One of the primary milestones for the real estate sector development is the capability and availability of granting credits to the sector, as well as the legal security that supports the financing process, important factors in the market development and that contribute in a representative manner to expand demands for housing in the last years.
Nowadays, resources for the financing sector originate, mostly, from resources made available by FGTS (Government Severance Indemnity Fund for Employees) and also from deposit balance in savings account.
- FGTS (Government Severance Indemnity Fund for Employees): mandatory contribution of 8.5% on employee's payroll, subject to labor legislation, managed by Caixa Econômica Federal (CEF) (Federal Savings Bank).
- Savings account: a major primary source of resources for housing system financing, it makes use of resources deposited in savings accounts related to entities composing SBPE (Brazilian System of Savings and Loans). The National Monetary Council requires that at least 65% of these resources are destined to real estate financing transactions, being 80%, at a minimum, related to housing financing transactions within SFH, with balance available for the other real estate financing transaction modalities, contracted at market rates.
The Brazilian financing methods are divided in Housing Financing System (SFH) and portfolio mortgage loan, exclusively destined to the real estate market and managed by finance agents. A brief description of the credits modalities available in Brazil is presented below.
- SFH (Housing Financing System): created in 1964, by means of a federal law and regulated by the Federal Government, it is destined to support real estate acquisitions in the country. Resources for financing in the scope of SFH derive, mainly, from FGTS and deposits in savings account. They provide lower fixed interest rates than the ones provided by the market, limited to 12% per year, with periods for financing contracts varying from 15 to 20 years.
- Mortgage Credit - Own Portfolio: in addition to resources destined to SFH, the savings account also originates from resources allocated in own portfolios in banks and destined to real estate financing. In this modality, the interest rates adopted and values financed vary due to the market behavior; they may be higher than the ones adopted by SFH.
In order to use the FGTS resource for property financing, a few requirements are necessary:
- The person shall not have any other active financing in SFH
- The person shall not be a possessor, prospective purchaser, owner, beneficial owner or assignee of other urban property, finished or under construction, in the municipality where the person lives or exercises his/her main occupation, in adjacent municipalities and in the metropolitan area.
- The assessment value shall be up to R$ 750,000.00 for the states of MG, RJ, SP and DF and up to R$ 650,000.00 for the others.
- The resource shall be destined to the holder's housing.
Over the last years, the real estate and construction markets reached the highest maturity level in Brazil, however, it is still restricted in comparison to other emerging countries and with similar profiles.
Fonte: Banco Central
For a long time, Brazilian banks were allowed to use most of the resources raised in savings account to apply in Federal Government bonds, without completely observing the original expected percentage. From 2002 on, BACEN established a framework schedule for banks, which has been resulting in a substantial improvement in the resources amount available to the real estate market.
Thus, competition for customers increased and conditions of bank financing granted to companies of the sector have improved, with a reduction in rates and prolongation of payment deadlines.As a consequence, since the second semester of 2005, the real estate market is heating up. According to BACEN data, financing for the sector had an increase of 61.6% in 2005, in relation to 2004. This surge remained in 2006, with an increase of 98.0% in the amount of resources destined to real estate financing, in relation to 2005.
The table below details the volume of credit originated from financial institutions made available for real estate companies:
|Unidades Financiadas||Volume Financiado|
|Ano||Número de Unidades||Variação sobre
|Volume Financiado (em milhões de Reais)||Variação sobre
Source: ABECIP (Brazilian Association of Real Estate Credits and Savings Entities)