THE RELATIONSHIP BETWEEN REAL ESTATE AND FINANCE AFTER COVID-19

 

Both the real estate market and financing dynamics suffered a lot of remarkable modifications due to the economic impact of the pandemic. However, the financial institutions are getting ready to go through a credit risk crisis beyond the real estate market explained Juan Carlor Mier, Head of Real Estate México and LATAM at HSBC.

 

At the beginning of the pandemic, the credits more likely to get a relief were evaluated so neither the bank nor the client were affected by the crisis. This way, now credit institutions are focused on identifying if that financial relief was enough or if there are any properties that require a bigger support, added Mier.

 

The financing expert also pointed out that the main objective of the financial institutions is to determine what credit programs should be deeply restructured before the beginning of 2021 to avoid affecting the account balances of the banks.

 

Pedro Azcue, real estate expert, said that the renegotiation of real estate and building contracts can be a common factor despite the differences of market and behavior across the country.

 

Specialists recognized that some of the most affected real estate sectors by the health crisis are: offices, due to the uncertainty about the demand; retail, the area that applied for more financial reliefs according to Mier; and hotels due to the impact in their cash revenue originated by accounting zero earnings during the closing of non-essential activities in Mexico.

 

Talking about the real estate market, Alberto de la Garza Evia, founder and CEO of Internacional de Inversiones, said that some of the actions his company took were rewriting contracts, reviewing projects to reduce costs, size modifications, the adaption of spaces to cover the new necessities originated by COVID-19, the investment in digital tools for commercialization, and the cancelation of new projects, mainly office buildings.

 

Gerardo Zambrano. Administration and Finances VP at FINSA, believes that afores still have capital to invest in real estate, but they will be more careful and selective with those projects they will back up. He also found that there are “new international players” searching for direct positions in Mexico. Nevertheless, the country must afford and ensure the juridic certainty for foreign investments.

 

Following this line of thought, Zambrano assured that the signing of the T-MEC treaty could benefit Mexico, particularly in the manufacturing and logistic industries. Experts coincided that the industrial sector has been one of the less affected during the pandemic as it has even shown lots of buy-sell and construction activities.

 

FINSA VP claimed that there is global trend to invest in this sector because a lot of organizations are looking where to redirect their capital. Some of the advantages found in the industrial developments are that products are usually valued in dollars, its construction takes little time and its unoccupied rate is lower than office buildings added Azcue. 

 

“There are different cycles for every real estate sector and today the less affected is ours. We have the chance to look for new capital to grow” claimed Zambrano. Understanding this cyclic nature of the industry will be a great ally for the recovery because it allows the rethinking of the business models to make them more resilient and diversified explained Mier: “The real estate market in Mexico is in a good place to move forward due to the discipline of those financing it and those developing it.”

 

Mexican markets such as Ciudad de México, Toluca, Querétaro, Puebla, Guanajuato, Guadalajara, Zapopan, Zacatecas, Durango, Gómez Palacio, Torreón, Saltillo, Monterrey, Chihuahua, Tampico, Tijuana, Mexicali, Hermosillo, Obregón, Los Mochis, Culiacán, Mazatlán and Tepic have ideal projects to be adapted into the “new normal” and promote real estate investment.

 

“We need to stay calm and optimistic about the future so we can take better decisions in our companies and activities, taking advantage of every opportunity ahead” concluded de la Garza.

 

Keywords: real estate post COVID-19, changes in finances COVID-19, changes in real estate market COVID-19