Interview: Infonavit CEO, on Reshaping Mexico’s Mortgage Market

Monday, April 27, 2015

Mexico is transforming its urban housing policy, and with the help of key names such as Infonavit and its CEO Alejandro Murat Hinojosa, the country is seeking to implement more sustainable solutions

Mexico represents a landmark example of how emerging nations can quickly upend their standing on the world stage and, with the right reforms in place, emerge as something truly impressive. In Mexico, urbanisation has taken hold more rapidly than almost any other OECD country, and by the year 2010 almost 78 percent of the population would go by the tag ‘city dweller’ (see Fig. 1). Owing to a half-century-long drive to fulfil the country’s formal housing needs, an unrelenting focus on social housing has brought with it a host of challenges, and Mexico must now adapt to a more sustainable model or risk facing struggles further along the line.

Under the leadership of its CEO, Alejandro Murat Hinojosa, Infonavit has transformed Mexico’s housing market and set the population on a pathway to sustainable prosperity. World Finance spoke to Murat Hinojosa about the many ways in which the housing landscape has changed, and how it is that his and Infonavit’s contributions have created a host of new and exciting opportunities. “Infonavit is changing the course of housing history in Mexico through financial innovation”, says Murat Hinojosa. “We transitioned from a quantity-oriented, numbers-based mortgage model to one focused on improving the quality of life of the workers and their families, not only providing mortgage loans, but also protecting and ensuring efficient returns to their savings.”

Some decades ago, large swathes of the population couldn’t afford a house, and the prospect of a home away from hardship convinced millions of city residents to pack their bags and head to the outskirts where the costs were less. With housing agencies like Infonavit doling out subsidised mortgages and healthy relocation packages, the focus on social housing construction enabled the country to make a much-needed transition. “This rapid expansion of housing finance [see Fig. 2], led mainly by Infonavit and facilitated by public policies aiming to expand access to formal housing, enabled the country’s transition from informal to formal housing on a grand scale”, says Murat Hinojosa.

“Although great progress towards diminishing the housing deficit was achieved, the model became unsustainable.” In choosing to focus on social housing outside of the city centre, the population has moved away from the pick of the jobs and services, which has raised congestion, dampened productivity and brought an all-round lesser quality of living. The country’s urban population rivals many even in developed nations, yet the key difference is that largely low-rise single-family homes rather than high-rise buildings dominate the landscape. Irrespective of the efforts made to address the housing deficit, the market of today still bears the scars of abandoned properties and social segregation, according to a recent OECD report prompted by Infonavit, and the sector has failed to provide the basic benefits of agglomeration: lower transportation costs, security, better schools, lower carbon emissions, innovation clusters and proper public services.

Changing face
The appointment of President Enrique Peña Nieto in 2012 hammered the final nail in the coffin of Mexico’s long running social housing model. This has shifted the government’s focus to centre less on single family housing and more on ‘verticality’. Since his appointment, the president has partnered with congress to approve no less than 11 key structural reforms, each aimed at boosting productivity, expanding citizen rights and, crucially, consolidating a more efficient democracy. “The federal government has shown a strong commitment with this sector and as such, at the beginning of 2015, President Enrique Peña Nieto has announced fiscal and financial measures supporting housing financing and development with aims to build 500,000 new homes with an expected investment of over $23bn”, says Murat Hinojosa.

Source: World Finance (link opens in a new window)

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affordable housing, financial innovation