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| Francisco Uribe |
Julián Hurtado |
In furtherance of the Colombian government's plan to construct one
million housing units for low-income families with an investment of
approximately COP$6.8 billion (US$3.5 billion), the Government issued
Decree 391 of February 16 2012 to regulate the possibility to apply
family housing subsidies (FHS) to leasing agreements for housing
purchases.
In Colombia, 1.5 million families do not own a home and, according to
the government, the number is growing annually by 250,000. Pursuant to
the government's plan, this new applicability of the FHS mechanism will
provide 16 million people with the possibility to purchase their own
home. Accordingly, in the first trimester of the year, plans for the
construction of housing solutions for low income families increased by
approximately 72%.
The FHS will be awarded to families that have successfully applied
for FHS subsidies from the relevant governmental entities, which must
approve the grant of the FHS subsidy. Additionally, the relevant
beneficiary family must executed a lease agreement with a financial
institution authorised to provide FHS services by Colombia's Financial
Superintendence. In order to provide FHS services, financial
institutions must enter into collaboration agreements with the
government entity that will provide the FHS.
According to the Decree, the FHS will be applied to either reduce the
rent paid by the family under the relevant lease agreement, or the
value of the purchase option contained in such lease agreement (if
applicable). In general, the awarded FHS will have a 12 month-term that
may be extended for an additional 12 months.
Regarding the funding of the mechanism, the Decree sets forth that
the government entity that awards the FHS should transfer the FHS' funds
to the financial entity with which the family executed the lease
agreement but only with the authorisation of the beneficiary family and
only when the execution of the lease agreement has been proven and the
family has taken up residence in the relevant housing unit.
In the event that the beneficiary family chooses to apply the FHS to
the value of a purchase option in a lease agreement, the transfer shall
be made for the exact value of the option, except when the option value
exceeds the value of the FHS.
The correct implementation of this mechanism would represent a change
of paradigm regarding the use of FHS, and the interest of private
investors in projects for the construction of housing solutions for
low-income families.
Francisco Uribe and Julián Hurtado