Impact of rates and inflation on construction in Colombia

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The construction sector in Colombia has been affected by high interest rates and inflation that undermines investment and drives up prices. Juan Luis Aristizábal, general director and president of Conconcreto, spoke about this panorama. In addition, he spoke about financing funds for upcoming projects, the challenges of the sector in Colombia and business in the US.

How is the company financing its works?

We have a portfolio that is very balanced between 50 and 50, with everything that has to do with infrastructure and building construction businesses, be it homes, shopping centers, offices, among others. We closed the third quarter of this year with almost $3.8 billion of “backlog” to execute in the coming years. This, adding together the Green Corridor that was awarded to us this week, we exceed the $4 billion backlog for the coming years. For the next fiscal period we already have contracts to execute $1.2 billion and for 2025 we have close to $2 billion contracted.

How is the construction sector in Colombia?

The factors that have impacted the company have to do with the reasons for the slowdown in construction in Colombia. High interest rates and inflation have a major impact on this slowdown. Today we are perhaps in the most complex moment of this entire process and we hope that you will recover soon. However, what we are showing, both at Conconcreto and in many companies in the sector, is that high interest rates are impacting investment.

How are they doing in the housing segment in Colombia?

We have very low exposure in the home construction business. In total there are only 14 projects, six are under construction and eight are in pre-sale. The large operation is in the US. There we have 2 very large rental housing projects that total around US$285 million in investment and we have around 850 single-family homes for sale.

How is your line of business in the United States?

We entered the United States approximately eight years ago very timidly and above all knowing and understanding the market. There we provided engineering and design services to the country’s real estate development sector and subsequently built the first Conex building with a total investment of close to US$100 million, where we acted as designers and generated contacts or contractors for the execution of the work.

We began to venture as investors and created a real estate asset management fund: Century Asset Management. We are attracting investment in the US and in Latin America where investors have to put their resources into rental housing for the middle class in the long term. We have investment options between 14% to 18% profitability in dollars depending on the alternative chosen.

How is South Florida doing?

We are actively growing in South Florida. Today we have close to an additional US$280 million in projects that we are going to launch in the next two years. Additionally, we are continuing with the strategy of building housing for sale.

By how much have operating costs increased?

Currently the dollar rises to almost $4,900 and then returns to $3,900 in terms of months. This greatly affects the stability of the market, especially at the time of purchasing inputs that have to do with the Representative Market Rate. Today we are in an uncertain market and that has an effect that weighs on our gross profitability or our operating profitability. Today we hardly reach 8% or 9%, so we have an impact of 400 or 500 basis points on gross profitability.

And the green corridor?

We were awarded last week after a process that was suspended and we hope to successfully complete the design stage to begin construction, possibly between six and eight months. That corridor has a total investment of $460,000 million.

How much have home sales fallen in Colombia?

Launches of new projects have fallen 50%. The impact is tremendous, especially on social housing actors due to the difficulty of acquiring subsidies. Today the most important thing is that the subsidies operate the compensation funds. There are no investors buying land to develop new projects or we builders are postponing those we have under study in time and that is what is impacting the fall of the sector.

How many employees do you have?

We normally have around 1,500 direct jobs. Depending on the volume of work we can have between 2,000 and 3,000. We have counted on 9,000.


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