Speaker - Mr. Gerardo De La Pena Hernandez, Deputy General Director, Infonavit, Mexico

1. INFONAVIT’S ROLE IN TRANSFORMING MEXICO’S
URBAN AND HOUSING DEVELOPMENT
ABRIL 2015
GERARDO DE LA PEÑA HERNÁNDEZ
“First we shape the cities, then they shape us”
Jan Gehl, Cities for People
ConnectKaro 2015

2. Who are we?

3. INFONAVIT - MORE THAN A MORTGAGE LENDER
Mortgage Lender: largest in Latin America Based on the size of its
portfolio and its origination level
>1.2 Million mortgage and home improvement loans originated between
January 2013 and December 2014
8million loans throughout its history
Infonavit is a strong financial institution that manages workers’
savings and finances social housing
MEXICANS LIVES IN A HOUSE FINANCED BY INFONAVIT
1OF EVERY 4
1st Mandate: Ensure access to a
suitable and adequate housing to
Mexican workers
2nd Mandate: Provide secure and
responsible management of the
Retirement Savings Fund

4. Mortgage investmentsHousing savings fund
Mortgage credit collection
• 4.4 million mortgage loans in our balance
• 1.2 million off balance-sheet loans
• ~5 GBP billion to invest in 2015
• Mexico´s biggest complementary fund for retirement
• ~33 GBP billion in the Retirement Savings Fund
• ~21% of all assets registered at the Retirement
Savings System (AFORES)**
• ~ 17 million active affiliates
• Annual return of 6.5% ~ to SB1 pension funds
- Non Performing Loans : 5.3% vs. 3.4%
of private banking
- Credit collection ~4 billion
~2.6 GBP billion in employers’
contributions for 2015
Infonavit has a social orientation and contributes to economic
development
*Subcuenta de Vivienda (SCV) ** As of January 2015, CONSAR
National
Housing
Fund
54 million
accounts
Employers’
Contributions of 5%
INFONAVIT’s
administration
costs

5. Infonavit tailored its model to respond to different challenges
throughout its 42 years of history
Infonavit participates both
in construction and
housing financing
• Due to lack of supply
• From buying land to its
selling
Leaves construction and
consolidates as a social
mortgage lender
• Finances finished
dwellings instead of
construction
Develops and implements
Dwelling Construction
Rules
• Detailed Building Code
Financial consolidation
process initiates…
• Catalyzes its role as a
loan provider
… and canalizes
governmental subsidies
• Massifies housing
supply
Normative role passes to
States/Municipalities
Evolving its institutional
framework and strategy to
boost workers’ social
security:
• Attend housing needs
through financial solutions
that improve quality of life
• Pay efficient returns to
right-holders’ retirement
savings
• Housing model oriented
to the development of
competitive cities
90's
Social mortgage
lender
70's – 80's
Market creator
2001 – 2012
Fighting the housing
deficit
2013…
Social security
booster

6. Diagnosis

7. In 2013, a deep diagnosis was conducted to understand the
challenges and opportunities in three dimensions
1. Lack of adequate regulation
2. Massive production of housing solutions (an average of 453k mortgage loans from
2006 to 2012)
3. Distant and isolated housing developments (abandoned houses represented ~3%
of total loan portfolio)
4. Deterioration of old housing units, lack of maintenance and public goods
1. 99% of total loan portfolio linked to minimum wage increase (~4.3 million loans)
2. Previous maximum credit limit underserved demand needs (955k affiliates suitable
of receiving a higher loan)
3. Lack of diversity, housing solutions heavily dependent on mortgages
1. Lack of inter-institutional coordination. Housing policy out of the cabinet’s agenda
2. Strong financial indicators that allow the implementation of innovative actions
Supply
Demand
Institutional

8. Infonavit’s strategic focus on property value appreciation
guarantees viability in the long run and higher social impact
Strong collateral
Quality of life
Social mobility
Competitive cities
Appreciation of
property values
=
Sustainable
net- worth

9. Actions

10. An institutional transformation was initiated to build
competitive cities
Enhanced coordination of urban
planning and housing institutions
Move towards sound and sustainable
urban development models
Reduce the housing deficit in a
responsible manner
Procure appropriate and adequate
housing solutions
1) Creation of Ministry of Agrarian,
Territorial and Urban Development
2) The institutional strategy is aligned with
the four pillars of the National Housing Policy
and consolidated in the financial plan
3) Improved scheme for granting
subsidies:
• No subsidies outside urban contention
perimeters
• Inclusion of affiliates with income up to 5
minimum wages (MW), previously up to
2.6 MW
• 2014 was the year with the highest
amount of subsidies granted 385 GBP
million
• 87% of subsidies target workers with
earnings below 2 MW (174 GBP)
1
2
3
4
Lack of inter-institutional coordination. Housing policy out of the cabinet’s agenda1
INSTITUTIONAL SUPPLY DEMAND

11. Incentives were established to optimize land use, increase density
and build sustainable housing
Promoting verticality and re-densification
Introduced regulation to contain urban sprawl (urban contention perimeters)
Massive
production
of housing
solutions
Distant
and isolated
housing
developments
2
3
INSTITUTIONAL SUPPLY DEMAND
Lack of
adequate
regulation
1

12. Incentives for housing developers ensure quality of dwellings
and correct industry practices for the benefit of workers
Now there are more than 2,800 participants
Before 5 firms represented 30% of the market
Now 20 firms cover the same percentage
All new housing developments are required to hire
coverage for structural damage and waterproofing
Now appraisals are monitored systematically to identify
market deviations and prevent misconduct
2,000 daily appraisals 60% of them are
new houses
About 200,000 houses
£ 48 million investment
Deterioration of old housing units, lack of maintenance and public goods4
INSTITUTIONAL SUPPLY DEMAND
Supported the restructure
of the three major housing
developers
Quality insurance
New appraisal’s platform
Housing developments with
difficulties

13. A set of innovations were implemented to our housing finance
model delivering important benefits for workers
Increase in the maximum
loan amount
New peso denominated
mortgage loans
Diversification of housing
solutions
99% of total loan
portfolio linked to
minimum wage increase
(~4.3 million loans)
Previous maximum
credit limit underserved
demand needs (955k
affiliates suitable of
receiving a higher loan)
Lack of diversity,
housing solutions
heavily dependent on
mortgages
• The loan balance decreases with
every payment, fixed rate, and
fixed payment
• Additional elimination of mortgage
origination & notary expenses
(benefits 72k credit holders)
• Pilot program to convert previous
loans to Pesos
• 76% increase going from 21K
GBP to 37K GBP, provides
access to better housing
• Arrendavit: rental solutions
• Mejoravit: 450K home
improvement solutions during
2013 and 2014
• Urban regeneration programs
1
2
3
INSTITUTIONAL SUPPLY DEMAND

14. Integral housing solutions were diversified to satisfy affiliate’s
different housing needs, along their working life cycle
Mejoravit: home improvement loans
Arrendavit: rental program
Urban and social rehabilitation programs
Improving the Unit
Painting Mexico
Urban furniture
Public libraries
Playgrounds
Reforestation
Housing units had been urban and social
intervened nationwide in 2014
Accessibility
Waterproofing
Mural painting and street art
Access to drinking water
Free Wi-Fi and electronic tablets
INSTITUTIONAL SUPPLY DEMAND

15. Tracking success

16. Infonavit invested in the design and implementation of KPI’s to
monitor and evaluate strategic performance
Homeowner Satisfaction
Provides insights of homeowner
satisfaction on the quality of
new homes and the service
they receive before, during and
after moving in
Comprehensive Home
Evaluation
Provides information about the
overall quality of the house and
its urban environment
Quality of Life Related to
Housing
Shows the change in quality of
life of the right-holder at the
time of receiving the mortgage
According with the Comprehensive
Home Evaluation (ECUVE) the
quality of houses has increased
steadily since 2012
11%
7%
5%
3%
24%
27% 28%
30%
2012 2013 2014 Jan 2015
Percentage of
homes with low
ECUVE
Percentage of
homes with high
ECUVE
The components that show more improvement are
the availability of urban infrastructure and services
(e.g. schools, health centers) and the proximity to
primary road networks and public transportation
hubs

17. Evidence shows that the model has been successful in
reshaping our urban landscape
- In the past 5 years, construction of vertical
housing increased from 8 to 27%
- Housing developments located within urban
contention perimeters increased from 35%
(2012) to 67% (2014)
- 98,426 peso denominated loans equivalent
to 1.4 GBP billion after 6 months of operations
- 6,174 larger loans equivalent to 183 GBP
million after 28 weeks of operations (221
credits / 6.5 GBP million per week)
- Since July 2014, all new dwellings financed
by Infonavit benefit from quality insurance
coverage
- 1.8 million credits granted, roughly
equivalent to the mitigation of 1,175,297 trees
and 111 GBP in annual household savings
Vertical housing
Contention of urban sprawl
Quality insurance
Mortgage loans:
- New loans are Peso
denominated
- Increase of maximum
amount of mortgage loans
Green mortgages

18. We don’t work alone

19. This transformation is possible with the support of specialists
from several academic and international organizations