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Construction Industry Cautiously Optimistic For 2005

Government infrastructure projects expected to continue; industry hopeful new administration will speed up permits process for private- and public-sector projects


January 27, 2005
Copyright © 2005 CARIBBEAN BUSINESS. All Rights Reserved.

Infrastructure investment projects earmarked for fiscal year (FY) 2005 by the Calderón administration, such as the completion of the new Convention Center, the Eastern Corridor, the conversion of PR2 between Mayagüez and Ponce into an expressway, as well as numerous water and road improvement projects, will be important for the construction industry’s–and the island’s–overall economy, as public-sector projects basically will carry the construction industry.

Since the early 1990s, construction has been the most dynamic sector in Puerto Rico’s economy, growing faster than most other sectors and helping sustain the economy’s overall growth. However, during the first three years of the Calderón administration, that wasn’t the case, according to many members of the industry.

Between 2001 and 2003, the construction industry experienced a dramatic slowdown, as permits for numerous private-sector construction projects were stalled, questioned, challenged, or simply caught in the endless web of government red tape.

According to an industry representative interviewed by CARIBBEAN BUSINESS, this year, the local construction industry could feel the effects of the delay in private construction permits experienced by contractors and developers during the first three years of the Calderón administration.

What’s more, according to preliminary figures from the Puerto Rico Planning Board, the total value and number of construction permits issued during the first four months of FY 2005 (July 2004 to October 2004) dropped 4.8% and 5.9%, respectively, from the same period in FY 2004. These figures are considered important indicators of future construction activity.

"For more than a year, I’ve been saying that in 2005 we will start to see a retraction in the production of housing as a result of a lack of construction permits issued during the first three years of the Calderón administration. We all know the permits pipeline was opened too late in the game," said Levitt Homes President & CEO Rafael Torrens. "When you open the pipeline after leaving it closed for too long, it’s usually dry, and that’s exactly what the industry is facing right now."

There’s usually a 12- to 24-month minimum delay between the issuing of a permit and the start of construction, explained Torrens, as projects go through different steps such as design, planning, product selling, and marketing.

"Developers and contractors depend on a continuous flow of construction permits for new projects to keep the industry solid while at the same time supplying all of Puerto Rico’s housing needs," said Torrens, a former president of the Puerto Rico Homebuilders Association.

Annual housing demand is expected to average 20,000 units over the next five years, according to a recent study.

Torrens said there is concern in the industry that the government has made a concerted effort to revitalize our urban centers, with the false pretense that it’s mainly to solve the demand for affordable housing, currently 52.5% of the total housing demand.

"You can’t build affordable housing in our urban centers because the cost of building there is very high. Additionally, there isn’t enough infrastructure in place, which means you need to add new infrastructure to densify," said Torrens. "You can build housing in urban centers, but not affordable housing. This idea of satisfying our affordable-housing needs with urban centers is a dream. It isn’t possible."

To show preference for permits of affordable-housing projects while slowing down the permits for other projects isn’t fair or reasonable, said Torrens, as it negates the consumer’s right to select and acquire the home of his or her choice.

"Ultimately, what this does is promote urban sprawl, which is bad for the environment as homes are spread out across the island without adequate power and water services," said Torrens. "That’s why the flow of well-thought-out projects with correctly issued permits is so important. Again, we can’t close the permits pipeline because, once it’s closed, it will be dry when opened."

Torrens is hopeful the new government administration will handle the permits process much more expeditiously than has been the case over the past four years.

The total number of permits for housing units issued during the first four months of FY 2005 showed a 20.1% decrease when compared with the same period in FY 2004.

This Caribbean Business article appears courtesy of Casiano Communications.
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