Ara Sinks in Mexico City on Concern New Tax Will Cut Home Sales

Consorcio Ara SAB, Mexico’s best-performing homebuilder in 2013, headed for its first weekly drop this month amid concern that President Enrique Pena Nieto’s proposed tax changes will reduce sales.

Ara fell 3.2 percent to 5.54 pesos at 2:09 p.m. in Mexico City, pushing its decline since Sept. 13 to 3.7 percent. It was the worst performer among the four stocks on the country’s Habita Index of homebuilders, which sank 2.8 percent today and is down 3.4 percent this week.

Pena Nieto is proposing a new value-added tax on home sales, mortgages and rents that Credit Suisse Group AG estimates would reduce the purchasing power of potential buyers by about 28 percent. The levy is included in a package of legislation he sent to Congress Sept. 8 as part of an effort to increase the country’s tax revenue and lessen its dependence on oil income.

Passage of the new taxes would be a “negative catalyst” for the entire homebuilding industry, Credit Suisse analysts Eugenio Amador and Julian Bravo Lozano wrote in a research note e-mailed late yesterday. Lawmakers will probably amend Pena Nieto’s bill before approving the changes because as written they would be “so detrimental to the sector,” the analysts wrote.

Mexico’s biggest homebuilders -- Desarrolladora Homex SAB, Corp. Geo SAB and Urbi Desarrollos Urbanos SAB -- are already preparing to restructure debt after their cash balances plummeted. Geo and Urbi have been suspended from Mexican stock-exchange trading for failing to file second-quarter results. Homex fell 1.9 percent today, pushing this week’s drop to 2.8 percent.

To contact the reporter on this story: Jonathan Levin in Mexico City at jlevin20@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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