Dilemmas

The housing sector in the developed world is becoming more challenging as a result of the economic crisis. Circumstances in the developing world, however, are even more difficult, due to the lack of established regulators such as land registries, housing associations and mortgage industries.

The local nature of housing projects results in a strong preference for long-term funding preferably in local currency within the countries where we operate. This is particularly the case when it concerns financing the mortgages. Although this remains a challenge, FMO is committed to mobilizing private sector funds for housing development, as such investment is crucial in solving the affordable housing equation. Governments often have neither the means nor capacity to tackle the housing shortage by themselves.

While we planned to close various transactions in India during 2011 a serious real estate crisis hit the country. High prices, strict government regulations on foreign real estate investments and the global economic downturn resulted in FMO closing fewer projects than expected. This also required us to put more effort in monitoring the existing portfolio, together with other international lenders. We are currently investigating solutions to address these challenges, including the liquidity issues affecting one of our slum redevelopment clients.

FMO takes the interest of diverse stakeholders into consideration when embarking on new housing projects. For example, redevelopment projects may require inhabitants to be relocated and compensated. The environmental and social impact of projects must be assessed, as well as ensuring the housing is affordable, in the vicinity of schools and health facilities, and compliant with safety regulations. FMO works with local developers to address any potential issues and offers environmental and social impact training for developers where necessary. Last, (local) governments are important stakeholders as they need to grant all licenses before construction can begin.