The Inter-American Development Bank today announced the approval of a $60 million loan to Peru to support the first phase of a $200 million program to transform the housing sector, mobilizing the private sector for investment, increasing the supply of homes and benefiting low-income groups.
The resources will help provide subsidies for low-income homeowners and upgrade low-income neighborhoods, encourage private sector investments in lot development, improve infrastructure and services in low-income neighborhoods, and support an ongoing process of modernization of public administration in charge of housing and urban development.
The IDB is expected to provide an additional loan of $100 million after the first three-year phase is completed. Local counterpart funds total $15 million for Phase I and $25 million for Phase II.
The program will be carried out by the Ministry of Housing, Construction and Sanitation.*
The project will subsidize housing for around 115,000 low-income people and develop underutilized state-owned property for residential use so it will generate housing for an additional 12,000 people.
Another 13,250 low-income persons will be benefited by a program for comprehensive neighborhood improvement.
Among the components of the project will be the consolidation of a coupon subsidy program. Funding will be provided for 9,100 subsidies of $3,600 each for the purchase of a new home worth $4,000 to $8,000.
MIVIVIENDA, a second tier government mortgage bank, will modify its targeting policies so as to benefit the poorest segments of the market.
One goal of the housing loan to Peru is to create a mortgage market and private sector financing for potential low- and middle-income homeowners who presently do not have access to housing credit.
By mobilizing private sector resources and improving the targeting of subsidies to benefit low-income groups, the program will organize a system to reduce a severe national housing deficit. Now an estimated 42 percent of the population lives in substandard housing, and only about 10 percent of homes are built by the formal sector.
The IDB loan is for a 25-year term, with a 42-month grace period, at the variable interest rate, now 5.8 percent.