U DEVELOPMENT AND H Pstorage.casasgeo.com/housing-day/INFONAVIT_2013.pdf9 •Housing agencies maintain financial health and pay close attentionto income streams. Source: Infonavit,

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URBAN DEVELOPMENT AND HOUSING POLICY

2013-2018

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I. Federal Urban Development and Housing PolicyII. Importance of the housing sector for the Federal GovernmentIII. Political stability and governanceIV. Economic stabilityV. Sound institutional frameworkVI. Housing demandVII. Availability of loans and subsidiesVIII. Housing supplyIX. Urban sprawl containment and land reservesX. New institutional framework and coordination with state and local authoritiesXI. Final remarks

Agenda

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On February 11th, President Peña Nietoannounced the new government’s UrbanDevelopment and Housing Policy guidingprinciples:

In order to achieve this goal, four strategies were defined:

1. Advance enhanced coordination of urban planning and housing institutions

2. Evolve towards a sound and sustainable urban development model

3. Reduce housing deficit

4. Procure high-quality, competitive and sustainable housing solutions

I. Federal Urban Development and Housing Policy

Main goal: To make decent and dignified housing available for all.Housing policy will be a fundamental piece of urban development policy, in the pursuit

of, not only housing, but also greater quality of life.

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II. Importance of the housing sector for the FederalGovernment

• The government acknowledges that the housing industry is one of the main economicactivities in Mexico

• The construction industry is driven by two main forces: infrastructure and housingconstruction, which together represent 6.23% of total GDP

• Housing is one of the main sources of job creation, with an impact in over 28 industrialsectors

• It is a very well developed industry, with approximately 1,200 large, medium and smallfirms located all over the country

• The government is committed to support the industry,maintaining a constant flow of loans and subsidies, anddefining a clear set of rules to provide certainty over themedium and long term

• The new housing policy guarantees that the industrycontinues to play a leading role in the economy throughhousing production

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Legitimacy

– Democratically elected government

– Smooth and coordinated transition

III. Political stability and governance

Efficiency

During its first 100 days this Administration hasachieved substantial change:

– Labor reform (setting new paradigms for the firsttime since 1970)

– Education (guarantees quality and proper oversight ofteachers)

– Reform to the Federal Legislation on PublicAdministration (brings together land, urbandevelopment and housing policy)

Governance

The historic Pacto por México, signedby three major parties, makes itfeasible to approve and executestructural reforms, such as:

– Telecommunications– Tax reform– Energy– Transparency

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IV. Economic stability

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• Stable macroeconomic markers

• Higher GDP growth rates are expected

• Steady foreign investment flows

• Job growth derived from recent reforms to theFederal Labor Act

• Control over inflation rates that shields workers’purchasing power

3-yearAverage

2013(estimated)

2014(estimated)

Inflation 3.93 * 3.67** 3.66**

GDP annual growth 4.36*** 3.55** 4.03**

Unemployment rate 5.03*** 4.51** 4.17**

Source: *Banco de México; **Banco de México, Encuesta sobre las expectativas delos especialistas en la economía del sector privado, January 2013; ***INEGI.

“By the end of this decadeMexico will probably beamong the world’s ten biggesteconomies”

The Economist, Nov 24th, 2012

“By the end of this decadeMexico will probably beamong the world’s ten biggesteconomies”

The Economist, Nov 24th, 2012

“Which country will become themore dominant economic powerin the 21st century? I now havethe answer: Mexico”

New York Times, Feb 23rd, 2013

“Which country will become themore dominant economic powerin the 21st century? I now havethe answer: Mexico”

New York Times, Feb 23rd, 2013

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V. Sound institutional framework• A different institutional design was proposed by this Administration to benefit the sector.

This design brings housing agencies under one single leadership allowing for greatercoordination

• Each Housing agency’s nature and legal mandate is maintained They will continue toaddress housing needs as before, simultaneously seeking stronger funding solutions.

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• Housing agencies maintain financial health and pay close attention to income streams.

Source: Infonavit, Financial Plan 2012-2016

50,039 52,035 54,177 56,327 58,536 60,817 63,717 67,562 71,680 76,088

75,688 82,884 93,047 103,832 115,439 127,990 140,416 152,010 164,005 176,232

10,000 10,000 10,00010,000

10,00010,000 -

--

-

5,052 4,239 4,830 5,1505,300

5,455 5,62311,947

16,84422,584

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Estimated Income INFONAVIT 2012 - 2021

Aportaciones Cotizantes sin Crédito Recuperación de Cartera

Fuentes Alternas de Financiamiento Otros Ingresos

140,779 149,158 162,054 175,309 189,275 204,262 209,756 231,519 252,529 274,904

V. Sound institutional framework

Contributions workers with no mortgage

Additional funding sources

Collection on loans

Other (fees, interest income)

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• Housing agency loan recovery strategies continue to show positive results

0%

5%

10%

15%

20%

25%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Non-performing loan ratio for mortgage lending

Infonavit Fovissste Bancos Sofoles/Sofomes

Source: CONAVI with data from housing institutions. Banks and Sofoles obtained from Central Bank.FOVISSSTE registers non-performing loans as of 2007. NPLs do not include off-balance portfolio.

Private Banks

V. Sound institutional framework

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Source: Banco de México, Encuesta sobrelas expectativas de los especialistas eneconomía del sector privado, january2013

VI. Housing demand

“The Central Bank’s board hasdecided to increase the 2014 jobcreation forecast to a range of 700to 800 thousand new jobs”

Agustín Carstens, february 14th, 2013

“The Central Bank’s board hasdecided to increase the 2014 jobcreation forecast to a range of 700to 800 thousand new jobs”

Agustín Carstens, february 14th, 2013

The government has identified underserved segments of the population that can beincorporated into mainstream financial products.

• Sate and municipal workers, including members of police forces (1.8 million)

• Small taxpayers: Independent professionals, small businesses and self-employed workers

• More affiliated workers for housing agencies due to growth in formalemployment given structural reforms foreseen in the Pacto por México energy, labor and telecommunications

Expected growth in formal employment(number of jobs)

2013(expected)

2014(expected)

649,000 705,000

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VI. Housing demand

6.2

5.6

some of these to bereplaced by new

homes

Housing units in needof improvement orextensionaa

Rural

Urban

• 5.6 million units in urban areas requireimprovement or expansion

• Some of these can be replaced by newunits

• Assuming that 20% of deteriorated unitsare replaced with new units:

1.12 million newunits in urban areas

Potentialdemand a:

Millions of housing units in need ofimprovement or expansion

1

Source: CONAVI based on INEGI National Housing and Population Census 2010.1. Locations with population over 15 thousand

• There are three main sources thatcontribute to housing demand

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1.5

1.3

Rural

Urban

Millions of housing unitsthat need to be replaced

• 1.3 million units in urban areas areextremely damaged or suffer fromovercrowding

• These units need to be replaced with newunits

1.3 million newunits in urban areas

Potentialdemand b:

1

Housing units that need tobe replacedbb

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VI. Housing demand


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PeriodAnnual average

incremental housingdemand

2011 - 2015 583,621

2016 - 2020 569,692

2021 - 2025 531,601

2026 - 2030 466,775

Source: CONAPO

• Over the next 20 years, 10.7 million unitswill be required to cope with populationgrowth

• 557 thousand units will be needed everyyear during the course of thisAdministration, of which 369 thousand arelocated in urban areas

2.21 million newunits in urban

areas

Potentialdemand c:

(2013 – 2018)

Housing demand due topopulation growthcc

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VI. Housing demand


15Source: CONAVI based on INEGI National Housing and Population Census 2010.

Households with access tofinancing

(million housing units) (1)

Households withoutaccess to financing

(million housing units) (2)

Total(million) (3)

Units in need ofimprovement or expansion 0.67 0.45 1.12

Units that need replacement 0.78 0.52 1.3

Units to cope withpopulation growth2013-2018

1.33 0.88 2.21

TOTAL 2.78 1.85 4.63

aabbcc

Housing policy goal463 thousand / year

• Over the next 6 years, cities with population over 15 thousand will demand 4.63 million new units (3)

• Of these, around 60% of potential consumers currently have access to formal financing channels toobtain a mortgage(1)

• As we make progress , improving labor conditions for informal jobs (2), the housing consumer basewith access to mortgages will be expanded

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VI. Housing demand (new units in urban areas)

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VII. Availability of loans and subsidies

• Housing agencies will maintain their loan origination pace

Sources of incomeguaranteed by lawSources of incomeguaranteed by law

No change inoperating rules this

year

No change inoperating rules this

yearFinancial healthFinancial health

Steady flow offinancing for

new units

Steady flow offinancing for

new units

• Loan origination programs are operating as usual and are guaranteed to continue to do sofor years to come

• In fact, INFONAVIT and FOVISSSTE started 2013 with better-than-expected results andperformed better compared to 2012 on a year-over-year basis

• During government transition, the housing industry requested support from the newadministration to reinforce financial liquidity. Hence, a special program was announced,which generated a spillover of 6,000 million pesos from December to February. (5,000million through INFONAVIT loans and 1,000 million through CONAVI subsidies)

16Source: CONAVI based on INEGI National Housing and Population Census 2010.1. Locations with population over 15 thousand

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GOALS 2013

Institution

Housing acquisition Improvementsand expansion Autoproduction TotalNew units Used units

Loans / Subsidies Loans / Subsidies Loans / Subsidies Loans / Subsidies Loans / Subsidies Investment(thousand) (thousand) (thousand) (thousand) (thousand) (Million pesos)

310 145 90 NA 545 123,471

57 18 0.1 NA 75 38,021

19 NA 65 NA 84 2,132

70 10 68 17 165 5,788

3 1 120 40 164 5,000

Banca*** 98 ND ND NA 98 88,000Sofoles*** 3 ND ND NA 3 1,260

Total 560 174 343 57 1,134 263,672Source: CONAVI based on figures from each institution .* The “Renueva Tu Hogar” or Improve your Home Program is 100% bank funding **CONAVI self-construction includes self construction, land with services, and Renovation. Note: FONHAPO does not break down housingprograms in acquisition.*** Financial entities do not break their housing acquisition figures in new and used housing units

• President Peña Nieto announced a 2013 goal of over one million housing initiatives, including500 thousand targeted to new housing units

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• 5,787 million pesos authorized by Congress to fund low-income household subsidies

• 67% of this budget will be applied towards new home acquisition (3,873 million pesos)

• This will allow for the construction of 69,790 new units

• Each federal subsidy (around 55 thousand pesos)stimulates an investment of 190 thousand pesos for aloan and 10 thousand in savings (down payment)

• Vertical construction will be a priority, taking 50% ofavailable funds, the remaining can be applied tohorizontal construction

• Subsidies are flowing according to plan in 2013

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• The Federal Government has already started creating the implementation tools to meetHousing Policy goals

• To promote greater participation by private bank in mortgage lending, on March 6th theMinistry of Finance, Ministry of Agrarian, Territorial and Urban Development and SHFmade a joint announcement to launch new financial products to serve industry needs

• One of these is a first-loss guarantee program aimed to cover:

• Mortgages for individuals unaffiliated to Housing Funds

• Construction loans for new housing projects

Guarantee fundGuarantee fund Financialinstitutions

Financialinstitutions

Guarantee fundGuarantee fund Financialinstitutions

Financialinstitutions

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• In order to benefit the Open Market, SHF will seek to stimulate the mortgageindustry in order to reduce the housing deficit, through granting its MortgageGuarantee with the following benefits

• The product was unveiled two years ago. To boost the mortgage flow, the productwas improved as follows:

1. Percentage increase of first loss guarantee (up to 30%)2. Improvement of the operation processes to deliver an efficient product to

Financial Intermediaries, mainly Banks.• The product will be launched under the name of SHF’s Mortgage Guarantee,

whereby there is an expected economic flow of 12,000 mortgage loans throughbanks in 2013 with an estimated amount of $4,600 million pesos

SHF MortgageGuarantee

SHF MortgageGuarantee

Diminishes the risk offinancial institutions

Improves general creditconditions to final customers

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VIII. Housing supply

• A new urban growth model aimed to contain sprawl and consolidate inner-cities. Thismodel allows for an optimum use of existing infrastructure, services and landexploitation.

• Housing units should avoid overcrowding and guarantee access to basicinfrastructure. Houses should have at least two rooms and decent surroundings.

• Verticality will be prioritized in order to increase density in urban centers.

• Mexico is already recognized as a world leader in the incorporation of sustainabilitycriteria for low-income housing increasing property value.

• Transitioning from horizontal to vertical housing has certain technological, financialand profitability implications over the current business model.

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IX. Urban sprawl containment and land reserves

New Housing policy aims to: Take advantage of installed infrastructure and urban equipment in the cities Exploit vacant properties and urban empty land Optimize land use increasing density and developing better recreational spaces Improve inner-city neighborhoods by reusing deteriorated urban space Dignified and sustainable housing Competitive cities

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SEDATU will design initiatives topromote and support CertifiedDevelopments (before DUIS)

In order to consolidate cities, in 2013 aninterinstitutional group will evaluate viability of landreserve inventory in order to determines a new U3perimeter in July.

Land reserves will be registered between March andApril 15th 2013

The current Administration intends to maintaincriteria on urban perimeters

• U1 Defined based on employment indicators(CONAPO) and demarcations by the Ministry(SEDATU before SEDESOL)

• U2 Defined based on availability of services andinfrastructure (source INEGI 2010)

• U3 City perimeter growth based on population U1

U2

U3

DUIS -> DC

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Based on voluntary registration of land reserves by homebuilders, there will be a NationalHousing Registry processed by RUV (called RENARET)

Purpose.- « Transform urban development into asustainable and intelligent development model

Reserves will be classified according to theircurrent status:

R1. Non residential reserves with noinfrastructure

R2. Residential reserves with noinfrastructure

R3. Residential reserves withinfrastructure

R4. Residential reserves with Iinfrastructure and housingproduction

Based on currently available information, approximately80% of land reserves are geared to urban housing

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Land Residential Infrastructure Housing

R1 R2 R3 R4

Step 1

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SEDATU and CONAVI will analyze layers of information inorder to determine viability of land reserves

a. Employmentb. Ground transportationc. Protected areasd. Land usee. Risk factorsf. Water availabilityg. Topography

Additional layers of information will be used to define areas targeted forexpansion based on expected population growth

Step 2

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26

Exam

ple

base

d on

land

rese

rve

regi

stry


27

R1DUIS->DC

Nueva U3


R1

Exam

ple

base

d on

land

rese

rve

regi

stry

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X. New institutional framework and coordination with state and localauthorities

Coherent programs andactions regarding:

- Land- Funding- Hounsing- Infrastructure- Environment

The new Ministry for Agarian, Territorial and UrbanDevelopment (SEDATU) will now lead urban andhousing policies and agencies

Closer coordination with state and local governments to- Standardize legal frameworks- Improve management capabilities- Red-tape reduction- Modernization of property registries- Sign cooperation agreements to alling federal and

local urban and housing policy

• Standardizedcriteria andprocedures

• Synergies

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• The Federal Government acknowledges the housing industry’s fundamental role in thedomestic economy and for the achievement of national goals

• The new urban development model will be adopted in a context of certainty. President PeñaNieto has repeatedly stated that “the housing train will keep forward”

• Housing agencies will not change operating rules for the remainder of 2013

• A new set of rules for 2014 will be announced six months in advance

• Existing urban perimeters used by CONAVI will be maintained; there will be noharming retroactive initiatives

• The new National Private Land Reserves Registry in under construction. It will allowthe government to analyze suitability of new perimeters for urban growth

A two-year transition period has been established so the industry can adapt to the new urbandevelopment and housing model

The National Development Plan 2013-2018 and Urban Development and Housing programs willbe released during the second semester of this year, from which strategies will be designed tomaterialize the National Policy’s main goals

FINAL REMARKS

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Appendix

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RESULTS 2012

Agency

Housing acquisition Improvements andextensions Autoproduction Total

New units Used unitsLoans /

Subsidies Investment Loans /Subsidies Investment Loans /

Subsidies Investment Loans /Subsidies Investment Loans /

Subsidies Investment

(thousand) (Millionpesos) (thousand) (Million

pesos) (thousand) (Millionpesos) (thousand) (Million

pesos) (thousand) (Millionpesos)

281 70,966.2 145 38,112.2 153 * NA NA 578 109,078.4

49 24,709.0 15 7,721.0 0.1 24.5 NA NA 64 32,454.5

36 1,336.0 NA NA 98 1,329.6 NA NA 121 2,665.6

102 4,936.0 15 780.6 72 681.7 20 975.9 209 7,374.2

2 638.4 1 273.6 66 1,358.0 2 58.0 71 2,328.0

Banca 104 82,771 ND ND 7 7,825 NA NA 111 90,595Sofoles 1 427 ND ND ND ND NA NA 1 427

185,784 46,887.4 11,219 1,034 244,923

Source: CONAVI based on figures from each institution .* The “Renueva Tu Hogar” or Improve your Home Program is 100% bank funding ** CONAVI self-constructionincludes self construction, land with services, and Renovation. Note: FONHAPO does not break down housing programs in acquisition.

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Housing initiatives 2012 vs. expected 2013

Agency

2012 2013Loans /

Subsidies Investment Loans /Subsidies Investment

(thousand) (Million pesos) (thousand) (Million pesos)

490 118,000 545 123,471

75 56,000 75 38,021

98 2,171 84 2,132

181 7,496 165 5,788

ND ND 164 5,000

Financial entities 138 97,298 101 89,260

280,965 263,672

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05,00010,00015,00020,00025,00030,00035,00040,00045,00050,000

0

100

200

300

400

500

600

700

27/0

2/20

13

14/1

2/20

12

02/1

0/20

12

24/0

7/20

12

15/0

5/20

12

29/0

2/20

12

20/1

2/20

11

06/1

0/20

11

27/0

7/20

11

18/0

5/20

11

04/0

3/20

11

23/1

2/20

10

IH

IPC

IH: Habitat Index tracking homebuilders’ stocksIPC: Mexican Stock Exchange Index

http://mx.investing.com/indices/habita-historical-datahttp://www.banxico.org.mx/SieInternet/consultarDirectorioInternetAction.do?accion=consultarCuadro&idCuadro=CF103&sector=7&locale=es

Mexican homebuilding public company performance

34

Number of housing starts

Source: RUV

Hous

ing

units

0

100,000

200,000

300,000

400,000

500,000

600,000

2009 2010 2011 2012

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Housing developers

Source: RUV

Housing developers in RUV1,364

1,159

1,4171,304 1,296

2008 2009 2010 2011 2012

Source: INEGI Economic Census, 2009; NationalConstruction Company Census 2012.

2009 2012

Homebuilders 419 554

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Investment in housing acquisition:new and used homes, housing starts and self production

Source: CONAVI with data from each institution. Includes new and used homes, construction on ownedproperty, minimal housing, and self construction. Data for 2012 Infonavit, Fovisste and SHF are as ofDecember and others until November.

050,000

100,000150,000200,000250,000300,000350,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*

Investment housing acquisition(millions of pesos 2012)

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0%

10%

20%

30%

40%

50%

60%

70%

2002 2004 2006 2008 2010 2012

% of loans for used homes

INFONAVIT FOVISSSTE

Used homes

Source: CONAVI with data from each institution. Used home financing as % of total home financing..

Documents

U DEVELOPMENT AND H Pstorage.casasgeo.com/housing-day/INFONAVIT_2013.pdf9 •Housing agencies maintain financial health and pay close attentionto income streams. Source: Infonavit,