The president of the Dominican Association of Home Builders and Promoters (ACOPROVI) He warned that the great challenges facing this sector are the issue of inflation and costs and the increases that interest rates may experience, after the Central Bank ordered increases in its monetary policy rate.
The architect Jorge Montalvo recalled that the main stimulus for the sector to have a great year, such as 20221, was the fact that the country had the lowest interest rates in history, due to the monetary measures implemented by said institution. to face the collapse of the economy in 2020, caused by the coronavirus pandemic.
Montalvo said that this historical minimum generated great dynamism in the line of housing construction, but it is necessary to land in reality.
Interviewed by Héctor Herrera Cabral on the D’AGENDA program that is broadcast every Sunday on Telesistema Channel 11 and TV Quisqueya for the United States, the business leader maintained that this was the day-to-day of recent years, but the interest rates for mortgage loans They are still very attractive, and he trusts that the process of increases will not be immediate, and will take place gradually.
He recalled that projects that were already pre-approved, and people who had already taken their financing, many times the rates were guaranteed for a number of years.
“Certainly it is another of the great challenges, that is, I day that the two great challenges are the inflation issue and the cost issue, and on the other hand, then, interest rates, we come from that historical minimum, we have already seen what that generated, now we have to land again in reality, in the day to day, which is the dynamic of recent years”, he reiterated.
Montalvo acknowledged that this issue will bring adjustments that will cause the person who had planned to buy a larger home, due to the issue of the increase in interest rates, to buy a smaller one.
“But yes, that same issue brings adjustments, the people who wanted to acquire a financed house of 150 meters and three rooms, to give you an example, will now say that they can buy it of 140 or 135 meters, then comes the creativity of the promoters to make a product suited to the needs, and the payment capacity of the purchasers”, reasoned the president of Acoprovi.
He argued that it remains to be seen how the market adjusts to this new reality, but said he was confident that the adjustments will not be abrupt and the rate increases will not be too much either.
The president of the Dominican Association of Home Builders and Promoters stressed that now “we are going to get out of the historical lows, and we are going to continue with interest rates that I think are going to be competitive, because the banking system has realized the importance of the mortgage issue”.
In this virtue, he explained that the average in Latin America of the percentage of mortgage loans in relation to the Gross Domestic Product is around eight percent, while in the Dominican Republic it is around four percent, which implies that there is still a lot of room to grow.
Says housing developers are not clear why the cement cover rose from RD$283 to 450 pesos
the president of Acoprovi says that housing developers are not so clear why the price of the cement cover has increased from RD$283 to 450 pesos, because said product does not have a high component of imported material.
“The truth is that we as promoters are not clear about it, we know that cement is produced with energy, and here energy has not had any significant increase, even in the case of fuel it has been seen how the government has been subsidizing it in the months”, clarified the architect Jorge Montalvo.
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Montalvo insisted that the energy component is very high in the production of cement, but, in addition to that, the raw material does not pay a tariff, and therefore they do not understand how there has been such a significant increase in this product.
“Recently we had an 18 percent increase in the month of December, but there was already an increase at the beginning of 2021, and, in short, the price of the cement bag ranges between RD$410 and RD$450, when before the pandemic cost 283 pesos, that is, that is an important number,” he explained.
The leader of the business union said “that these are the things that are important”, because we must remember the importance of cement in other by-products.
He added that in the construction sector there has been an increase of all kinds, and there are products that have risen more than others, but there is an official index that is prepared by the National Statistics Office and that summarizes the impact that all materials have and the labor, which is called the Housing Cost Index.
“To give you an idea, in the last year, from December 2020 to the same month in 2021, the cost of a square meter of construction had skyrocketed by 15 percent, when we have had an inflation of more than 8%. throughout the economy,” Montalvo explained.
The Construction professional said that, to that percentage, of increase in the cost of housing, the increase of the previous year must be added, because it is something that comes from 2020.
He said that this is the reflection of the significant rise in steel, at the time, in cement that rose recently, among other materials that are required for construction, and in the specific case to build a house.
He recognized that this increase is transferred to the final price of the house, but it is something that is happening gradually, and it depends a lot on the moment the project takes.
The government asks to temporarily apply the ITBIS and tariffs on freight costs that existed before Covid
Engineer Jorge Montalvo understands that, as a mechanism to face inflation, the government should apply tariffs and ITBIS on imported goods, to the costs that freight had before the coronavirus pandemic.
“How to attack the issue of freight distortion, I think that we could, temporarily, that for the calculation of tariffs and the ITBIS of imported goods, the pre-pandemic cost would be taken, because we are talking that a freight of China, where a lot of construction materials come from, which was priced at two thousand dollars a van, rose by nearly US$20,000”, suggested the president of Acoprovi.
ACOPROVI said that it made that suggestion last year, but the authorities thought that the situation of rising freight costs would be temporary, however, what is being seen is that this is an agenda item for 2022, with which The sector will have to deal.
“So, this has led to many times, the van pays much more for freight than for the merchandise it carries inside, it has happened, with some things that take up a lot of space, it is something unusual,” complained the architect Montalvo.
He recalled that last year the government accepted a suggestion from Acoprovi to raise the issue of low-cost housing, which helps families with fewer resources, and by raising it from three million 800 thousand pesos to RD$4.5 million, he guaranteed that people who had embarked on their housing project and who had the ITBIS bonus, could continue to have that incentive.
He insisted that the measure of calculating the ITBIS and the freight cost tariff, on imported goods, at the levels that existed before the pandemic, even if it was transitory, received the support of the governor of the Central Bank, who saw it attractive, not only for the topic of construction materials, but more broadly.
He considered that this is one of the tools that the authorities have and that they will be pondering, in light of the fact that “we know that this is a situation that will continue for a while.”
