Politica De Vivienda En Colombia

COLOMBIAN CONSTRUCCION & HOUSING SECTOR

HOUSING POLICIES

The Housing Deficit in Colombia:

The housing deficit issue has been for decades a priority for the Colombian governments as the offer of houses is not sufficient to meet demand and a significant portion of the houses are in poor/not decent conditions. The latest census of 2005 shows that as much as 36% of Colombian households has deficiencies in its habitation space. Of this 36%, one third is a quantitative deficit and two thirds are qualitative deficits.

Quantitative deficit means that a part of the population does not have a house, while qualitative deficit means that a part of the population has houses with significant inadequacies in terms of structure (bad materials, no walls, etc).

Despite all the programs put in place since the 1970s for the housing sector in Colombia, the problem hasn’t been solved yet and it keeps being a priority for the governments. In particular, the housing policy received a big impulse especially with the presidency of Santos (now re-elected in June 2014) which created the Ministry of Housing (“Ministerio de Vivienda”) with the Law 1444 of 2011, and in April 2013 launched, among other programs, the PIPE (Plan for the Impulse to the Productivity and Employment), which includes several actions specific for the housing sector.

Politica de Vivienda - Housing Policy & Subsidies:

Recently, the country is implementing 3 big programs with the objective to create sustainable solutions to the housing need of the population:

1) VIPA: Programa de Interes Prioritario para Ahorradores, i.e. Program of Priority Interest for Savers, which grants subsidies to low-income Colombians;

2) Viviendas Gratis: Free Housing, which provides extremely poor Colombians with a free house;

3) FRECH: Fondo de Reserva para la Estabilicacion de Cartera Hipotecaria, i.e. Reserve Fund for the Mortgage Portfolio Stabilization, which provide subsidies to the interest rate.

These programs intend to provide different kind of subsidies based on the value of the house, classified as follows:

Value of the house

Segment

(house classification) Minimum Wage

Million Pesos

Segment 1 (VIP)

Segment 2 (VIS)

Segment 3

Segment 4

Up to 70

+70 to 135

+135 to 235

+235 to 335

Up to about 40

About +40 > 79

About +79 > 140

About +140 > 179

1) The VIPA is a subsidy both to the acquisition price and the interest rate (up to 5%) which allows the acquisition of 86,000 houses for poor families which do count with a little bit of money saved (for this reason it is called for “Ahorradores”= “Savers”). This subsidy grants that only 30% on the incomes of the family are destined for the payoff of the financing quotas.

Which are the requirements to apply?

- The household has no other house

- The household’s overall salary is between 1 and 2 times the minimum monthly wage (i.e. 616,000 to 1,232,000 Colombian pesos as at 2014)

- The household wasn’t already granted another housing subsidy

- The household has family savings representing at least 5% of the total house value

What’s the risk for the Bank giving the loan and for the construction company?

Due to the risk for the financial sector implied in such loans, the program includes the emission of guarantees from the National Guarantees Fund (FNG – Fondo Nacional de Garantias S.A.) which will guarantee these loans thus facilitating the issuance of loans to this low-income sector. There is no particular risk for the construction company.

What’s the status of this subsidy?

It is still in place. In June 2014, the Colombian Minister of Housing Luis Felipe Henao announced to re-launch the program for additional 200,000 houses in the next four years.

2) The program Viviendas Gratis was created in 2012 to provide, with 100,000 free houses classified as VIP (House of Priority Interest), the poorest Colombian families which are not able to access credit.

Who can benefit from the Free House program?

The Administrative Department for Social Prosperity elaborates a list of possible eligible beneficiaries for each municipality and district, based on their belonging to one of the following categories:

- Be included in national social programs focused on fighting extreme poverty or be included in the category of extreme poverty;

- Be in situation of displacement;

- Be affected by natural disaster, public calamities or emergencies;

- Be living in areas of high risk;

- Priority is given to people with any handicaps, old people, and women/men leader of the household.

If the applications are more than the number of subsidies available, the Administrative Department for Social Prosperity will chose the elected families with a public raffle.

How is the program financed and how does the promoter/construction company participate?

The national dedicated funds such as Fonvivienda, Findeter, or other public entities transfer the funds to “patrimonios autonomos”, which are legal entities in charge of selecting the developer company for the house construction.

The construction company which owns the necessary urbanistic licenses and comply with the price and quality requirements can participate to the tender for the development of the project. Once the company is selected, the contract in place with the entity is regulated by the private law.

What’s the status of the program?

The 100k houses have all been contracted and more than 65k have already been completed.

In June 2014, the Colombian Minister of Housing Luis Felipe Henao announced to re-launch the program for additional 300,000 free houses over the next four years.

3) FRECH, a subsidy to the loan’s interest rate for the acquisition of a house, introduced in 2009, for houses of Segment 1 to Segment 4 (value of the house up to 335 minimum monthly wages).

Until today, three FRECH subsidy programs have been launched: FRECH I in 2009, FRECH II in 2012 and FRECH III in 2013 -this last one still in place and renewed for the next 4 years.

- FRECH (Fondo de Reserva para la Estabilicacion de Cartera Hipotecaria) I and II: subsidies to the interest rate for the acquisition of new VIS (House of Social Interest) and VIP constituted in 2009 and 2012 respectively. It granted up to 5% to the interest rate.

- FRECH III : launched 6 May 2013 and still active, it is subsidy to the interest rate for the acquisition of new home. About 19,000 subsidies have been granted in 2013, and the program

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