The pilot plan which was launched in a real estate project in Montevideo to rent brand new apartments with option to buy completed its first cycle with auspicious numbers: close 80% of tenants reached the necessary savings to access a mortgage within four years. The plan was launched in 2017 in two buildings of the Torres Nuevocentro (adjacent to the mall) seeking to serve a market niche that real estate developers did not offer at that time.
The product sought to meet the demand of an important group of people who, due to cultural factors or income margin, lack previous savings, or do not have the contractual formality of a job that allows them to meet the requirements demanded by the bank to grant a long-term mortgage loan (20 or 25 years). The bank usually requires a prior savings of 20% of the value of the property to grant a mortgage loan.
The pilot for the Nuevocentro Towers was launched four years ago and an additional 20% was to be paid on the standard rental value of one to three bedroom apartments for a term of 4 years. During that maximum period, 100% of what the tenant allocates to the payment of the property he occupies was deducted from the final sale price. When the rental agreement was signed, the price of the apartment was frozen for four years and six months of the lease were deposited as collateral. The deposit and the rents were accumulated in indexed units (UI) month by month and computed as savings. Once the necessary amount for the initial payment (20% of the value) was reached, the purchase option could be used with the signing of the property deed.
When the product was launched (2017), most of the apartments were two-bedroom apartments (about 80 m2) with prices starting at US$163,000. Rents ranged from $24,000 to $27,000 per month.
What results did it give?
According to data from the administrator of the Torres Nuevocentro Trust —accessed by El Observador— in the last 4 years, 182 rentals with purchase options were agreed and, since June of last year, families began to exercise the first purchase options after reach the minimum required savings (20%).
In the case of the Herrera tower, 84% of the tenants made use of the purchase option, while in the Artigas tower that percentage was 65%. Adding both ventures, the percentage of users who appealed to the option was 74%, while the one who terminated the contract was 19%.
Precisely, about that number of tenants who did not meet their initial purchase objective, one of the reasons that was handled was the deterioration of the labor market due to the pandemic and the particular situation of each family. In any case, it is considered that the result of this pilot was “very encouraging”.
