Mexico Home Builder Posts $796 Million Loss

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Desarrolladora Homex, Mexico's largest home builder, recorded a 10.1 billion peso ($796 million) loss for the second quarter, as sales plummeted and the company took a 5.3 billion loss on land and construction projects. 

The Mexican government has shifted development subsidies from suburban areas to more affordable "vertical" urban projects, leaving Homex and other developers struggling to pay off debt on land purchased in outlying areas.

Homex wrote down the 5.3 billion peso charge after an "initial feasibility analysis" of housing developments and land reserves, the company reported.

The results reflect "the industry's regulatory and structural changes," Gerardo de Nicolas, Homex's chief executive, said in the filing.

The second quarter loss for Homex compares to a profit of 568 million pesos last year. Revenue for the developer fell to 1.1 billion pesos, an 84 percent drop compared to a year earlier. Housing revenues in the quarter were 290.4 million pesos, a decline of 93.4 percent compared to the second quarter of 2012.

Homex and competitors Corp. Geo and Urbi Desarrollos Urbanos SAB have hired advisers to restructure debt as they face losses on land reserves far from city centers, Bloomberg reports.

Earlier this month the government announced plans to offer an additional 1.5 billion pesos in subsidies, a 25.9 increase from last year, to help struggling developers.

"The housing industry in Mexico continues to be very attractive, and we're confident in the commitment and support of the federal government to create a solid and active future for the industry and for our company," Mr. de Nicolas said in a statement. "We will continue dedicating our efforts to progressively reactivate our housing projects in Mexico."