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Monday, October 25, 2010

Value Brazil

How to Value Brazil Property and Land.

Please see an interview below with Aline Lisboa.
A fully qualified surveyor and valuation engineer with several years experience of examining real estate and land throughout Brazil.
-You can give our readers some information about your formation as a valuation engineer?
Like all engineering students, I gained my qualification from a state university (of Rio de Janeiro) and in the first part of my higher education, worked as an intern at an insurance corporation for six months.  My time here was spent supporting the overall operation of the organization as well as learning the fundamentals of property evaluation, feasibility analysis and several other topics which served to assist my engineering studies – in fact, I decided to extend my time there based in the organization’s consultation department.  Whilst studying still, I went work in the managing engineering department of the same company and I received a proposal from an ex-client (a bank that operates in six different countries who was also a client of this firm) to form the CONAI property and land evaluation company which, naturally, I jumped at.  Today, in addition to myself, we have an experienced architect, a qualified lawyer, an accounts team as well as administrative support and trainee engineers.  CONAI serves the likes of Banco Itaú, HSBC Bank Brasil, Brazilian Mortgages, Bancorbras, Banco do Brasil amongst others.
  Our operation is mainly focused on work with these banks on their credit lending, complemented by real estate and land viability studies; survey reports; detailed measurements and cost of works budgeting.  We also work with independent real estate companies and buyers, both small and large, in the same manner and our case load is increasing in line with the growth of the Brazilian property market.

-What are the main factors that should be taken into consideration when you approach the evaluation of a building or plot of land?

 From the outset, it is worth stating that approaching valuation should be viewed in essentially the same manner regardless of the type of real estate related asset – whether that is a field, an office space in a commercial building or a residential apartment.  In my professional view, perhaps the most important factor to consider is the location and neighborhood – something which remains fairly standard in most global marketplaces.  Of course, there are also other fundamentals such as the build quality (which, particularly in Brazil, can vary hugely); level of finishing; micro economic factors; neighboring towns / cities; competition; local government policy; regeneration policies in place; employment; income levels amongst other factors.  A problem that we often encounter that your readers should be aware of is that in large conurbations such as Rio de Janeiro and São Paulo, where there is urban sprawl and visible divides of income distribution, statistical discrepancies can occur in producing a market valuation due to such extreme variations in price ranges.  For example, I can value a 3 bedroom apartment in Barra da Tijuca in Rio’s West Zone (where the rate of violence is relatively low) and have the exactly the same unit in neighboring   Jacarepagua (where the violence rate is slightly higher due to the presence of a generally poorer demographic of resident) which would value significantly lower – the difficulty is exacerbated when evaluating a property that is on the border of a richer and a poorer area.  For many Brazilians, your postal code is a sign of your social status – a consideration that completely contradicts the mathematically-based principles we learnt at engineering school!  The point I am trying to make is that valuation is not always a clear cut process.

-In terms of analysis of property or land values – are there any public sources of data that can be accessed by investors?
Here in Brazil, the current professional analysis of the market value for property is solely allocated to private companies specializing in real estate assessments.  I believe one of the main reasons for this is the real estate market in Brazil has gone through a great period of change of the last two decades and, as such, the process has become convoluted.  However, during this period the market has become more sophisticated and sold data, although no official is often logged by real estate companies (which can be made available upon demand).  It is also possible to see the level of IPTU (Imposto sobre a propriedade predial e territorial urbana, local government tax) being paid which can determine what the declared value of the property is – however investors should be careful as to assume this value as we often see that, particularly in a growing market, the real time evaluation is often higher (this can be accidental or purposely registered with the local government in order to avoid paying higher taxes).  It is my belief that the Fundação Getulio Vargas (FGV) are in the process of creating what will be Brazil’s first official register of property and values – whilst this will not be a legal record, it is widely agreed that it will help with the process of understanding house prices in Brazil better (note there has not been a confirmed date for this to be available to the wider public).

-What are the main risks that you feel an investor in Brazil should be aware of and how can they be protected? 

When analyzing risks, I think it is important for the investor to ask him/herself the following questions as a minimum:
  • What are the most promising sites?
  • Which are regions are expected to grow the most?
  • Should the investment be within the city or in the outskirts?
  • Should the land plot be one that is ready for development or one where planning permission needs to be obtained?
  • What are the potential asset depreciating factors that could come into play?  For example, is the property or land plot located in a poorer neighborhood / is there a probability of growth of (Favela) slums or other related risks?
  • Is the area subject to flooding?
  • How are the basics infrastructural facilities such:  (water, electricity supply and sanitation)?
Other than these, obtaining the correct legal advice is a must and, whilst overseas Brazil property investors have identical rights to residents, any contractual agreement must been examined with a fine toothed comb.  There are also certificates that guarantee the investor a minimum level of security when purchasing a property, namely:
  • a certificate of encumbrances (Certidão de Ônus Reais) which will indicate whether the property or land plot has any attached issues whether that would be judicial, existing liens (such as mortgage ties) or other overriding factors (such as usufruct rights) that can corrupt a clean transaction;
  • a certificate which will show the history of the property in the last twenty years (Certidão Vintenária) – an added guarantee that is often used to assure the buyer that there have been no previous legal or other related issues;
  • a long lease certificate (Certidão Enfitêutica) in order to determine whether the property is public or private;
  • With regards to rural Brazilian land / property purchases, ownership can be protected in the form of a geo-referenced certificate from INCRA (Ministério do Desenvolvimento Agrário, Ministry of Agrarian Development).
Other important factors to bear in mind include issues with regards to shared condominium obligations (including related taxes and other fees) and  also, particularly with commercial property in Brazil, if the owner/s has/have any labour claims against him/her/them.

-How can overseas investors ascertain whether important factors such as water, electricity, drainage are adequately in place?

 The best point of reference for this information is the local government office Called here as (‘Prefeitura’). And some agencies which also are responsible for each kind of these services. In Rio de Janeiro, for example, the company responsible for water supply is SECONSERVA and then other services related to sanitation, gas supply, electricity, canal management, storm drainage and other essentials are dealt by in conjunction with COMLURB and the CGC (Coordenadoria Geral de Conservação, General Coordination of Conservation).  It’s important to remember that these services are primary only and investors should verify such essential systems within the buildings they are investing in – particularly with larger projects (such as condominiums or apartment blocks).

-With regards to the ongoing national controversy with regards to the Movement of Landless Workers (Movimento dos Trabalhadores Rurais Sem Terra, MST) – many investors remain concerned as to the risks of buying land, particularly in remote locations.  Can they be minimized? 

Firstly, is should be noted that the MST is a movement organized by rural workers in order to place pressure on the government to ensure full access and entitlement to land produce – the role of the movement is often unjustifiably assumed by both Brazilian and internationals as being something akin to gypsyism.   Secondly, what many people do not know is that not enough to simply ‘take hold’ of the land and for it to be subject to land reform it needs to be unproductive.  What follows is that the government buys the unproductive land in order for it to be redistributed to the rural workers.  There have been many cases where MST protesters have occupied these lands have been removed by the military because it is deemed to remain as private property.  A short-term solution for those who have land that may be considered unproductive is to take advantage of the market in Brazil and sell or perhaps come to an agreement to rent (where possible).  I am aware that this is what is occurring in various regions in São Paulo, Rio de Janeiro and Rio Grande do Sul amongst others.

-The CONAI organisation has its headquarters in Rio de Janeiro, which is one of the cities of Brazil which has witnessed massive growth in property prices in recent times prompting a debate that they are becoming out of touch with reality – how true do you think this is?
The growth of the market values of properties in Rio de Janeiro has happened for different reasons and some parts of the city have witnessed more rapid growth than others.  In the West Zone for example, we have Barra da Tijuca: a neighborhood that has a tremendous amount of land suitable for building with the added benefits of being located close to the beach; a good proportion of upper middle class Cariocas as well as very modern facilities / infrastructure without crowdiness.  Prices have increased considerably and land has highly sought after by developers.  The South Zone (home of world renowned areas such as Copacanbana, Ipanema and Leblon) contains some of the most expensive real estate in Brazil which has also increased (in addition to very limited available land space).  Then you have areas such as Jacarepagua (mentioned above) and areas of the north zone (such Tijuca, Duque de Caixas and Nova Iguaçu) and as well as moving to north of the state where much of the country’s new found oil wealth is to be found (such as Macaé and Campos de Goytacazes) – where prices are considerably lower in comparison but growth prospects look strong.   The fact is that it is important to look at prices from an affordability perpsective – as our economy has grown, so has the wage levels of the general population.  People in Rio, generally speaking, are earning more (this includes the lower classes) and have better access to credit than ever before and, therefore, prices have have been increasingy accordingly.  I think it will be time to worry about a bubble when the house prices go beyond the abilities of people being able to meet their commitments.  The banks have seen what has happened in the rest of the world with regards to over-zealous lending and also do not want a repeat scenario of what happened in the 1980s – for this reason, it is not a simple process to get a home loan in Brazil (as was formerly the case in countries like the USA) and inflation control is considered of more importance than ever (by both the government and the general public).  I also feel that Rio de Janeiro (and many other cities of Brazil) have an issue of under-supply, once this situation improves it should theoretically bring more equilibrium and sustained growth into the market place.

-What areas of Brazil do you see as the most promising? 

I think it is fair to say that most states in Brazil are witnessing growth in some way or another yet, specifically, as well as Rio de Janeiro (city and state), São Paulo has for a long time offered interesting opportunities – the East Zone is currently a hot bed of activity with the creation of the red subway line.  The central states such as Goiânia and Tocantins offer excellently valued real estate and are receiving a huge amount of both private and public funding (such as via the Growth Acceleration Programme).  In the south, Porto Alegre and Curitiba are excellent cities to invest in with modern facilities and some of the highest standards of living in the country.  The north-east also offers excellent value (prices are generally cheaper the further north of the country) and is also seeing a wide range of construction activity including hotel and other commercial development as well as residential projects throughout.

Friday, October 15, 2010

New Brazil Interview with Riordan Roett Part 2.mp4

Part two.

New Brazil Interview with Riordan Roett Part 1.mp4

Please see below a two part interview with the author of a recently published book – “The New Brazil” – Riordan Roett. As a professor of international studies at the Johns Hopkins University in Washington DC, Riordan has written over 22 books on a range of topics and we had a chat on a range of topics related to Brazil including the main economic growth characteristics of the country; the issues / problems; inflationary pressures on the economy; Brazil as a world ’superpower’; its position in relation to the other BRICs; the China / Brazil relationship; the United State’s attitude to the country; the country’s political stability amongst other topics.

Monday, October 11, 2010

New vistas for Indian investors

Brazil to open new vistas for Indian investors

Huma Siddiqui
Thursday, Apr 08, 2010 at 2252 hrs IST

New Delhi: With Brazil launching a $878-billion program to upgrade the country's infrastructure, there are huge opportunities for the Indian companies to get projects, contracts and orders to supply of equipment, machinery and materials.
The India-Brazil-South Africa (IBSA) Summit, to be held in Brazil on April 15, will give an opportunity to the businessmen from these countries to discuss the opportunities available. It is seen as a trilateral developmental initiative to strengthen cooperation, policy dialogue and coordination among these major emerging countries.
The Indian business delegation, likely to be led by Ficci president Rajan Bharti Mittal for the business summit that will precede the actual IBSA and Bric summit, will get an opportunity to assess for itself the sectors on which Indian businesses can capitalize.
There will be meeting between representatives of development banks at the Brazilian Development Bank (BNDES) head office, under the aegis of Ficci, and this will be followed by the seminar, Bric and IBSA: Common Business Opportunities.
Talking to FE, Brazil ambassador Marco Brando said, “Issues relating to investment opportunities, connectivity, agri business and financial markets will top the agenda of the IBSA, Bric as well as the bilateral summit next week.”
Though India is very cautious, other Bric members have a common position on International Monetary Fund (IMF) reform. “The parties hope to expand the number of currencies that comprise the Special Drawing Rights (SDR), the IMF's reserve asset, to include the Chinese yuan, Russian ruble, Australian and Canadian dollars, and gold. The IMF is set to review the SDR basket of currencies in November 2010,” said officials.
According to both government as well as industry sources, “An Indian company wanting to set up shop in Brazil requires no special government authorization to organize a local business, unless it is formed as a branch or is in a restricted industry such as financial services.”
A joint study by Ficci and Deloitte states, while the investors are free to expand their operations, the incentives granted for the original investment are not automatically extended to the enlarged operation.
“Indian companies should rush in as the up-gradation program of the Brazilian infrastructure plans to improve access to clean water, medical posts and energy as well as modernize the country's air, road and rail systems. The energy part of the plan envisages investment of $257 billion, including Petrobras' $220 billion investment plan,” R Viswanathan, India's ambassador to Argentina, Uruguay and Paraguay.

Saturday, October 9, 2010

Getting a Piece of Brazil



Getting a Piece of Brazil

There is an expression "Who doesn't register
is not the owner." Your contracts and agreements are
not valid until they are registered in Cartório.

Brazil is a fantastic country that can offer some outstanding life-style opportunities for the right person. Unfortunately, there is not much information available for people looking into something more than a brief touristic adventure.                                                                                                                                                         Property purchase requires detailed understanding of the requirements of the law and the dynamics of the search, negotiation and buying processes. 

This article is not intended to serve as an authoritative source of information related to dealing with a variety of situations in Brazil. Instead, it serves the purpose of answering some of the most common questions pertaining to a number of areas as well as orienting you in respect to the possibilities of situation assessment, requirements and, of course, action. 

I am a strong believer in pre-emptive approach to solving problems. It is much easier and a lot less expensive to take some evasive and precautionary actions than to deal with full-blown unanticipated problem. It is even truer in any country where you have numerous disadvantages of unfamiliarity with judicial process and law, language and culture. 

Here are some of the terms and requirements of conducting Real Estate transactions in Brazil:

Can foreigners buy or rent Real Estate Property in Brazil?

Yes, they can!!!
Foreigners are permitted to buy, own and rent Real Estate Property.                                                By law Brazilians and foreigners are on almost equal footing when it comes to property ownership and tenant rights. Non-Brazilians are subject to certain limitations dictated by national and security interests. Foreign Governments can't own Real Estate Property except buildings and properties used for consulate or embassy sites.

Sources and further information:

Constitution of Federal Republic of Brazil Article 5, Item XXII.
Any local Cartório Office.

What documents do I need to buy or rent property in Brazil?

Your travel passport is usually enough in order to sign a rent lease agreement. To buy a property CPF (Cadastro das Pessoas Físicas) is also required. CPF is easily obtainable by foreigners.

Who can I use as a rental/real estate agent?

There are numerous business establishments and licensed individuals who can offer your services of apartment rental brokers or for sale property listings.
Administradoras _ Business specializing in administering RE properties for individual owners or condominiums.
Imobiliárias - Essentially Real Estate Agencies
Procuradores -( Real Estate Brokers) Businesses specializing in locating desired properties.
All these businesses can be found in local Yellow Pages under Administração de Bens, Administraçã de Condomínios, and Imobiliárias.
Needless to say, references and direct referrals can save you from unscrupulous operators.      In case of untried and unknown agent you might want to verify that the individual or business you are dealing with are members of CRECI .

(I 'm on CRECI registered to act as a Real Estate Broker on Brazil.)*

*Jose Gualberto

But what is CRECI (Conselho Regional de Corretores Imobiliários) or Regional Council of Property Managers?

CRECI is the Professional Organization regulating career Property Managers and Real Estate brokers.                                                                                                                                                Only registered members are legally allowed to work as Corretores (Property Managers, Realtors or Brokers).                                                                                                                                While CRECI membership is not a guarantee against dishonest actions by certain individuals or companies, it provides you with at least additional leverage and official complaint organ.

Do I need a local lawyer to conduct Real Estate transactions in Brazil?

It is not mandatory, but recommended.

Can I lose the rights to my property?

Yes, under certain circumstances you can.

What is a Registro Imobiliário?

Registro Imobiliário is the statute of Real Estate Property. In order to claim possession of a Real Estate Property you have to register the transaction of property ownership transfer at Registro Imobiliário.  
                                                                                                                          Usually takes place at Cartório do Registro de Imóveis located in the same jurisdiction as the property, but can also be conducted at any location by an authorized official. 

There is an expression "quem não registra não é dono" (Who doesn't register is not the owner). Your contracts and agreements are not valid until they are registered in Cartório.

What is the extent of the degree of publicity about ownership of property in Brazil?

It literally means that anybody can have access to property ownership information without any reason or authorization.

What is Matrícula?

Matrícula is the passport of a Real Estate Property; the only legal relationship between the property and its Matrícula is one-to-one. Besides uniquely identifying a property, Matrícula contains detailed description and historical records of all legal, judicial and financial transactions pertaining to the property and full information, such as description of the property, its precise address and location, past and present owner information, mortgages etc.

Do all Real Estate Properties have Matrícula?

No, not all of them do.                                                                                                                               Only properties that were constructed or involved in some type of legal or financial transactions since December 31, 1973 have one.

What happens if the property was altered through construction or natural causes and doesn't correspond to the description contained in Matrícula any more?

Property description needs to be changed through a judicial process called Processo de Retificação.                                                                                                                                                 
Unless you are willing to plunge into legal quagmire, verify that the property description contained in Matrícula corresponds exactly to reality. To be specific, you buy what is on the paper, not the RE property itself.

What documents do I need to request from property seller before considering buying a property?

At a minimum the documents you should ask for are:
- A copy of Certidão de registro da Incorporação no Cartório de Registro de Imóveis.
- A copy of  the Convenção de Condomínio*.

* Just if you are buying some place inside of a condominium such an apartment or a house.
- A copy of License of Construction (Alvará).

* Just if you are buying some place under construction, or land plot with some construction project, or  in case of someplace recently constructed.

- A Copy of Architectural Plan of the construction approved by the Mayor's Office.

What do I need to do when I find a property that I'd like to purchase? 

- Check for Matrícula of the real estate property. Matrícula is a document that contains information about all transactions directly related to the property since its construction.                                                                                                                                                IPTU values may  be variant, ask your Broker or to the owner the  informations about this tax.                                                                                                                                                               The ownership transference  you can be obtained (the Matrícula) through a local Cartório de Registro de Imóveis.
Verify that the property is debt and lien free.                                                                                           In order to verify IPTU payment complacency check with Prefeitura by submitting o número do contribuinte (registration number) indicated in Matrícula do imóvel

- Verify that the Condomínio fees are paid off.
Any debts on the property can and should be taken into consideration during the negotiation.

How much should I give for a Sinal?

Sinal (down payment) can range anywhere from 5 percent to 50 percent of the agreed value of the property.

Can I pay for my property in currency other then Real?

No, always pay in local currency.

What is an acceptable commission paid to the Real Estate agent for sale or exchange of a property?

The standard fee is 6 percent of the value of the deal (property). In case of property exchange, commission is usually split up between the parties involved. In sale, the seller pays.

What is CPF?

CPF (Cadastro das Pessoas Físicas) is an identification number that is used for documentation, registration and identification of individuals during and for financial transactions.

Why do I need CPF?

CPF is required for identification and registration purposes, to conduct financial transactions, such as opening up a bank account.

What is Cartório?

Cartório is a Notary Office.


How much should I pay domestic help?

Check the local market. Talk to people who have domestic help. Determine whether how much service you need and number of days per week that you may require it. If you can limit work hours to 6-8 hours up to three times per week, you can hire help as prestador de serviço and pay only agreed hourly or daily wage. Based on the availability and quality of domestic help and the amount of work daily rates can be as low as R$ 40.00  and as high as R$ 80. Full time help should get paid at least 1½ minimum wage plus transportation and other expenses.

What Payroll taxes should I pay if I employ workers in Brazil?

Social Security tax: 20 percent
Other Fees: 2.0 percent to 6.0 percent
Labor Accident Insurance: 1.0 percent to 3.0 percent
Severance Pay Indemnity Fund (FGTS): 8 percent (deposited monthly to employee's escrow account).

How much do I tip Porteiro?

Tipping is not big in Brazil. Though some places that deal almost exclusively with foreigners became tip oriented, the majority of establishments are not. Restaurants add 10 percent service fee to the check (BTW, it doesn't necessarily mean that the waiter gets it), hotel bell boys (men) would appreciate a Real or two, the taxists are mostly getting by on rounding up the fare. But what do we do with porteiros (doormen)?
Porteiros are sometimes tipped small amounts (R$2-R$5) when they provide occasional assistance services, such as helping with shopping bags or other courtesy gestures.                     It is not required and oftentimes a smile and obrigado suffice, but a small tip can go a long way.

What are basic rights granted to workers in Brazil? 

Brazilian Labor and Employment Laws are extremely worker friendly. Here are just a few of the guaranteed rights:

1. Wages: Minimal salary is constitutionally guaranteed and is currently set at R$ 540.00* (To have sure the price in American dollars please consider for one American dollar in Brazil R$1.62* ) a month. 

This is not a standard values, they may change any time.  For an actualized Brazilian minimum salary value, and for the dollar tax rate, please check on Brazilian government web sites.

2. 13th Salary: The 13th salary is equivalent to an additional month's salary paid annually or proportionally to number of months worked in the year.

3. Vacation: Employees are entitled to at least thirty (30) fully paid vacation days after working one year for the same employer if not absent from work for more than five unjustified times during this same period.

4. Maximum Workweek is set at 44 hours with overtime pay required for additional time worked. Overtime pay shall be at least 50 percent more then regular hourly rate

5. Prior notice in case of dismissal: In case the employer wishes to dismiss an employee, he is obliged to give a prior notice of at least thirty days to the worker.

6. Guarantee Fund for Time of Service (FGTS): The government severance employment Fund (FGTS) is the equivalent to 8 percent of the employee's salary, deposited every month by the employer in a blocked FGTS bank account in the name of the employee. In case of dismissal without cause the employer has to pay a 40 percent penalty of the FGTS over the entire amount deposited in the FGTS bank account. Withdrawals, are however, authorized only under circumstances established by law.

What about Christmas presents, bonuses and tips for your building and domestic help? 

They are completely at your discretion, with the exception of the Thirteenth Salary.
By Mr. Boris Goldshmit Real Estate Investor in Brazi.,