Brazil Property -Foreign Investment
Also see Affordable Housing Brazil Affordable Housing Brazil
Projects
From 1964 to 1986, approximately 27% of houses
built were privately financed to some degree, resulting in an 11% reduction of the overall housing deficiency
index, according to the João Pinheiro Foundation (2000).
The general population of Brazil had thus been responsible for the majority of this
overall reduction in housing deficit, through individual or collective initiatives, which have highlighted
self-construction methods.
In the 1990s, however, the continued reduction of the housing deficit began to be
seen as an issue that, whilst not solely the government‟s responsibility, did require government stimulation –
especially in the case of lower and middle-income (“affordable”) housing.
In 2007, as a result of government policy, foreign companies are already investing in
Brazil, drawn by the falling interest rates and strengthening economic growth that they forecast to boost demand
for both commercial buildings and residential properties. In 2006, foreign investment in Brazilian real estate
quadrupled from the previous year, reaching approximately US$1.5 billion, according to the Central Bank of
Brazil.
Brascan Imobiliaria S.A., a subsidiary of Toronto-based Brascan, now has fixed assets
in Brazil worth US$300 million. Sales last year rose to US$180 million, of which US$20 million was profit. Half of
Brascan's projected turnover in Brazil for 2007 (US$200 million) will come from residential condominium sales with
the other half from luxury hotels and shopping malls.
Business magazine CartaCapital ranks Brascan Imobiliara top of the 12 best Brazilian
construction companies. The Company has been a joint-venture partner with Inter-Continental Hotels for more than 25
years, and owns 60 percent of the chain's two five-star properties in Rio and Sao Paulo.
Hines, a U.S. real estate developer, and Calpers, director of the California Public
Employees' Retirement System, have already created funds worth US$820 million to invest in Brazilian real estate.
The Calpers and Hines partnership created its first fund in 2005, raising US$250 million. In February 2007, they
successfully launched a second fund, with a subscription of US$570 million.
Observers are already noting that Latin America's largest economic powerhouses,
Mexico and Brazil, are beginning to enjoy a real estate revival that neither country has seen in years with
building sprees in residential and commercial properties. This is due to sound economic fundamentals, modernised
politics and recent law changes to stimulate foreign investment. As Rogerio Basso, a Miami-based Latin America
specialist for Ernst & Young's hospitality and real estate advisory service, puts it: "There are good
expectations for growth in both countries." Three areas in Brazil's real estate market – middle-income housing,
tourism and "build-to-suit" industrial warehousing – are poised for impressive growth within a three to five-year
horizon.
At the Reuters Latin America Investment Summit in March 2007 Gary Garrabrant, CEO of
realty investor Equity International, stated that Brazil offers tremendous opportunities in developing affordable
housing and other areas related to real estate, such as special purpose finance companies.
Garrabrant is enthusiastic about the country and its investment opportunities. Equity
International has stakes in Gafisa SA (home construction), BR Malls (a shopping centre operator that has already
filed to go public), and Bracor. Garrabrant even said that so many investors had inquired about Brazil as an
investment destination that it was on the verge of being worrisome, as Equity International likes to operate where
the playing field isn't too crowded. "On a superficial level Brazil is hot. It's fashionable to be investing in
Brazil," he said. “Brazil's middle class is growing and the country's vast poor are about to gain affordable
housing.
Foreign investors have not missed that story”, Garrabrant is of the opinion that when
major U.S. pension funds and institutional investors are investing heavily, it is a sign something is changing.
“There are more durable investments, not just one wave”.
Source: World Bank – Country Brief
Source: Habitat for Humanity website
Source: Real Estate TV, Central Bank of Brazil Source: A mixed-use future from hotels
to affordable housing Brascans Jacky Delmar (Latin CEO Executive Strategies for the Americas. April
2000)
Source: Bloomberg - Hines, Calpers May Invest More in Brazil's Real Estate
Market
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