Surely, many Chileans who dreamed of buying their home during the last few years, and were waiting for the delivery of their house or apartment while the project was being completed, are now having difficulties to do so.

Mortgage rates mortgage rates reached historically high levels, reaching their highest levels since 2009, when the crisisat their highest levels since 2009, when the subprime crisis was unfolding. subprime crisis global subprime crisis.

This, together with the significant increase in the value of the UF, The increase in the value of the UF as a result of inflation, led to thousands of Chileans no longer being eligible for credit from banks, preventing them from taking out mortgage loans. Thus, from 2019 to 2024, the income required by financial entities to grant this type of loans increased more than 100% in nominal terms.

Undoubtedly, this has been a thorn in the side of both the real estate companies -which have seen lower sales- and the people who need financing. Considering the importance of the real estate and construction sectors for the country's economic activity, there is information that the government is in talks with private sector agents, such as the Association of Banks and Financial Institutions (Abif) and the Chilean Chamber of Construction (CChC), to try to reduce the rate of mortgage loans for middle class housing by a few percentage points.

However, although today obtaining mortgage financing to invest in real estate can be complex, preventing many people from participating in this sector, there are alternatives for those who want to do so for investment purposes.

Real Estate Investment Funds

If someone is looking to have exposure in their investment portfolio to the real estate market, with the risks and expected returns it offers, real estate focused mutual funds may be an option, real estate-focused mutual funds may be an option..

Some interesting factors of this type of investment vehicles is that they allow you to invest -in some cases- with no minimum amounts, or with minimum amounts that are much lower than what a person would need to acquire a property, in addition, you would not need a mortgage loan for this very purpose. for this very

These are not only usually managed by expert managers administrative management of the assets, but also, for the same amount of capital contributed, they make it possible to have a greater diversification of assets, locations, real estate, etc., for the same amount of capital contributed. diversification of assets, locations, real estate, etc.

This means that for the same $100 that one can buy an apartment, invested in a real estate fund, one can give exposure to more than one apartment, in different locations, and even provide exposure to other types of assets, such as commercial properties, offices, among others. In this sense, the risks arising from this type of investment will be more diversified.

Private Real Estate Debt

On the other hand, just as there are funds that buy real estate, there are others that participate in the real estate market through private financing to real estate companies. private financing to real estate companies.

Today, this is being quite attractive to many investors because they offer attractive expected returns indexed to the UF, in a context where the rates of traditional investment instruments, such as time deposits or fixed-income mutual funds, are falling.

On the other hand, there is a gap in the financing structures of real estate projects, due to the fact that banks, just as they have imposed greater restrictions on mortgage financing, have also imposed them on real estate companies. This has led companies in the sector to seek financing alternatives, due to the higher capital requirements they have had to face, mainly due to lower sales speeds and an increase in the cost of construction materials for the projects.

Fynsa Deuda Inmobiliaria III Investment Fund

In this context, Fynsa Real Estate Debt III is emerging as a fund that will invest in a diversified portfolio of real estate project real estate project financings, managed by real estate companies with a solid track record in the track record and a solvent financial position.

The financing operations carried out by the fund will have important real estate guarantees, focused on real estate -located in urban sectors throughout the country- intended for primary housing and which are already completed, having obtained their respective municipal reception, in order to avoid construction and regulatory risk.

For more details and information about the fund, please consult your investment executive.

DISCLAIMER

José Pablo González

Portfolio Manager Private Debt Fynsa AGF