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.
A bill on preferential interest rates suggested by the industry would reduce the cost of a home loan by up to 50% and boost construction in the country.
In order for the construction sector to recover from a 2013 that ended with a negative number it is necessary to reduce interest rates on mortgage loans so that more people are able to buy a home, therefore the business sector is recommending a proposal for a law on preferential interest, which was proposed more than six years ago.
Construexpo Fair will bring together national and international companies at the International Center for Fairs and Conventions on March 27- 30th 2014.
The Salvadoran Chamber of Construction Industry (CASALCO) is organizing the event with the participation of 177 companies and which will cover four areas: Expo Housing, Expo Environments, Expo Construction (with presentations related to technology, prefabricated, tools and materials) and Expo Machinery (which showcases heavy or light machinery such as cranes and concrete mixers).
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.
In the first quarter of 2013 a decline was registered in the construction sector reflected by lower cement consumption and lower volumes of construction loans.
A report by the Salvadoran Chamber of Construction (Casalco) reveals that during this period, 9,017 bags of cement weighing 42.5 kilograms were consumed, a figure which represents a decrease of 7% compared to the amount consumed in the same period in 2012.
Employers have suggested that the Social Housing Department raise the ceiling for lending to $125,000, in order to create opportunities for lower-income segments.
The Salvadoran Chamber of the Construction Industry (Casalco) has proposed that the Social Housing Fund (FSV) increases to $125,000 its lending ceiling, seeing as it is now being analyzed, reported Elmundo.com.sv.
In 2011, house sales in El Salvador grew by 4%, and the industry is planning new campaigns to encourage home ownership.
Strengthening the housing market is a key item for the construction industry to consolidate the economic recovery of 4% recorded in 2011, noted the Salvadoran Chamber of Construction (CASALCO).
The union has decided to boost the campaign entitled “Your own home, wellbeing guaranteed” for six months.
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. "
The market registers over $30 million in social housing purchases (up to $75.000).
Mario Rivera, president of Casalco, the Salvadoran Construction Chamber, explained that in the first months of 2011 they've experienced a paused recovery, the first since 2008.
However, he added, the situation is still fragile, and he acknowledged they must improve the lack of housing options for high income families.
Credits for home purchase only rose one percentage point between May and July this year (from 3% to 4%).
This announcement was made by the Salvadoran Construction Chamber (Casalco). Its report adds that construction loans are still static at 4% of all credit granted by the banking sector.
Ismael Nolasco, Casalco executive director, said that while it is true that there is a slight increase in credits it is too early to say whether the sector is out of the crisis. "In reality there are no symptoms of a genuine recovery - the sector is still in need of monetary injection," Nolasco said, according to Elsalvador.com.
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.
Faced with restrictions on local credit availability, 10 projects are looking to foreign banks for finance.
Mario Rivera, president of the Salvadoran Construction Chamber (Casalco), commented that it is not yet possible to access credits from the guarantee fund set up through a trust by the Multisectorial Bank of Investments (BMI).
In Laprensagrafica.com he is reported as saying that, “We can’t even get credit with a guarantee.
Business unions complain that excessive red tape complicates the country’s economic recovery.
The Social Housing Fund has 93 projects pending authorization, including private and public initiatives.
The Salvadoran Construction Industry (Casalco), estimates that it takes 18 months to complete the required paperwork, stating that this adds considerable costs to any project.
Salvadorans are gearing more towards renting homes, as buying real estate is becoming increasingly difficult, due to little credit and complicated paperwork.
Additionally, banks are lending little money to build new homes. According to Casalco (Salvadoran Chamber of Construction), home building loans have dropped 73.4% in the first quarter of 2010.
Ismael Nolasco, executive director of Casalco, commented that “they are conducting a study with the Multi-sector Investment Bank (BMI) to evaluate the state of the industry. ‘Many people who are renting homes would prefer to buy, but they face too complicated requirements for getting a loan’, he said”.