The demand for expensive housing in Monterrey is on the rise, but it faces a problem that seems irremediable: the lack of water.
In a scenario that looks for those responsible and goes from climate change to accusations of corruption and poor application of public policies, the real estate industry is balanced between the joy of the boom and the shadow cast by the water crisis.
At the beginning of the year, Monterrey shared a divided scenario; on the one hand, economic development in the real estate sector and, on the other, the shadow of the water crisis, which overshadowed the advance of the market, but apparently does not stop it. Monterrey is suffering the ravages of a severe drought not seen for more than 20 years, generated by multiple factors, from climate change to insufficient public policies, including suspicions of corruption and mismanagement of water dams.
The controversy that has been unleashed around this phenomenon is as strong as the scarcity, which has forced the state government to declare an Emergency Declaration at the beginning of the year, in which various mitigation measures were activated, which have been adjusted in time and form until today.
Even with this complex panorama, the real estate sector in the metropolitan area of the City of Monterrey (ZMMTY), remained the most dynamic during 2021 in the country, according to the 4Q21 real estate situation report from the Tinsa consultancy (tinsamexico.mx), and was reaffirmed in 2022, indicating that in the first quarter of 2022 a little more than 5,600 new housing units were displaced in the ZMMTY.
In the Lamudi market report (2021), Nuevo León had an increase in real estate demand in the first quarter of 2021 vs. the same period in 2022 and ranked number 7 in the national ranking of the states with the highest growth in the demand for residential, commercial, industrial, office and land properties for sale and rent.
But the real estate bonanza is surrounded by suspicions because the water supply suppressions do not include companies that have private wells licensed by the National Water Commission (Conagua), which indicates that in Mexico agriculture uses between 68% and 70% of the water, while industry and hydroelectric plants 14% and domestic use around 10%. But while industry consumes less water than agriculture, the pollution it generates is equivalent to that of 100 million inhabitants.
For Julio Pérez, director of mixed uses at Alora Developer, located in Monterrey, large companies such as soft drinks companies and bottlers have many sanitary processes to carry out, “therefore they have a high water requirement, but they also contribute by donating liquid from their concessions. ”, a fact that the governor of Nuevo Léon, Samuel García Sepúlveda, corroborated –although without giving figures–, at a press conference (May 15), “to Arca Continental and Ternium, thank you very much for donating water; It has not been enough and there are companies that have not yielded a drop of water, acting irresponsibly”.
If a developer requires feasibility, Pérez comments, he will have it, but he also has to give his contribution, “either in a specific work, that the developer executes the work or in an economic way so that Agua de Monterrey executes it.”
Precisely, with the situation of the drought, feasibilities are not being delivered or are very reduced. Pérez comments that when the feasibilities are requested, it is necessary to contribute with a specific work; drill wells, equip them, put the pump, everything that is needed and gives them to the government to operate, maintain and manage. The exploitation is done jointly and an equitable solution is sought.
The director of mixed uses of Alora desarrolladora, considers that the situation for real estate developers who punctually carried out their feasibility strategies on time and in order is not as serious as for those who took time or were just beginning the procedures. “It is difficult because the government limited all feasibility due to the crisis.”
There is no date for this to normalize, there is also no certainty of restarting operations. “We depend on the official answers.” Alora Developer has, according to its director of mixed uses, some project that is already ready, but awaiting connection, the last step. While the properties already delivered, where people are going to enter, do not have a problem either, since they have all the services, although they have to make their contract.
Nor do they have new projects, for the same reason that there are no demolition and construction licenses. Pérez hopes that the recovery will be soon, not in the long term, because, he says, “the real estate boom in Monterrey continues and this industry is going to push. What you have to do is apply investment, and he believes that “with resources in four or six months this will not be a problem.” He asserts that progress will be made between the government’s plans and the overall industry working together.
Cristela Hernández Salazar, president of the Mexican Association of Real Estate Professionals of Monterrey and the Metropolitan Area, AC, comments that the environment that is detected is one of uncertainty, although there are still no concrete indications of how the crisis will really manifest itself, she considers that “ probably in the deliveries and the sale of land they will be very affected”, it is something that will be seen in the future.
For Ricardo Padilla Silva, director of Fraterna, a real estate developer, precursor of mixed-use and high-density spaces in Monterrey, serious water scarcity can collapse societies until they disappear. “That does not happen in Monterrey, but there is a huge imbalance in economic-demographic attractiveness, against decades of neglect of the environment issue.”
With reference to the Water Master Plan for Nuevo León, which contemplates actions in the short, medium, and long terms, with an investment of 25 billion pesos, in order to guarantee the supply for the metropolitan area for the next 50 years, Padilla indicates that it is “interesting and well planned, but in reality, much of what happens for good is because people also have a great role.” But the authority must ensure that the laws and regulations are applied in a homogeneous manner, without favoritism or advantages, because in a free market, of competition, if everything is equal, everyone has to develop their capacities to solve the problem.
What the governor proposes has to do with reducing consumption and how to increase supply, “but supply has to do with the rainfall in the area. If nature does not help, then we are going to experience a more complicated situation. In addition, he adds, he took the risk and the precautions were not taken in time. It was possible to start the reduction and contraction of the service three years ago”.
For Padilla, high-density buildings with mixed uses, which favor pedestrians and the use of mass transportation, or non-motorized means (walking, biking), are a great solution for urban life. But in the “urgency and desperation due to the water crisis, he points out, they want to reduce the number of houses that can be built in one place, when it is clear that as a city becomes denser and more compact, it becomes more efficient, including water management and drainage.
“Washing, bathing and the use of toilets are the three factors that require high water consumption but that do not affect the developments already delivered. The ideal thing would be for the buildings to be autonomous, for the buildings to have the capacity to function without being connected to drinking water and without being connected to drainage, using saving technologies for this”, he emphasizes.
He considers that not enough time has passed to affirm that there is any contraction in the real estate market. “There is no data yet, although people are concerned about the way of life we have. The cuts are a surprise, we had 20 years without water cut, now there is low pressure, spaced, it is a novelty. Although in Monterrey there is a water crisis every 20 years due to population growth.”
What is worrying and can have quite an impact, he indicates, are the cuts in the feasibility of the water supply and that will not have an immediate reflection. The director of Fraterna Desarrollos considers that the joint work of the union with the government, the development of their own capacities to solve the problem and the use of technologies can be the key to solving the crisis.
Especially since the problem extends to places like Saltillo, Monclova and Torreón. It is not a one-off issue, in the businessman’s opinion, but Monterrey stands out due to its size, geographic, economic and social location. “It is an issue that should not be carried out by just one sector of the industry, but by the whole of society.”
For the Chamber of Real Estate Owners of Nuevo León, Caprobi, (1921), through its president, Mauricio Navarro Garza, the short, medium and long-term mitigation strategies that the government has proposed, “are in line to solve the problem definitively, but it is a long road, it requires time and a lot of investment.
It does affect developers, says Navarro, “in continuous growth and development. Now it is not noticeable, but in the future it will be noticed. Either because of the water crisis, or because of the infrastructure, which are two issues that our water and drainage agency has. The feasibilities are not being given on time and at the speed that growth is demanding of us. Therefore, if slowdown is being experienced, if it is holding us back. It is inevitable that it will reach us and if it is not corrected it is possible that it will reach us at the end of the year”.
According to the National Water Commission (Conagua), the main source of water consumption is agriculture and livestock (approximately 65%) followed by urban public use —in charge of Water and Drainage—, with 25%; multiple uses, around 6%, and industrial, less than 4%.
However, private industry is directly pointed out by some groups and as one of the main responsible for water scarcity. Navarro affirms that, on the contrary, the industry is the one that is supporting and urges those who point this out to verify who has transferred water capacity and who has withdrawn water and connected it to the network”.
“What I would demand from the government is that it check carefully what is happening with the feasibility processes, because one thing is the feasibility of supplying water and another thing is that you have water. We (the industry) must continue transferring infrastructure, we must advance and authorize operations”.
But what cannot be stopped is development, infrastructure cannot be stopped. That would tell the governor and the Monterrey Water Agency (Monterrey Water and Drainage Services), we have to see it a little more rationally, “concludes Navarro.