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Low Interest Rates, High Housing Demand Bolstered Construction & Real-Estate Industries

Many private-sector projects still contending with delays, even revocations of government-issued construction permits


December 25, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.

The local construction industry, a pillar of Puerto Rico’s economy, remained afloat in 2003 thanks to low interest rates, a strong demand for housing, and the revival of public-sector infrastructure projects.

Private-sector leaders remain concerned, however, over the alarming number of government-issued permits that have been stalled, challenged, and even revoked after construction has begun. For example, the Legislature tried to intervene in the Paseo Caribe project after the $240 million tourist, residential, and commercial megaproject had received all the necessary permits and endorsements from all concerned government agencies–and after construction had started.

The latest example is the crematorium that Puerto Rico Memorial is building in Isla Verde. The project obtained all the government permits more than five years ago, yet

community members challenged the permits in court after construction began, and the judge revoked the permits.

According to preliminary figures of the Puerto Rico Planning Board, the total number and value of public and private construction permits issued in fiscal year (FY) 2003 were up 13.6% and 25.2%, respectively, compared with FY 2002.

During the first quarter (1Q) of FY 2004 (July to September 2003), the total number of permits (2,702) was 8.1% higher than in 1Q 2003. The number of private-sector permits increased 2.1%, while that of public-sector permits gained 124.6%.

The value of construction permits went from $661.4 million in 1Q 2003 to $813.1 million in 1Q 2004, representing a 22.9% increase. The value of construction permits issued to the private sector rose 11.2% to $598 million, while the value of permits issued to the public sector went from $123.5 million to $215.1 million, for a 74.6% gain.

The number of housing units increased 30.1%, from 5,038 in 1Q 2003 to 6,554 in 1Q 2004. The number of private-sector units grew 8.3%, while public-sector housing units registered a twofold increase, from 1,100 in 1Q 2003 to 2,242 in 1Q 2004.

Real estate

The year 2003 has been mixed for Puerto Rico’s real-estate industry. While sales of new residential units have remained strong thanks to low interest rates, the commercial and industrial markets have been somewhat depressed because of the glut (excess inventory) caused by business and plant closures.

The military downsizing (including the eventual shutdown of Naval Station Roosevelt Roads in Ceiba) as a consequence of the U.S. Navy’s departure from Vieques has resulted in a massive exodus of military personnel from Fajardo, Luquillo, Rio Grande, Ceiba, and Naguabo. The large number of empty houses and apartments, in turn, has lowered property values in the area.

This Caribbean Business article appears courtesy of Casiano Communications.
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