While many countries in the developed world are suffering from burst real estate bubbles and crippling mortgage crises, Colombia’s construction sector is still sailing smooth waters and is expected to do so indefinitely.
According to Sergio Mutis Caballero, President of Grupo Valor, this real estate stability is due to several factors. Firstly is the fact that a huge housing deficit guarantees that demand outstrips supply. Some 280,000 houses are needed yearly yet in a good year, only about 135,000 are built – essentially meaning that no houses go unbought.
Secondly, Colombians in general put a down payment of 50% towards their homes with relatively low interest rates, which combined, result in zero property value depreciation and a lower risk of loan defaults.
Thirdly, says Mr. Mutis, Colombian culture places great value on home ownership. As a result, 70% of houses are bought by individuals and families as residences, while just 30% are bought as investments.
Grupo Valor S.A. is a well-reputed, mid-sized real estate developer with projects throughout Colombia and who excels at forming partnerships not only with suppliers, builders and promoters, but also with domestic and foreign investors. One of its biggest partners is the L.A.-based private equity fund Paladin Realty Partners, with whom Valor last year signed a US$20 million agreement. The joint venture, called PALVAL Homebuilding Platform, will build approximately 1,000 middle-income housing units in high-density areas in Bogotá and beyond.
Why have Paladin and various other equity funds chosen Valor as their local Colombian partner? Mr. Mutis explains: “We’re not the biggest but we’re solid in terms of economics and market knowledge. Our fund partners find our vision, size, emphasis on innovation and environment, and our strong partnerships very attractive.”
The president also highlights that Valor always seeks – as its name rightly suggests – extra value. “We don’t take on a project unless there’s something innovative about it, whether it be innovation in the product, in the project concept or in the building system. We even have a section of the company called the Innovative and Sustainable Building Department.”
Although the company focuses mainly on middle and upper-middle housing, it also participates in social housing and commercial and tourism projects.
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