Debt relief for Mexico’s biggest homebuilders

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Mexico’s Department of Internal Revenue and Public Credit (SHCP) announced yesterday that they will be absorbing as much as 30% of the losses ($15 billion pesos) on loans made to the country’s largest homebuilders. “The beneficiaries of the Federal Mortgage Agency’s guarantee program for homebuilding will be efficient developers with healthy balances and viable projects, who will be able to access financing,” according to an official from the SHCP. The director of the National Housing Commission (Conavi), Alejandro Nieto, emphasized that this is not a “bail-out”, however, the announcement comes shortly after Fitch Ratings put the Mexican housing sector on negative watch. Last week, Homex (the largest developer) announced a fourth-quarter net loss of $206 million pesos.

The blame for the woes of what should be a booming industry is being placed on an executive decision to move away from single-family home construction towards urban apartments in government housing projects. According to Fitch Ratings: “As a consequence of the gravitation of the market away from single houses on the periphery of urban communities, homebuilders will need to sell a portion of their existing landbanks that are now unsuitable for future projects.” The developers are also burdened with increasing inventory levels as the Infonavit (public housing lender) is offering more financing for the purchase of previously owned homes.

The builders’ share prices escalated rapidly yesterday (Urbi, 18.52%, GEO,14.09% and Homex,13.65%).

 

Sources:

Financial Times, Whoa, Did Mexico just bail out its homebuilders? (Mar 6)

Bloomberg.com, Homex loss highlights builder woes (Feb 27)

Proceso, Lanzan plan de financiamiento para desarrolladores de vivienda (Mar 6)