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.
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”.