Announcement of Mexico Housing Market Development Project on June 29, 1992

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. *Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 92/103 Contact: Ciro Gamarra Tel: (202) 473-8721 MEXICO: HOUSING MARKET DEVELOPMENT PROJECT The following is information on a project approved by the World Bank's Board. DATE: June 29, 1992 WORLD BANK GROUP SUPPORT: World Bank loan: $450 million. The World Bank loan is for 15 years, including five years of grace, with a variable interest rate, currently 7.73 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.25 percent on the undisbursed balance. TOTAL COST: $1.6 billion OTHER FINANCING: Housing Fund for Commerical Banks (FOVI), $984 million; Homebuyers' down payments, $160 million IMPLEMENTING AGENCY: FOVI ESTIMATED COMPLETION DATE: 1997 PROJECT DESCRIPTION: The objective of the Housing Market Development Project is to expand the supply of mortgage finance for low-cost housing by supporting the government in: (a) removing regulatory barriers in order to lower housing costs and to encourage private builders and financiers to expand investment in housing, especially at the lower-income end of the market; (b) broadening the housing policy dialogue that addresses the government's medium-term housing strategy; (c) improving FOVI's mortgage instrument and its on-lending mecha- nisms so as to stimulate commercial bank interest in lending for low-cost housing; and (d) improving information on the housing market. The project includes: (a) a regulatory reform component to achieve a broad-based and effective deregulation of the housing sector by inducing state and local governments to reduce their regulatory burdens; (b) a housing sector policy component, including the expansion and liberalization of the urban land market; FOVI measures to channel an increasing share of its financing to lower-income households, to induce banks and developers to expand investment in low-cost housing, and to remain financially self-sufficient; further integration of the housing finance market within the overall financial system; improved targeting of public sector housing financing to low-income households; and the expansion of commercial bank lending for housing; (c) a FOVI credit line component to on- lend funds to commercial banks that will provide mortgage financing for the sale of houses targeted at eligible beneficiaries earning less than five multiples of the monthly minimum wage ($650); and (d) a studies component covering policy options for the creation of a secondary mortgage market, the development of a new index for adjusting payments on FOVI mortgages, and a development plan to improve housing market information.