Investing in real estate in Colombia: advantages ahead

Articles

11 of May of 2021

The long-term impact of the Covid-19 crisis is yet to be established. Nonetheless, the real estate sector will play a decisive role in economic reactivation. According to Oxford Business Group and Engel & Völkers, investing in real estate continues to be seen as relatively crisis-proof. Find out the main features of the Colombian real estate market here.

Numbers to consider investing in real estate

The real estate sector was one of the first to resume activities after the lockdown restrictions started to ease in 2020. The construction sector also plays a crucial role in the national economy. According to the Colombian Chamber of Construction, in 2019 this activity represented 6.3% of the national gross domestic product. At the same time, it employed the 6.8% of the labor force on the national level.

The Colombian Chamber has also estimated the annual sales for housing projects for 2021. After a fall of around 5% in 2020, this year’s prospective growth is between 4.3% and 7.5%. This represents 187,936 and 195,545 sales of housing units, respectively.

The construction and infrastructure sectors are connected to the real estate market. These tend to pull and dynamize the economy as they place demand on Manufacturing industries such as construction materials and the petrochemical industry. On the other side, these sectors are linked to service industries and financing.

Colombia’s industry is favoured by top-quality construction materials

An impulse for the real estate housing sector

In different Latin American countries, the government has released stimulus to subsidize the demand for housing projects. The aim was to support the population that suffered a decrease in spending power, via the central and commercial banks. These measures help to stimulate the movement of the real estate market as it enables consumers to buy and invest.

In Colombia, during September of 2020, the government announced 200,000 mortgages towards the purchase of people’s first family home. These mortgages are designed to subsidize both social and non-social interest housing and help sustain the expansion of the real estate market. Through the region, other countries have offered different alternatives via the banking system with mortgages at rates between 7.75% and 10.4%.

Bogota and Cartagena: the best places to invest in real estate in Colombia

Colombia is a competitive country for foreign investment and has a good perspective for recovery. The analysis of the country’s economy, presented by BBVA Research, states that it will grow to 4.8% for 2021. And when it comes to real estate investment opportunities, Bogota and Cartagena are the cities leading the way.

For a general outlook, Bogota’s gross domestic product (GDP) was $102.05 billion in 2019. In terms of the real estate market for new housing projects, in 2020 Bogota registered a growth of 21.2%. The country’s capital has the biggest market for this segment. Meanwhile, Cartagena, one of the top tourism destinations in the world offering a UNESCO World Heritage Site, is an ideal place for those investors seeking to buy holiday homes or invest in Colombia.

Incentives for investing in real estate

One of the first incentives investors need to be familiar with is the Resident Investor´s Visa. This scheme allows foreigners to apply for a Visa once they certify a foreign direct investment of an amount starting at US $100,000. This investment can be for real estate or other investments. You can find more about the Resident Investor´s Visa here.

For investments in commercial real estate, there are opportunities as well. The sector of commercial malls, hotels, offices and warehouses have space to grow and there are several stimuli for these activities. For example, new hotels built in municipalities with 200,000 inhabitants or more will enjoy the benefit of a fix income tax of 9% during the first 10 years. If the project gets established in municipalities with less than 200,000 inhabitants, the benefit will extend to 20 years. The fixed 9% income tax will also apply for projects like theme parks, ecotourism, agrotourism, and marina projects if built in municipalities with a population of 200,000 or more. Find more about the legal and tax incentives to invest in Colombia.

Colombia’s economy will continue growing hand in hand with real estate projects and investors. Find here what you need to know to buy real state in Colombia or establish your company in Colombia.