The builders' guild in El Salvador is preparing a law proposal, which provides for the approval of preferential interest rates on loans for home purchases.
The proposal to be presented by the Salvadoran Chamber of Construction Industry (CASALCO) will be applicable for bank loans to low- and middle-income families who purchase their first home.
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 February credit for the construction sector reported a growth of 38.22%.
According to the Salvadoran Chamber for the Construction Industry (Casalco), the industry obtained between the months of January and February about $79 million in loans to build and buy homes, representing an increase of 38.22% compared to the same period in 2011.
"Funding for construction totaled $23.07 million, 5.94% more than last year.
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.
Financial institutions lent 15% less for building houses in 2011, complained the Chamber of Construction.
The Salvadoran Chamber of Construction Industry (Casalco) reported that the portfolio of loans for housing construction experienced a decrease of 15% in 2011, as banks only granted $113.9 million.
At the presentation of an institutional report, the executive director of Casalco, Ismael Nolasco, said the bank had chosen to lend to housing developments for the middle class segment and above, which represented a lower risk. On the other hand, some builders have chosen to develop small projects with their own resources, reported ElSalvador.com.
Despite some signs of recovery, mainly in public works, the industry continues to stagnate, as shown by credit indicators for construction.
Between January and May 2011, banks lent $7.4 million for housing projects, 73% less than in the same period last year, when loans were for $27.7 million.
With regard to house buying, the situation is totally the opposite.
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.
Commercial banks loaned $84 million between January and August; in the same period of 2008 they gave credits for $302 million.
Mario Rivera is the President of Casalco, the Salvadoran Construction Chamber. He argues the government's anti-crisis plan does help his sector, but it is not enough.
"Builders believe the solution lies in approving the law for Preferential Interests, with which anyone getting paid minimum wage could get a loan to buy a house", reports Elsalvador.com.
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.
From January to November 2008 13,780 loans were granted, compared to 17,938 in 2007.
The Salvadoran Chamber of the Construction Industry (Casalco) said in their report, according to elsalvador.com: "The number of loans for home construction decreases 45.6%, since in 2008 only 189 home loans were granted compared to 2,187 in 2007.
Regarding the total financing granted, the report says that for housing the banks granted $10.65 million, that is 55.9% more than in 2007, when $6.83 million was granted.