Peru enacts rent-to-own bill to drive real estate growth

Photo credit: Andina

President Ollanta Humala sign into law today a bill designed to increase demand in Peru’s slowing real estate and construction sectors.

According to reports from May when the law was first announced, the bill removes the requirement of a down payment on a mortgage by providing a subsidy of up to $5,400 for new and existing homes that meet requirements of the rent-town own program.

Officials initially projected the measure will drive sales of 30,000 homes.

“Without a doubt, this law will benefit the middle class by guaranteeing them the right to private property and a dignified home,” said prime minister Pedro Cateriano after his cabinet’s approval of the bill. “Peru will become a country of owners.”

After receiving the President’s signature, the law will be published in state daily El Peruano in 30 days. Financial entities, real estate agencies and construction companies will then have a first look at the legislation’s details in order to tailor products for potential home buyers while complying with the law.

Gustavo Rizo, president of Peru’s real estate developers association (ADI) says the rent-to-own law will have a moderate benefit on the industry overall. But he says the legislation’s success depends on its protection for homeowners by allowing them to evict tenants who do not pay rent.

“The leasing regulation will generate a little more supply and access to demand. The development of the rental market will depend on whether the law is satisfactory to investors,” Rizo said. “The law is very important if it controls one variable, that a breach of contract is punished by eviction. To the extent that [eviction] is expedient, the law is favorable without considering tax benefits. If the law does not give control [to the homeowner], it won’t be effective.”

Home sales in 2014 fell 40% from 2013 to their lowest levels in three years as Peru’s economy slows after a decade-long boom in commodity prices.

President Ollanta Humala signed the rent-to-own bill into law without passing the legislative branch in accordance with the limited decree powers Peru’s congress granted the government last month.


Consejo de Ministros aprobó decreto legislativo de alquiler-venta para viviendas (Andina)

Humala promulgará hoy norma de alquiler y venta de viviendas (El Comercio)

Leasing inmobiliario: Ollanta Humala promulga esta tarde ley de alquiler-venta de viviendas (La Republica)

Medidas para el sector inmobiliario serán efectivas si logran “controlar” al inquilino (Gestion)

  • This is a marvelous idea as this is how I purchased my first home in the US. The ability to EVICT if the rent is not paid – is EXTREMELY IMPORTANT. I have a huge home in Harrisburg, PA where renters refuse to leave as advised by their powerful and politically-connected attorney. I am told she uses the first floor of the centrally located homes as an additional office! They tell the City and police they are staying under SQUATTERS RIGHTS and force me to go to court to evict them! This can take 2 years and be very expensive, while I am losing over $1,700 @ month rent! I guess I could bribe the police to evict them – as works here in Peru, but I do things LEGALLY even if others do not. Good article Colin.

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