Investment calling: social and middleclass housing needed

Paraguay housing

President Cartes is committed to social housing reforms to address social inclusion, which has been one of the priorities of his administration from the start


B R I E F I N G  / BY  Jorge Marengo Camacho


SENAVITAT (Paraguay’s Ministry for Housing) estimates that in 2011 there was a deficit of over 1.1 million homes, with 13% that were non-existent and 87% in need of repair. In 2014 only 78.3% of Paraguayans owned their own home. This figure only increased by 0.2% in 2015 to 78.55%. In fact, the amount of homes needed rises in cities, with 75.49% of city-dwellers living in their own home, compared to 83.21% in rural areas. This is partly due to high internal migration with people from the provinces moving to cities in search of new opportunities. The capital Asunción is a good example, where in 2014 only 67.8% of the population owned their own home.
With a relatively small middle class in relation to the working class, and high levels of inequality, we might conclude that the market for buying or renting property in Paraguay is unattractive. But for Fruet and Muñoz, consultants at CEPAL, the problem is not one of income but a lack of financing. They propose solutions such as payment plans through FONAVIS (The National Social Housing Fund), to construct 7,500 homes per year. Under this scheme, lower-middle class Paraguayans would have the opportunity to own a specific type of home, paying instalments of US$60 per month. Fruet and Muñoz underline the importance of the public sector working with the private sector in this policy.
In addition, 45% of the Paraguayan population is under 24 and only 14% is over 54, which shows it is as a country with strong potential. With an average age of 27, there are many young people who would be willing to invest in a home if given credit. Moreover, buying and renting both residential and business premises is increasingly attractive, due to lower costs compared with neighbouring countries, and the regional political landscape.
In Buenos Aires a 200m2 house in some middle-class neighbourhoods can cost over US$300,000. The fact that you can find a house in Asunción with the same number of bedrooms, a better finish and a swimming pool for US$90,000 or less definitely creates competitive advantages. If we add to that Argentinian tax and duties (which encourage capital flight) or the internal political crisis in Brazil (linked to a lack of growth due to falling petrol revenues) then Paraguay undoubtedly starts to look like an attractive option in the region.
One of the major goals that President Cartes set himself was to transform the sector of the population that lives below the poverty line (over 30%) into a working class, thus solidifying the country’s small middle class. The strategy he chose was a national development plan in which the issue of housing was integrated into strategic objective 1, entitled Poverty Reduction and Social Development. As part of this objective, housing is seen as a tool for empowering the vulnerable population. Housing is to be accompanied by certain infrastructure services, which would have a knock-on effect on health, such as access to clean drinking water, and waste collection and disposal.
This policy implements programmes for community improvement and mortgage credit rediscount, and more programmes are being piloted to construct homes through mutual support cooperatives. The policy, which has a Keynesian feel to it, contributes to local work not only by constructing and funding homes, but by producing the material to build the homes in the communities. An example can be seen in the San Francisco neighbourhood in Asunción, where 12,000 people are involved in making a million bricks using artisan techniques, so that the homes can be built.
Possibly the most problematic aspect is the territorial planning, which lags behind, which is relevant on two points: In her speech at the XXV Assembly for Housing Ministers and Authorities in Latin America and the Caribbean, Minister Soledad Nuñez underlined the importance of strengthening medium-sized cities in order to reduce internal immigration. This will help to organise a more structured growth and discourage the traditional centralist regime.
The other strategy relates to the creation of an urban agenda with political and social actors from different departments, in which they who take on the management of territorial planning and departmental and municipal development. Various voluntary organisations will also be collaborating in this work, either through the government (Arovia) or different social organisations like Un Techo para Paraguay (A Roof over Paraguay), international organisms like the IDB or HABITAT, and socially responsible companies like Grupo Barcelona.
What is being bought in Paraguay are futures, and for this to happen the government needs to promote confidence to investors. Figures indicate that this is being achieved. According to various reports from CEPAL the rate of return on investment is around 22%, which makes the country more profitable for foreign direct investment. This figure is backed up by Paraguay being the second country in Latin America in its percentage growth of DFI, with 230% compared to 2013-2014 (second only to Barbados).
It is certainly true that drinking water distribution, a lack of sewage systems, and general health cover are all pending tasks. Those who will benefit will be those who show confidence that the indicators will continue to improve and with them the price of their properties.



8-Programa Nacional de Desarrollo 2030.