Preferential Interest Law to Facilitate Access to Social Housing, Decree 27-2022

Newsletter #134 / May 2022

On May 18, 2022, the Preferential Interest Law to Facilitate Access to Social Housing, Decree 27-2022 of Congress of the Republic of Guatemala (hereinafter, indistinctly called "the Law"), entered into force.
The purpose of the Law is to create the technical, social, and financial institutional basis to allow Guatemalans access to decent housing through the institutionalization and regulation of preferential interest for mortgage loans.
The Law, among other issues, provides:

  1. Subsidized interest rate. It is the annual interest rate that the State of Guatemala absorbs, through the mechanism of tax accreditation to the Income Tax, for which it empowers the State to cover up to 40% of the reference interest rate for the first 4 years. and 30% for the following 3 years.
  2. Persons who may opt for this benefit. It provides that only Guatemalans may opt for this benefit to purchase a real estate that does not exceed the equivalent of 170 minimum wages, including the incentive bonus, provided that they have not previously benefited from a State subsidy, they prove that they lack their own home, the property they wish to acquire has basic utilities, they have a source of income, and the loan is secured with a mortgage or any other title or document that contains a mortgage security.
  3. How to obtain the benefit. The person chooses the home and the financial institution with which he wants to finance it. Said institution will apply the selection criteria and determine the preferential rate, and if he meets the requirements, the mortgage loan deed is authorized, the mortgage certificates are issued, or the loan is granted through securities that guarantee the obligation. The loan may be paid through the direct discount mechanism or through withholdings made by the beneficiary’s employee.
  4. Benefits. Financial institutions may deduct from their income tax return the value of the interest rate subsidized by the State. As for the beneficiaries of this type of loan, they will have ten (10) days of grace, where no surcharge or default interest will be charged to them, if they are late in any installment.

It is expected that the benefit granted by the Law will allow more Guatemalans to opt for decent housing, which would increase the demand for popular housing projects, which entails a business opportunity for developers and financial entities that choose to finance this type of project.

For more information, please contact:

Sara Santacruz

Juan Francisco Sandoval