Real Estate Investment Funds: New Opportunities and Challenges for the Paraguayan Market

Itaú Asset Management launched its first local real estate investment fund, an important step that can change the landscape of the real estate market in Paraguay. The objective of the fund is to raise 25 million dollars for the construction of ten apartment buildings, offering a new investment alternative for both local and international investors.

What is an investment fund and how it works?

An investment fund is an expertly managed entity that pools money from multiple investors to create a diversified portfolio. This portfolio can include bonds, real estate or stocks, with the goal of achieving the best possible return for investors.

In the case of real estate investment funds, the capital of several investors is pooled to buy, develop and manage properties. It is an easy way to participate in the real estate market without having to buy properties individually. Investors can profit from real estate investing without the hassle of managing properties and at the same time diversify their risk with the help of experts.

Opportunities and challenges in the Paraguayan market

Itaú's real estate fund is launched at a time when Paraguay's real estate market has little institutional investment. Until now, developers relied on selling units to final owners or small investors to finance their projects. This allowed small and medium-sized investors to buy apartments at low prices and obtain good returns, but limited scale and liquidity for developers.

The entry of institutional funds like Itaú changes this. Now, a single entity can own the entire property, which adds more depth and liquidity to the market and allows for larger transactions. Investors buy shares in the fund, diversify their risk and access professional management of their investments.

In addition to the opportunities, real estate investment funds also face several challenges:

Operation and maintenance: Managing and maintaining buildings in good condition is crucial to obtain the expected returns.
Risk of overbuilding: Having too much capital available can lead to building more than the market really needs, causing an oversupply.
Misuse of funds: There is a danger of using funds to rescue low-quality properties that would not sell well on the open market. This has caused problems for other funds in the past.

The arrival of Itaú shows international confidence and optimism in the Paraguayan real estate market. Competition between institutional and private investors to attract capital will make the market more competitive. This benefits the economy by creating a more dynamic and professional environment in the real estate sector.

The real estate market in Paraguay is advancing. With more institutional funds, the market will become stronger and more professional. This way, one will be able to face challenges and take advantage of opportunities. This promises a good future for the real estate sector in the country.