The Inter-American Development Bank today announced the approval of $34 million loan to the state of São Paulo, Brazil, to help finance the first phase of an innovative project to finance home purchases and improvements by low-income city residents living in downtown tenements.
The Bank may finance a second phase of the project with a second loan of up to $76 million, which will bring the total cost of both phases to $220 million, including local counterpart funds.
The project is innovative not only because it is the first Bank program directed to assist low-income families living in rundown tenements in downtown areas, but also because it will introduce mechanisms for active participation in the housing improvement process by beneficiaries, who will select their own housing solutions that will be financed by a combination of subsidies and credit. The program will also involve the participation of municipalities, civil society and the private sector.
The first phase of the project will develop new financial instruments to finance a pilot project, using explicit direct subsidies and supporting loans, to enable 5,000 families living in tenements in downtown São Paulo to purchase new homes, renovate existing living quarters, or purchase housing collectively.
A larger-scale second phase operation will finance housing solutions for another 11,000 families living in the central area of São Paulo and in other municipalities of the state.
The program, to be carried out by Companhia de Desenvolvimento Habitacional e Urbano do Estado de São Paulo*, is expected to have an impact on reversing the urban decay faced by São Paulo and in downtown areas of other cities.
Beneficiaries will receive technical asistance for organizing residents associations and counseling and training on the home-purchasing process and the establishment of condominiums.
The IDB loan for the first phase of the program is for a 25-year term, with a four-year grace period, at the currency pool variable annual interest rate, now 6.29 percent. Local counterpart funds total $36 million.
In another recent operation to support development in the state of São Paulo, the Bank approved a $120 million loan to improve the state’s highway network and to enhance and expand intercity bus terminals.