Tuesday, March 07, 2006

The unseen part of Venezuela's housing program 

Venezuela's housing program has been much discussed - from the government consistently missing its targets for new housing units to the high quality of what it is building. But there is one part of the housing program that is often completely overlooked. And that is the large subsidies that the government gives to people to purchase housing on the secondary market, i.e. from private developers.

These subsidies take two forms. First there is often a grant amount that is simply given to people to aid in the purchase. Second, the remaining part of the cost of the home is financed at highly preferential rates. Today in Ultimas Noticias they gave the exact numbers for those subsidies:

For people with incomes up to $375 per month they are given a grant of $8,000 and the balance of the purchase cost can be financed with a loan at 4.08% interest (inflation is over 10% so this is really a negative interest rate).

For people with incomes between $375 per month and $750 they get a grant of $6,900 and the rest is financed at an interest rate of 7.08%.

Those who earn from $750 per month to $2,076 are not given a grant but get a preferential interest rate of 9.98% (still negative interest).

The value of any homes purchased under these programs is capped at $22,300 which will buy a comfortable home in Venezuela.

So when one sees that the construction sector of the Venezuelan economy is booming this is one of the governmental programs that is helping to bring that about.


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