Peru's Autoconstruction Sector: A $25 Billion Industry with Quality Concerns

A recent study by the Grupo de Análisis para el Desarrollo (Grade) reveals that autoconstruction in Peru is a significant yet often overlooked sector, moving S/25 billion annually and contributing 4.1% to the country's GDP.

Why this matters: The autoconstruction sector's significant contribution to Peru's GDP and its prevalence among lower socioeconomic levels highlight the need for policymakers to address the quality and financing concerns in this sector. Failure to do so could lead to increased housing costs, safety risks, and perpetuation of social inequalities.

The study highlights that 71% of urban homes in Peru are self-built, primarily by untrained construction workers, resulting in low-quality structures. This phenomenon involves millions of families, with an average family spending S/190,000 to build their home, broken down into S/44,000 for land purchase and S/146,000 for construction.

Álvaro Espinoza, a researcher at Grade, points out that '94% of these homes are built by construction workers without technical studies, leading to low-quality constructions with high structural uncertainty.'

The financing for these projects is also a challenge. The study reveals that 70% of families use their savings to finance autoconstruction, while only 8% of the total financing comes from mortgage credits. The remaining families rely on consumer credits, which have higher interest rates, making the housing more expensive.

Autoconstruction is particularly prevalent among lower socioeconomic levels. In socioeconomic level (NSE) C, 9 out of 10 homes are built through autoconstruction. In NSE D and E, almost 100% of homes are built this way. In contrast, in NSE B, only 39% of homes are autoconstructed, and in NSE A, all homes are conventional constructions.

The study also notes that autoconstruction is more costly than formal construction, with an average cost of S/1,735 per square meter compared to S/1,314 per square meter for formal construction. This implies a 33% higher cost despite the lack of specialists, legal procedures, and formal permits.

To address these issues, Espinoza suggests producing more social housing and promoting access to specific credit for autoconstruction. Additionally, the state could provide technical assistance, subsidizing structural evaluations for autoconstructed homes to ensure they are built adequately and in less time, with professional plans and supervision.

To recap, while autoconstruction is the primary means of housing production in Peru, it brings significant challenges, including high costs and low-quality constructions. Addressing these challenges requires coordinated efforts from both public and private sectors to facilitate access to formal financing, technical assistance, and professional construction services.

Key Takeaways

• Autoconstruction in Peru moves S/25 billion annually, contributing 4.1% to GDP.
• 71% of urban homes in Peru are self-built, primarily by untrained construction workers.
• Families spend S/190,000 on average to build their home, with 70% using savings.
• Autoconstruction is more costly than formal construction, with a 33% higher cost per sqm.
• Addressing challenges requires access to formal financing, technical assistance, and professional services.