier access to mortgage credit to families demanding it. This is the reason why we have recently announced the creation of an Advisory Commission that will carry out a diagnosis of the sector and provide policy recommendations to promote mortgage credit in the country. The results of this study will be reflected in better conditions for a greater number of low-income families to access mortgage credit, which will be added to economic benefits provided by the National Government through social programs such as “Mi Casa Ya“ and “Semillero de Propietarios.“



You may also be interested in...

View All interviews