The resolution approved by the Monetary Board establishes that the released resources will be allocated 80.0% to the acquisition of low-cost housing and 20.0% to interim loans for its construction.
SANTO DOMINGO.-With the authorization of legal reserve funds for the construction sector, the authorities seek to reposition this important sector of the economy, which ended last year with a precipitous decline, going from 23% growth during 2021, to reach only 1.6% in the January-November 2022 period, according to reports from the Central Bank.
Yesterday the Monetary Board authorized the relocation of RD$21,424.4 million for the channeling of loans for the construction and acquisition of low-cost housing, whose value currently amounts to up to RD$4.5 million.
Representatives of the construction sector had expressed their support for this measure as one of the main alternatives that monetary authorities should adopt to achieve greater stability in the sector and thereby restore its dynamism, as one of the fundamental pillars of the Dominican economy.
Analyzing the situation of the sector in 2022, last December, Jorge Montalvo, president of Acoprovi, the Association of Housing Builders and Promoters, stated that with the appropriate measures from the government and monetary authorities, the construction sector will be able to rebound in 2023 and regain the dynamism that characterized it during 2021.
“A release of reserve requirements by the monetary authorities that injects fresh resources into the construction and acquisition of new homes, initially focused on social and low-cost housing, which can later be expanded to other segments, could give a significant boost to the housing sector,” Montalvo stated.
Based on reports from the Central Bank, he explained that the main causes of the sector's slowdown were the high costs of construction materials and the sustained increase in interest rates.
Likewise, Eliseo Cristopher, president of the Confederation of Small and Medium-Sized Construction Companies (Copymecon), agreed with the idea that the legal framework would be a positive factor in facilitating funds with specialized interests that will impact the growth of the sector.
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The Central Bank of the Dominican Republic (BCRD) stated in a press release that the objective of the reserve requirement repositioning measure is to keep economic agents and the general public properly informed.
It is important to note that at the end of 2022, approximately RD$21 billion was returned to the Central Bank, corresponding to a legal reserve release process carried out in 2017 for the financing of productive activities, the entity maintains.
It adds that taking these elements into account, the resolution approved by the Monetary Board establishes that the released resources will be allocated 80.0% to the acquisition of low-cost housing and 20.0% to interim loans for its construction.
“Financial entities must channel these loans at an interest rate that does not exceed 9.0% per year, with terms of up to five years for the acquisition of homes and two years for construction (interim).”.
With this operational decision, he says, the Central Bank's effective reserve requirement rate would remain at the levels prevailing before the expiration of the measure adopted in 2017.
This measure does not change the current restrictive monetary policy, as it leaves the reserve requirement ratio unchanged for the various financial intermediation entities, the Central Bank said.
"This restrictive stance is reflected in the behavior of monetary aggregates, which have moderated their growth to rates well below the expansion of nominal gross domestic product, consistent with the guidelines of the Central Bank's Monetary Program. For example, at the end of the year, the growth of the money supply (M1) slowed to close the year at 10.2%, while the broad money supply (M2) expanded by only 6.8% and the money supply in the broad sense (M3) by 5.4% year-on-year.".
