Analysis is being done on the concept of a leasing and a housing trust fund to facilitate greater access to bank financing for the construction industry.
The Salvadoran Construction Chamber believes that its financial capacity to develop more projects could be expanded through the use of trusts.Its president, Jose Antonio Velasquez, told Laprensagrafica.com that"... at the moment banks lend to housing developers'against their balances'. By using the concept of trust loans, the bank takes control of the project and would be able to lend more".
In the first two months of the year the total amount of loans granted to build houses fell by 85% compared to the same period in 2015.
Data from the Salvadoran Chamber of Construction (Casalco) indicates that out of the total credit extended by the banking system to productive sectors in the country, only 1% was for construction loans.
As for loans granted for housing, in January and February Casalco reported that only $1.2 million was awarded to construction companies, well below the $8 million recorded in the same period in 2015.
Up to June banks had only provided financing for housing projects worth $14.36 million, while in the same period last year it had already reached $32 million.
"The new housing projects can be counted on the fingers of one hand," said the executive director of the Salvadoran Chamber of Construction Industry (Casalco), Ismael Nolasco, adding that the drop is a reflection of an industry that is not investing in large housing projects because it has seen any demand.
The restriction of loans for house purchase by banks, together with the lower demand for rentals is keeping the sector depressed.
According to estimates by the Salvadoran Chamber of Real Estate sales and rentals of houses have fallen by 40% since 2009.
An article in Elsalvador.com reports that José Ventura Salvadoran president of the Chamber of Real Estate (CSBR) said, "although the housing deficit totals 444,000 homes, according to the Department of Housing, 'restrictive policies and the strict criteria of the banks for loan approvals, even to customers who before the crisis were guaranteed approval, has reduced the number of Salvadorans who can afford a house. "
Since 2008, more people have applied for loans to buy pre-owned homes than for new ones.
According to data from El Salvador's Social Housing Fund (FSV), in 2006 of 1,520 registered loans, 1,169 were for a new home. In 2008 the trend changed with more mortgage applications for pre-owned houses.
"Tomás Chévez, FSV president, stated that according to the most recent data, as of August this year, the trend continues with 1,821 loans registered for pre-owned homes and 590 for new ones," reports Laprensagrafica.com.
Salvadoran home builders welcomed President Funes's announcement, that turns into reality the long awaited anti crisis plan for the sector.
Funded by the government and the private sector, the global housing project aims to build 25.000 homes, generating over 100.000 direct and indirect jobs.
The first stage of the plan will see investment for $165 million, for the construction of 5.800 homes.
Commercial Banks have authorized short term loans to builders for the construction of 5000 homes.
In response to the ‘anti-crisis plan’ announced by President Mauricio Funes on Thursday June 18th, the Salvadoran Banking Association (Abansa) will be authorizing construction loans for $50 million.
According to Elsalvador.com, Abansa’s President Armando Arias said, “the plan is still in the internal evaluation phase.
Legislation in El Salvador proposes preferential interest rates for the purchase of new housing with costs between $15,000 and $60,000.
The Salvadorian Chamber for the Construction Industry (Casalco) presented to the Legislative Assembly a government bill that would encourage low-income families to purchase new housing in the range of $15,000 to $60,000.
Lack of credit, the uncertainty of an election year and rising material and oil costs were the principal causes.
The Salvadoran Construction Industry Chamber (CASALCO) had predicted zero growth.
German Rivas of Laprensagrafica.com published statements by the Executive Director of CASALCO in his article: "The expectations for 2009 are not very optimistic.
In the absence financing solutions, the construction union sector initiated meetings with private banks.
The Salvadoran Construction Industry Chamber (CASALCO) is not seeking massive loans, but more flexibility in granting credit.
La Prensa Grafica published on its website: According to Nolasco, the hope is to find new funding mechanisms in private banking, as well as to know what the requirements are to gain access to resources.
There are 19 housing projects which would generate about 2,400 houses in different market segments that are stagnant.
Ismael Nolasco, executive director of the Salvadoran Construction Industry Chamber (CASALCO) detailed in Elsalvador.com: "Eleven projects are already in the process of analysis in the Multisectoral Investment Bank (BMI), which is responsible for "banking" the projects, meaning that it looks for funding options.
The IDB and the World Bank denied the loan requested by the Salvadoran Chamber of the Construction Industry for the development of 15 projects.
Elsalvador.com reports: "At the onset of the project, the entity had programed $30 million to start the project. Now the Chamber is once again seeking funds to reactivate the sector. "Unfortunately, up to now the sector continues to be in the same situation as previously; I even mentioned that we had a project with the multilateral bank, but that project did not work out, they said no...however we continue to look for working alternatives to get credit," said the president of the group, Mario Rivera."
With a few days left before the end of 2008, there is concern about the inventory and little or no sale of houses in the market due to the credit restriction.
Mario Rivera, president of the Salvadoran Chamber of the Construction Industry (Casalco), added that the companies still have apartments or houses and that "they are unable to sell them because there is no financing for family," and therefore run the risk that the builders will not be able to fulfill their commitments with the banks.