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How the market will change with mortgage loans and emerging loans to develop buildings - La Nacion Propiedades
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Cómo cambiará el mercado con los créditos hipotecarios y los incipientes préstamos para desarrollar edificios
El presidente de la Cámara Empresaria de Desarrolladores Urbanos reflexiona sobre el presente y futuro del mercado inmobiliario argentino
www.lanacion.com.ar
June 10, 2024
The president of the Business Chamber of Urban Developers reflects on the present and future of the Argentine real estate market
By Damián Tabakman
The Argentine real estate market could be reconfigured based on mortgage loans to buy a house and in addition to loans to developers to build buildings
Based on the normalization of the macroeconomy in Argentina and the slowdown in inflation, which hopefully will be consolidated soon, we will have to prepare to adopt a new work model , just as they do in other countries. What will it consist of? The first is linked to the recent reappearance of mortgage loans . As the system grows and consolidates, high-impact changes will be generated , among which we can mention:
- All transactions thus financed will become traceable, banked and transparent . This in itself is already a great novelty.
- People must take care of their credit history to qualify.
- A new demand from buyers with approved credits and willing to buy will be unleashed , so the price of properties will rise. This demand will be much higher than supply because those who could not do so for years will begin to buy.
All this phenomenon will make the market volume grow geometrically . We estimate that the level of activity will increase greatly in the coming years.
Secondly, changes related to the product will appear. Other types of buildings will be made thinking of the end user and not of the investor or saver for whom we have been working.
Loans to developers: They expand access to housing
Another very relevant change is already coming in the financial structuring of projects, as is happening in the rest of the world.
Some banks are already starting to offer loans to developers. This completely changes the real estate market, to the extent that it becomes widespread.
Because? As part of the funding for the work is provided by the banks, developers are given the possibility of charging buyers low fees until possession , which they can then combine with a long-term mortgage. With this model, buyers could pay the same fee from signing the contract at the well until paying off the credit decades later, probably with some reinforcements during the construction period. The same if financing from the well was offered to buyers.
All of this operates as a great activator of the market and catalyzes many new ventures for a public eager to buy their first home.
In this way, those people who today do not have 30% of the price of the property that the bank does not finance with mortgage loans or who do not qualify because they do not have sufficient and demonstrable income are included and given access to housing. a good credit history.
What are developer loans like?
The developers already have credits for them, which are called: “construction loans”, which are disbursed for progress of work and returned at the end
There are many variants, but the simplest consists of financing through lines called “construction loans” that are disbursed as work progresses and are returned at the end.
The developer, with the funds coming from the price balances of the buyers in the well, must cancel his “construction loan.”
Banks finance approximately half of the investment in construction and the destination of the “construction loan” is what remains attached to the land. That percentage may increase over time.
It should be noted that with these credits, virtually the entire line of business also becomes traceable, banked and transparent.
And hopefully at some point the mortgage subrogation system will begin to operate so that the “construction loan” can be linked to the long-term loan automatically or resolved through so-called “future mortgages.”
New players in the market
The market will have new players, among which institutional investors, local or foreign, and real estate investment funds stand out
The other aspect that will change a lot will be the building. The financial cost of “construction loans” is a huge incentive to reduce construction deadlines and incorporate technology to do so. That will also be a big difference compared to how we have been doing it, given that the delivery time today is in line with the payment capacity of investors.
The other novelty that will appear, although perhaps not so quickly, is that of institutional investors , local or foreign, and real estate investment funds.
A fund usually acts as a demanding passive investor controlling the business from the point of view of the proportion of capital contributed, which is associated with a developer whom it requires to also invest. This is the person who runs the day-to-day running of the project, reporting to the fund, and a “split” (distribution) of the project's profit is established between the two parties.
Finally, it is very possible that it will once again play an important role in the real estate world, the capital market . Currently, real estate has almost no presence in that area, with few exceptions. It is expected that the Argentine capital market will grow a lot and channel resources towards our industry.
In short, a completely new market is most likely coming with actors who will acquire a leading role that we are unaware of today. We must begin to prepare companies in anticipation of the business model to come. Those who start earlier will be better prepared for when it arrives, which hopefully will be soon.
The author is president of the Business Chamber of Urban Developers (CEDU)
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