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

Who are we?

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

8 million 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

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

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

Diagnosis

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

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

Actions

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

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

regulation1

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

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

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

Tracking success

Infonavit invested in the design and implementation of KPI’s to

monitor and evaluate strategic performance

Homeowner SatisfactionProvides insights of homeowner

satisfaction on the quality of

new homes and the service

they receive before, during and

after moving in

Comprehensive Home

EvaluationProvides information about the

overall quality of the house and

its urban environment

Quality of Life Related to

HousingShows 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 ofhomes with lowECUVE

Percentage ofhomes with highECUVE

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

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

We don’t work alone

This transformation is possible with the support of specialists

from several academic and international organizations