| What is Driving the Affordable Housing Boom In Brazil? |
 |
 |
 |
| Written by Eduardo Collins |
| Saturday, 01 August 2009 18:26 |
|
Caixa Economica Federal, Brazils government-owned savings and mortgage bank has announced impressive figures with regard to housing loans. In 2005 Caixa only granted R$5.1bn in home loans, the bank has granted in excess of R$17.4bn in home loans in 2009, a 340% increase in lending.
Caixa Economica Federal, Brazils government-owned savings and mortgage bank has announced impressive figures with regard to housing loans. In 2005 Caixa only granted R$5.1bn in home loans, the bank has granted in excess of R$17.4bn in home loans in 2009, a 340% increase in lending. It is easy to see why as Brazilian interest rates have fallen steadily over the past two years, with the rate reducing from 19.75 per cent a year in August 2005 to 10.75 per cent in 2009. The Brazilian Government has introduced a raft of measures to boost growth since the onset of the global economic crisis. The most important of these is Minha Casa, Minha Vida (My House, My Life) which will pour R$60bn into Brazils housing market. Brazil's construction industry was heading into decline after several years of strong growth and this scheme has reinvigorated the construction industry which accounts for 5 per cent of Brazil's gross domestic product. Goldfarb construction president Milton says This will provide about 70 per cent of our business this year. His company plans to build 12,000-14,000 homes under the scheme this year alone. Spotting a bandwagon, developers have jumped aboard, but Minha Vida is not the only indicator of a construction boom in Brazil. Of 23 companies that have listed on the Sao Paulo Stock Exchange this year, 11 are property developers. Many of these developers have aimed at the top end of the market. Yet this sector may already have reached saturation, while the real demand in Brazil is among the middle and lower income groups. It is Caixa's job to promote development of this housing sector and it does so at subsidised interest rates and at spreads that commercial banks cannot match. For those at the bottom of the income scale, the programme offers eye-popping subsidies. It allows people earning up to three times the national minimum wage of R$465 a month to buy flats or houses worth up to R$52,000. The Government Subsidy varies according to the salaries of the applicants. A purchaser earning the minimum wage will get a subsidy of R$46,000 " leaving the buyer to provide just R$6,000, which they will borrow from the Caixa and repay in 240 installments of R$46.50 a month. Douglas Munro, Sao Paulo president of US-based developer Hines, explained that one of the major reasons for this important advance in lending was the approval in 2004 of a new law providing increased protection for lenders by allowing them to foreclose on non-payers and seize their property in lieu of payment. Hines is one of the few big international developers to have chosen to concentrate on middle and lower income groups, with homes costing on average R$100,000, for families with monthly income of about R$2.500 " not poor by Brazilian standards, but certainly not wealthy. Both Caixa and Hines say There is no bubble ready to burst, but investors need to be aware of the future outlook and not be blind to the pitfalls of doing business in Brazil. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Eduardo Collins is a consultant to Urban Land Brazil and wrote the piece Affordable Housing in Brazil and recommends you visit Urban Land Brazil for more in depth information information about investing in this exciting sector in North East Brazil. Get a totally unique version of this article from our article submission service |