Brazilian developers offer bulk-investment opportunities
Under the landmark 2009 policy ‘Minha Casa, Minha Vida’ (My House, My Life) the Brazilian Government has pledged to build one million affordable homes for low-income families by 2011 alone. With fast construction techniques meaning equally fast returns, some developers are now offering the chance for foreign individuals or groups to make bulk-investments into their social housing projects. At Natal’s Bosque Verde, net profit is calculated at 23% after just four months, which can then be reinvested twice more in one calendar year.
Samantha Gore, Sales and Marketing Director for Brazil real estate specialists uv10.com explains the concept, “We’re collaborating with a 20-year established development company in Natal on a project called Bosque Verde located in a high employment area close to all major transport routes including the City’s Agusto Severo Airport. It comprises an impressive 1,534 family properties divided into 15 gated communities complete with a shopping mall, school, children’s playground, police post and health centre. With huge demand and fast modular construction techniques, Bosque Verde will be built and turned around quickly and, by offering initial investment packages with discounts to bulk buyers, the developer is able to reinvest his capital early into the next opportunity. Bulk-investor discounts of up to 25% are offered with a four-month turnaround for buyers. A 120-unit purchase would deliver 23% ROI in that short window.”
So what’s the risk of being left “holding the baby” with 120 unsold units? Answer – virtually zero. Samantha continues, “When Minha Casa, Minha Vida was launched in Natal on 4 May 2009 massive queues formed and by 12 May they had 25,000 people signed-up for subsidized loans. So far only 600 housing units have been built in Natal under the scheme leaving a shortfall of over 24,000 approved buyers waiting for homes which offer decent living conditions. A well-located amenity-rich development such as Bosque Verde close to busy factories offering employment, such as Ford and Coca Cola, will sell-out instantaneously upon launch. To date, no advertising has been done yet 700 families have registered for the project through word of mouth alone, awaiting the imminent launch. So high is demand that the developer will contractually guarantee that 90% of his units will be sold before even the first brick is laid.”
Already attracting a Government investment of 60 billion Reais (23 billion euros) Minha Casa, Minha Vida has a double aim of shoring up Brazil’s construction industry alongside reducing the country’s current shortfall of seven million homes. A combination of cash grants, the removal of purchase taxes, discounted interest rates and guarantees to cover mortgage payments for up to three years in the event of job loss for Brazilians on the program, will help millions of low and medium income families to purchase their first home. Meanwhile, qualifying developers receive a subsidy and tax break for agreeing to market units at fixed competitive rates.
Families with incomes of up to ten times the minimum wage of 465 Reais a month (approx. 180 euros - set to rise to 505.90 Reais or approx. 197 euros in 2010) are eligible. The lowest earners, up to three times minimum wage, can secure a home worth up to 50,000 Reais (approx. 19,500 euros) whilst those earning three to six times can buy up to 130,000 Reais (approx. 50,600 euros) depending on where they live. Bosque Verde units are pitched at 75,000 Reais (approx. 29,000 euros). Although easy loans for low income households sounds like a recipe for a subprime disaster (see: USA 2007) the maximum loan-to-value from Caixa Economica Federal – official scheme partner and Brazil’s number two state-run lender - is 90% and they perform stringent checks on earnings and credit records.
Minha Casa Minha Vida housing is no short-term sticking plaster solution, the emphasis is on quality housing. Bosque Verde is well-equipped and well-located. The two storey two bedroom townhouses complete with private gardens are both attractive and comfortable and, to make them extra appealing to the domestic market, able to be extended back into the garden. An open-air shopping centre will join the existing petrol station at the entrance of Bosque Verde, destined to serve not only residents but the local factory workers. Speaking of which over 3,300 jobs have been created within a two kilometre radius of Bosque Verde over recent years.
A bulk 120-unit purchase comes in at 6.75 million Reais (approx. 2.6 million euros) with 23% ROI after four months taking into account the 25% discount given on purchase and costs of selling including taxation and agent’s commission. A 60-unit package is also available at 3.825 million Reais (approx. 1.47 million euros) which offers a 10% ROI after the four month build based on a 15% discount and costs. The investor can also repeat the process three times in one year giving an annual ROI of 69% or 30% respectively.
For more information, visit uv10.com.
