Paraguay has become, in recent years, one of the main destinations for real estate investments, both for Paraguayans themselves and for foreign investors. Its capital city, Asunción, was considered, at a recent event that brought together prominent businessmen from the sector, as one of the three stars of the region, together with Bogotá (Colombia) and Santa Cruz de la Sierra (Bolivia).
The country's economic stability - in a regional context of recurring crises - and an attractive legal and regulatory scenario for foreign investment, are the main macro reasons for the growing boom in Paraguay's real estate market.
But, more specifically, Paraguay today has an emerging middle class (nonexistent twenty years ago), with demands that seek to be satisfied.
Some data to put in the balance: on a social level, according to data presented at the Forbes Real Estate Summit in Buenos Aires at the end of last year, only 17 percent of millennials (between the ages of 25 and 40) have a formal job that allows them to take on long-term debt. The rest are eager to access rental housing, a reality that offers investors a rent of between 7 and 8 percent in dollars, with a capital gain of between 25 and 30 percent.
On the other hand, mortgage loans are accessible to a growing segment of the population with good purchasing power, at an average rate of 7.9 percent in guaraníes and a 20-year term (these are the conditions offered, for example, by the AFD -Agencia Financiera de Desarrollo-). This allows this middle class to feed the unsatisfied demand for almost one million homes, in addition to a universe of 100,000 people who every year go out to look for their first property.
This scenario shapes a market with two key players for the real estate industry in Paraguay: investors, who seek the best opportunities to achieve a secure income, and clients with the capacity to assume long-term debts.
The case of Asunción and its real estate development
The situation in Asunción is illustrative to understand the phenomenon of the real estate investment boom in Paraguay.
According to data presented at the aforementioned Forbes event in Buenos Aires, Paraguay's capital city is home to 800,000 inhabitants, but more than 2.5 million people work every day and commute from the surrounding areas, which has an impact on the quality of life. This explains the urgent demand for housing solutions to reduce the number of hours of exhausting daily commuting.
Moving from the concept of the horizontal and extended city to one that is more vertically oriented is an established trend that will require a long term, guaranteeing sustained and sustainable opportunities for both local and foreign investors, with high returns.
The legal framework (which also remains stable, regardless of the political changes of the different governments in power), completes the security framework that long-term investments require. In effect, the foreign investment law guarantees the right to property and the free entry and exit of capital.
The importance of local partners for foreign investors
Real estate investments have always been among the preferred options for a wide range of individuals and organizations with available surplus capital. What is always sought after, in any case, are stable or rising markets.
Real estate is always considered by experts as a low-risk, income-secure investment. However, there is always the risk of poor returns -or losses-, especially when the market is unknown or the conditions of a property are not properly evaluated.
In the case of Paraguay -as in the case of any market outside the country-, real estate advisors recommend seeking a local partner, both to streamline processes and to ensure the efficiency and profitability of investments, without overlooking the fact that a local partner knows both the idiosyncrasies and the conditions and context of the market.
Two parameters are key: analyzing where to invest and assessing the best time to invest. These are issues that include at least three aspects:
- Conduct an exhaustive analysis of the property in which you want to invest, and clearly determine the total amount to be invested.
- In the event of establishing the sale as the end point of an investment, do not do so prematurely. Most real estate investments consist of medium to long-term operations, and a sale at the wrong time, in the midst of an unfavorable scenario, may result in a less than optimal return.
- Calculate the expected returns on the investment, whether it is oriented to rent or to establish a business.
A framework of stability in a regional context of ups and downs
Paraguay has had a stable exchange rate for more than twenty years, within the framework of a serious fiscal and monetary policy, with a sustained reduction in the tax burden. All of these conditions have given a sustained boost to economic activity.
In the words of Sebastián Benítez Bittar, Director of Benítez Bittar Constructora, "Paraguay left behind the reputation of being the center of smuggling, and became the center of opportunities, due to monetary, political and social stability, which includes an elemental predictability for any businessman who wants to invest".
Another well-known real estate entrepreneur, Alejandro Zuccolillo, Director of ZUBA Inversiones Inmobiliarias, noted during the Forbes event that the certain expectation that Paraguay will reach Investment Grade will allow the country "access to capital and financing to take advantage of development opportunities and position itself in the market".
Gestoría en Paraguay, your local partner for your real estate investments
Under the guidance of its Director, Gloria Sosa, Gestoría en Paraguay -leader in streamlining procedures for foreign entrepreneurs and investors- is the ideal partner for foreigners who want to direct their investments to the real estate opportunities in Paraguay.
Together with her daughters (Silvana, Business Administration and Real Estate Advisor; and Valeria, Economist and Financial Advisor), Gestoría en Paraguay bears the seal of three generations at the service of all kinds of procedures and operations, since the beginnings of Sulma Paredes, its founder.
