Abandoned Homes in Mexico Draw Venture Capital Jonathan Levin - Bloomberg
go to original May 23, 2013

Abandoned homes in Mexico are in part a result of a government policy that helped back mortgages and provide subsidies for low-income homes on cheap land sometimes hours outside the nation’s cities. (Spencer Platt/Getty Images)

Mexico’s attempt to solve the country’s housing shortage by constructing millions of new homes far from city centers has crippled the nation’s homebuilders and fueled record foreclosures. For Antonio Diaz, a former investment banker with Banco Santander SA, it’s an opportunity.

Diaz’s company, backed by a venture-capital firm whose funders include JPMorgan Chase & Co. and the Soros Economic Development Fund, is buying foreclosed homes for as little as 60 percent of face value, refurbishing them and then selling them for up to 90 percent of a new home price. The number of properties sold by Tijuana-based Comunidades que Renacen SAPI, or ProVive, climbed 10-fold to 530 last year, and its target is to sell 1,300 units in 2013, said Diaz.

For Diaz, 53, it’s an attempt to repopulate towns that face an exodus and plunging property values after the government subsidized developments that sprawled too far from cities and led to unattended buildings that lured criminals and illegal tenants. He estimates there are 400,000 deserted homes and another 200,000 held by squatters, even as the economy is projected by the government to grow 3.1 percent this year.

The number of empty properties “creates a very interesting universe for doing business,” Diaz said.

Abandoned homes are in part a result of a government policy that helped back mortgages and provide subsidies for low-income homes on cheap land sometimes hours outside the nation’s cities. During the last six-year administration ended in 2012, the National Workers’ Housing Fund Institute, or Infonavit, gave out a record 3 million mortgages and housing credits.

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