Infonavit’s contribution to private housing development

Private housing in Mexico was a major issue in the early 1970s. The poorest members of society were restricted, with no access to mortgages, and no savings to build solid homes and a future. This became the motivation behind the 1972 constitutional decree that founded the Instituto del Fondo Nacional de la Vivienda para los Trabajadores (Infonavit), the National Workers Housing Fund Institute.

Under the scheme, Mexican private sector workers must contribute up to five percent of their payroll to the National Housing Fund, which is used by Infonavit to grant a series of mortgages and financial products to low income workers, at competitive interest rates. Employees with access to Infonavit funds have been the fastest growth segment for homeownership over the past decade, and the institute predicts it will supply 3.3 million new mortgages between 2013 and 2017; allowing a large scope for social change and development in the area.

“Its mission is to generate progress in Mexico by accompanying the mortgage-holder: helping to meet their housing needs and increasing the net-worth for their families,” explains Alejandro Murat Hinojosa, CEO of Infonavit. “The institute is built on four pillars: better coordination between housing institutions; the reduction of the housing deficit; adapting the urban and social housing models; and to generate wealth and quality of life through housing for mortgage-holders and their families.”

Social institute
Infonavit is a social institute as well as a financial one. When employers contribute the funds on behalf of employees, it allows the latter group to use these funds to access bigger loans and mortgages. The institute has a huge scope; 68 percent of the mortgages issued in Mexico are provided by Infonavit. Murat Hinojosa says: “When we talk about better coordination among the housing institutions and better articulation and allocation of resources, we have to consider four fundamental elements: community building; re-diversification of verticality; commitment to the environment; and information and technology.”

These are not the words of a profit-minded individual, but of a social crusader committed to bettering the lot of others. “We try to integrate these elements by stimulating better access to public services and infrastructure for communities.”

The institute has a vast history of helping the lower income members of Mexican society onto the property ladder. Last year alone, Infonavit granted over 578,000 loans, of these 63 percent were focused toward title-holders that earned less than four times the minimum wage. “We are attending the lowest segment, and that is very important to us”, says Murat Hinojosa.

Infonavit’s resilience in the face of changing governments is due to its adaptability

“We have a strategic agenda, based around four fundamental points: housing needs, financial sustaintability, social balance and scope of policies. When we approach our financial model, we have understood that it is not about a financial product, but about generating quality of life.”

The institute is a fundamental part of the Mexican government’s strategy to combat housing needs in Mexico, and has been for the past three administrations. Infonavit’s resilience in the face of changing governments is due to its adaptability. When it was founded in the 1970s, mortgages were exclusively for buying new-builds; it was a valuable strategy at the time that helped boost Mexico’s building industry.

But in recent years, upon noticing a change in its client’s demand, Infonavit created loan products to meet several other needs, such as building own homes, and renovating and buying previously owned property. “Infonavit is a social mortgage financial institution. Our mandate establishes that we should work with low income areas, or segments that commercial banks don’t serve,” says Murat Hinojosa.

“What we have been able to achieve over the past few years is a cross-subsidy model that gives us the opportunity to establish more competitive interest rates, so we can benefit title-holders…

“The great opportunity Infonavit is excited about today is to migrate from a traditional housing model to a more integrated urban and sustainable model of competitive cities.”

Empowering communities
Part of Infonavit’s modernisation strategy has also been to develop a whole range of sustainable financial products. The ‘Green Mortgages‘ programme, which accounted for 400,000 loans in 2012, is aimed at promoting sustainable elements in the housing industry, such as solar panels. “It benefits people by giving them better control of their budgets in energy and water consumption, and gives them the opportunity to lower CO2 emissions,” says Murat Hinojosa. “So not only would we foster a commitment to the environment, but we would enable our title-holders to have more control over their energy and water budgets, and generate huge saving as well as reduce their carbon footprints.”

Infonavit’s Green Mortgages scheme is also central to its urban development strategies. Most of these mortgages are granted to urban developments. “We consider a commitment to the environment with better transportation and better community building,” says the CEO. “This is important because, if people are happy where they live, our financial products will certainly be more robust. But we will also be achieving our most fundamental goal of generating quality of life and net worth. We want to be generating social as well as economic wealth.

The institute has a vast history of helping the lower income members of Mexican society onto the property ladder. Last year alone, Infonavit granted over 578,000 loans

“We have gone beyond the need for new housing to identify the preferences of our clients. So now we have generated products that address the needs of people buying new houses, or expanding or renovating their houses. We are also trying to address the renting model, which Mexico has not been able to tackle properly.”

Infonavit’s approach to risk and return, which is fundamental financially, is also unique. “We have a motto at Infonavit: “as long as there is a willingness to pay there will always be a solution”,” says Murat Hinojosa. The institute is just as concerned about its social scope as it is about returns. “It is important to consider the quality in the housing and how to achieve a community. If we achieve these two fundamental elements we will be generating net worth.”

For Infonavit, it’s vital that loans contribute to the betterment of the communities where the beneficiary-employees choose to settle. One of its most successful programmes in recent years is aimed at improving communities not only for residents, but also municipalities.

The Municipal Competitiveness Programme in Housing aims to provide much-needed relief for local purse strings. “Today in Mexico, many of the municipalities lack resources, planning capacity and financing to better their communities,” explains Murat Hinojosa. The programme gives incentives to municipalities that meet high standards of community building and sustainable urban development.

Infonavit offers financial support to local projects, and helps implement action plans. “By doing this, we are helping municipalities generate the resources they need to build better infrastructure in their communities.”

But the programme goes one step further and allows municipal authorities to collect property taxes from Infonavit, together with mortgage payments. This has significantly boosted tax collection by ensuring taxpayers can use their Infonavit titles to pay their taxes.

Thinking ahead
The Mexican mortgage lender is clear in its goals for the future: Infonavit will continue to push through and consolidate its human capital – financial sustainability – making its operational model one of the most efficient in Latin America. “We will achieve this with a great strategic agenda and good corporate governance,”says Murat Hinojosa. “We will continue loaning and accompanying our title-holders through life, and supporting them with their housing and financial needs.

“We see great opportunities in the future. We need a model that continues to understand better the preferences of our clients and to continue bringing them the solutions they need in rent, in growing the size of their property, and solutions to buy new or older houses. We need to understand that we need to have a wider scope. We see the possibility of generating housing solutions for all Mexicans.

In that regard, we are aligned with the President, Enrique Peña Nieto, who has asked all housing institutions to generate mortgage solutions for those underserved workers who donít have the access to social security in housing. These are the municipal and state workers, armed forces, police and small business owners. The three fundamental opportunities for the future are renovation in housing, a wider scope attending underserved worker and rental schemes which do not exist in Mexico.”