"We still believe in Peru’s real estate sector and we do know that it still has a great potential to develop."

We cannot analyze Peru’s economic growth, which allowed it to become the world’s financial capital this year, without measuring all the components of its economy. Without a doubt, one of the main drivers of the economy have been the construction and real estate sector, growing 198% during the last 10 years while influencing other sectors. On one hand, it has stimulated the banking sector and it has become an important labour source for a lot of families; while on the other hand, this sector offered homes to a population that has for long been suffering from a supply deficit. This process was possible due to the fundamental role played by public and private institutions.  You have many years of experience in the real estate and construction sector in Peru, and have, from different positions, worked towards its growth and strengthening. From your point of view, how has this area contributed to the country’s growth dynamic?

As a matter of fact, in the last 10 years we have experienced a real estate boom in our country. Predominantly in Lima, but in other provinces from Peru as well.

Without a doubt, the best way in which our sector has contributed to this country’s development has to do with its highly important capacity to generate jobs, formal jobs.

This formal employment, together with the labour sources produced by the construction sector, that generates monthly earnings to this people, comes together with an important increase in the consumption capacity of a significant part of our population. Actually, domestic consumption is now one of the main sources for our country’s growth.   

Certainly the dynamic of the real estate sector, together with the construction of a significant amount of edifications, also generates important material and construction equipment’s purchases, as well as contracts with subcontractors or specialists in the sector.

Thereby, is not just about generating labour sources, but invigorating and growing together with a group of industries directly linked to the construction sector, which then generate new labour sources as well.

We are not just talking about labour force from the construction sector, we are also talking about the generation of labour sources for engineers, architects, and many other professionals related to the real estate and construction sector.

All of this also promotes the incorporation of many Peruvians to the economically active population by creating formal labour, another example of our sectors’ contribution to the country.

Now, it is for certain that, for all of this to occur, the banking and the public sector did play a fundamental role. When it comes to the financial system, by granting mortgage credits to clients; and the public sector by generating new zones and urban soils to favor this development.

Other important vector is related to the plans of the Ministry of Housing; with the creation of Fondo Mi Vivienda many Peruvians received the help they needed to, together with us, the real estate developers, face projects that allowed many Peruvian families to have their own property.

Another significant point is that all this growth that we have achieved in the last years has to do precisely with the fact that families may count with their own house, that their life quality improved, that they could dispose of their own property (asset which is then appreciated in time); as well as the fact that these families have access to a mortgage credit, which means they are part of the banking system, they have their own account, they have access to a credit card or a loan to buy a car, etc.

Beyond doubt, there are many tangible benefits generated by the real estate sector’s development to our country in these last years.

Taking into account this tendency and the constant growth experienced by INGROUP, we would like to know if the key to your group’s success is related to the diversification of the segments to which your projects are targeted. How did you adapt to the market’s demand and the changes in the banking and credit systems? 

We manage three brands: Inmobiliari, directed 100% at A and B, as much residential as commercial, Recrea, directed at C, and Vibien directed at D, which is part of a program from the Mi Vivienda fund called Techo Propio.

So thanks to this distribution we’re able to maintain ourselves throughout different real estate market downturns. In 2014, the banks, which had placed loans in segment C, changed their policies.

People now had to prove their creditworthiness over twelve months, rather than just four. Then their evaluation would begin; they weren’t guaranteed the loan. So they don’t get the money for real estate for a full year.

We should take into account, that an important percentage of people in segment C are small businessmen and it is not that easy for the banks to achieve a calcification or analysis of the client’s ability to pay for a mortgage credit.  

As a consequence, the cash flows for real estate companies with many projects in segment C also changed. Before you could receive the client’s mortgage credit in after 4 months while, during 2014, in many cases that would take 12 months.

This generates a gap between sales related incomes and construction related outcomes. In this context, you tend to take more credit lines and, as a consequence, your project’s financial expenses grow or the increase of investment on capital does not generates expected return rate.

Actually, INGROUP’s main strength is having a mix of products for the different socio-economic segments in the country. This allows us to move from one segment to the other, having an overall view of the market’s behavior.

In February and March of 2015 your group made a strategic agreement with a Swiss institution. Why, when everyone is holding back, does your group keep investing more than ever, and why do foreign investors trust you?

This year we’ve launched big projects and we have more left to launch. We’re taking chances. We still believe in Peru’s real estate sector and we do know that it still has a great potential to develop.

Just taking into account that our financial system has 250 thousand mortgage loans, in a 30 million inhabitants country, while a country like Chile has 1.7 million, for 20 million inhabitants, and Colombia being around 1.9 million loans with 40 million people, gives us an idea of how much space for growth do we have in this industry here in Peru (and with adequate margins, given the risk levels of the sector).      

We’ve developed large real estate projects, of excellent quality and good aesthetics, which the client knows is valuable. The philosophy uniting those who founded this company is to try and give the client excellence in every area.

We invest in quality, we bring in foreign architects, we hire the best decorators, we make an effort to offer the highest level of customer service and at the most competitive prices for the industry, and this is something that has been recognized by our clients.

There are still plenty of aspects to improve though, and we are in a constant search for new things to offer to our clients; this has been the groups’ hallmark since its very beginning.

We have good investment partners who have greatly helped our growth. Working together with very important investment funds has helped a lot to our development and, certainly, constitutes a great responsibility for all of our collaborators conforming INGROUP today.

Also having always clear numbers, maximum transparency in information, not speculating with prices, assertiveness when it comes to construction costs, deeply analyzing the investment decisions on the land we acquire, to comply with their requests; all of this generates trust in these funds, and this trust then transforms into their wish to keep on accompanying us in our growth, with more projects and more investments on real estate.    

Certainly, in these last years, after 2014 and the deceleration of the economy, the sells have lowered, and this a fact. Now, this is something we do not control and, in spite of it, the whole team behind INGROUP keeps on putting all of his efforts in accomplishing the results we have set up as goals.

In my opinion, investment funds do understand both things: on one hand, a country with a lower growth rate, and, on the other hand, the value of INGROUPS’s human capital progressing with endeavor and accomplishing all projects’ goals.

The United States is often referenced when speaking of investment in the country. There are still many funds with positive regard for what’s happening in Peru, in comparison to other countries in the region when it comes to invest. Where are Peru and your company on this regard; to capitalize on this perception and differentiate from other countries in the region?

We have many opportunities to continue building, in comparison to countries like Colombia or Chile. All of the real estate projects have had success. From 2003 to 2013 you could sell houses or apartments not for their commercial value but simply because the client would buy, without caring whether it was in good condition.

Everything you did was sold. Now you do need selling points. The market is maturing, and continues to be attractive.

Now is the time to be a buyer, to invest expecting improvement. There are good prices. It’s a good moment to invest in land and then to wait for the present cycle to improve.

There are good locations in which, most certainly, developments could be encouraged within a year much more calmly; but this is the time to buy and save it for the proper moment.

This constitutes then a great opportunity for investment funds as well, because there is plenty of money in the world, and the funds concentrated today in the capital management can achieve good and healthy purchases, and knowing that within some months this would have another value or an eventual development project would do very well.  

The foundations of Peru’s economy are very healthy, the relation of debt vs. reserves is very healthy; it is true that 2014 and this year are not the best we had in the last 13 years, but all of the economists are predicting for our economy to improve in a relatively recent period of time, 12 months approximately.

In the meantime you can not only buy land at a reasonable price, but also move forward with procedures on construction permits and prepare the project for it to be ready to be launched at the correct moment; and this something that foreign, as well as local, funds are very aware of.  

In line with the World Bank funds, we’ve been told of the need for investment in population segment D. What’s your opinion on this?

In that segment there’s a space to do good, socially responsible work, and also have profit as a business. Currently we have two social interest projects adding 6,000 houses and before we did a 1,100-house project.

The deficit and demand there are infinite, you could reach a million homes, easily. The big issue is that when the Techo Propio program was structured, directed at this sector of the population, the World Bank and the Inter-American Development Bank told Peru’s Ministry of Economy: the bond you’re giving to this person to access housing is not a subsidy.

The difference is important. The bond is not a subsidy, it’s an investment. The Minister at that time said no and went the subsidy route. But studies of these organizations explain and maintain why this was not a subsidy, because you see someone living in a home without water or drainage and in unfortunate situations.

This influences, for example, the spread of diseases. More money will need to be spent on health, and it’s the State’s money. It’s a program our country needs, a program in which the private sector should cooperate along with the State.

North American investors are worried about the news coming from Peru, due to the subjects present on the international media. We want to show a truthful image so investors can be informed, especially in the face of the elections that, as you pointed out, generate some uncertainty. What would you like to convey about your company and the sector in general?

About the sector, that it still has a long way to go. Chile and Colombia have more than 1,600,000 mortgage loans, while the penetration of credit in our country is very low, 280,000.

The demand exists, there’s a young population in need of housing and that’s what maintained sales. We still have a lot of opportunity to do things, in Lima as well as in the provinces.

If you’re able to understand the idiosyncrasy of the client in the provinces, above all in the coast where it’s most developed, you’ll find large business possibilities, because there is land at a very good price, you can do beautiful things and drastically improve the population’s quality of life.

There are people in the provinces who already have the purchasing power to buy. I think we live in a country with real estate possibilities and a lot of work to do.

Regarding our company, I can tell you that we have and we are still doing a considerable effort to offer the best to our clients, whether if it is on customer service, the project we are developing or the product we deliver.

We are a company convinced of the potential of our country’s potential on real estate and passionate about what we do, we definitely follow a deep conviction when doing our work and we are always looking and exploring new ways for the improvement of our company.

What do you say to investors when you invite them to do business with you? Why is it profitable?

I speak about Ingroup with pride. Several things are important. Firstly, we’ve been able to position the brand very well. This generates important trust for the investor. Secondly, we have the virtue of analyzing the investment before we do it an infinite number of times.

We never speculate on sale prices. We make the feasibility of the project as conservative and honest as possible. Thirdly, we have the capacity to design appealing, practical projects. This also increases the possibilities of commercial success.

Right now we in Recrea, which targets segment C, sell 25 units per month. If you ask any other developers competing in this segment, they’re selling 8 or 9 units per months. Why am I selling more? Because we’re not static, we have the capacity and flexibility to reorient the project and thus continue the sale according to the client.

You have to be thinking all the time. If you don’t innovate, you won’t survive. Furthermore, at the social responsability level we’re developing a non-profit organization called AIRE, which combines environmental commitment with art.

Among other things, this is what makes us a highly attractive company, for clients and investors alike.