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.
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.