Liveable space: Government programmes are in the works to boost the social housing segment through private sector collaboration

With its economy expanding rapidly, one of Panama’s key challenges is to provide public services for its inhabitants. From housing itself to sanitation and energy, these areas are providing a host of opportunities for construction through concessions, tenders and public private partnerships. Housing, especially at a social interest level, has become a government priority and a fast-growing niche – Convivienda, one of the main developer associations, reported $826m in sales for the 2014 period, with over 7700 houses built and sold.

Changes in legislation are also altering the building landscape. A new bill under consideration, Law Project 12, aims to regulate urban development, which has gone unplanned in past years despite fast population growth. One of its key characteristics that could affect developers is the requirement of public consultation before development approval, whose results would be binding. Such rules, added to other limitations on land use, could further exacerbate permitting issues for developers and construction firms (see analysis).

Housing Deficit

The most recent figure from the Panama Ministry of Housing (Ministerio de Vivienda, MIVI), from 2012, showed Panama with a housing deficit of more than 113,000 houses, having increased by 8.5% in the previous two years. Today the number is estimated at just over 170,000, implying a 14% annual increase in 2012-15. On top of this, informal settlements house more than 300,000 people. Most of the dilapidated dwellings are in historical neighbourhoods, adding up to nearly 10,000 homes, with 57% of these in Colón and another 22% in Panama City. “Although there are good initiatives in place to address the housing gap, the sector needs to work together to devise a solution to offer social housing units at less than $40,000,” Katherine Shahani, president of the Panamanian Association of Real Estate Brokers and Developers, told OBG.


To address this, the government has made housing a key part of its Strategic Government Plan 2015-19, which aims to use incentives and private sector collaboration to boost housing construction by 125,000 homes. Schemes such as the Techos de Esperanza (Roofs of Hope) programme, Colón’s Urban Renewal programme, informal housing renewal, housing finance incentives and the Solidarity Housing Fund (Fondo Solidario de Vivenda, FSV) will provide a significant boost to the sector. The total budget allocation for these, amounting to $1.45bn, includes funds for building, remodelling and adding basic services to social interest housing. The two main programmes, Roofs of Hope and FSV, will benefit from $95m in funds from the Ministry of Housing and Land Management ( Ministerio de Vivienda y Ordenamiento Territorial, MIVIOT).

Solidarity Housing

Under FSV, a homeowner can partner with a developer to apply for a $10,000 incentive (recently raised from $5000) on homes costing up to $50,000 (raised from $40,000), meaning the state covers at least 20% of the home’s value. The rest of the cost must be covered by an approved home mortgage, which receives a preferential interest rate of 0% for homes worth under $40,000 and 1-2% for those worth $40,000-50,000. To qualify, the applicant’s family income must be below $1200 per month. The project must be the applicant’s first home, have a minimum area of 50 sq metres and be connected to all services.

The scheme has begun to catch on. By November 2014 more than 2700 houses were granted the incentive and another 1200 were in January-March 2015. The MIVIOT projects that nearly 5000 houses will receive it in 2015, meaning an estimated $50m in government investment. Developers have also shown keen interest; by March 2015 more than 129 had signed up. Assuming houses costing $30,000-50,000, FSV would mobilise another $150m towards developers.

MIVIOT’s other main housing programme, Roofs of Hope, has a budget of $80m, with its resources mostly directed towards home renovation and renewal for underprivileged areas. Most of the work under this scheme is done via public authorities, though materials purchases are usually carried out by public tender. The main goal is to renew 50,000 homes within five years. COLÓN URBAN RENEWAL: With an estimated $500m investment, the Colón Urban Renewal programme is by far the most ambitious housing project in the current administration and probably in Panama’s history. Its scope includes demolishing structures considered dangerous, rebuilding and remodelling salvageable structures, constructing 500 new houses, and adding sanitation and general public services.

Since its announcement in early 2015, multiple changes have been made to the initial tender with the aim of making it more inclusive. As of April 2015, the participating companies numbered more than 20, including Norberto Odebrecht, Constructora Meco, Sacyr, Constructora Urbana and China Harbour Engineering Company. As part of the changes, the minimum net worth required for participating firms was lowered from $200m to $150m, among other adjustments to requirements on liquidity, leverage and total liabilities.

One of the most interesting changes is that, since the requested final price for the tender is not published, MIVIOT will compare all tenders against a number they calculate, and anything outside of a +/-10% range will be disqualified as “too risky”. A final change was the extension of the presentation deadline to April 28, 2015. According to a 2014 report by Convivienda, out of the 7721 houses covered by the programme, 1322 were worth under $50,000, meaning that 17% of their sales by volume are eligible for the FSV programme. Another 3120 were in the $50,000-80,000 range, and 1363 were in the $80,000-120,000 range, meaning that over 75% of their business could apply for the preferential interest scheme. Convivienda already has a 76% market share within the metropolitan area of Panama City, and in 2015 it is planning to enter the $30, 000-40,000 market, building more than 500 units.

Other Projects

In March 2015, MIVIOT also tendered the urbanisation projects for the “Los Cañaverales” programme in Herrera Province and the “19 de Octubre” programme in the Coclé province, each for an estimated $10m. Another two projects were added later that month: the $3.1m “Colonias de Azuero” project in the Pesé region and the $6.2m “Villas de la Esperanza” project in Panama Province. The “Ave Fenix” project, a $5m housing complex in the Chorrera District near Panama City, was canceled in April 2015 due to land issues, and will be moved elsewhere and completed by MIVIOT.

Forward Looking

With two strong umbrella programmes, financial incentives like preferential loans and an openness to public-private partnerships, the current administration is taking the housing deficit head-on. This presents a range of opportunities for both local and foreign developers and building firms. Many projects are up for grabs, and they will come in all sizes, from a few dozen houses to mega-developments like those in Colón. The influx of projects should continue for the next five years, since the housing expenditure must stay over the 0m per year mark to meet its . ( 49bn budget target. If such endeavours are properly administrated and implemented, Panama may look forward to closing the housing deficit and bringing itself nearer to reaching its goals for social equality.