A rising number of foreign investors are looking in on the prospect of getting a tidy profit from real estate acquisition in Brazil. The major changes in rules regarding property purchases made by the Brazilian government further increased the clamor for assets, both from local and foreign entities. Aside from the economic growth which the region has been enjoying since 2001, the government mandate on real estate in 2005 has proven to be a stepping stone in attracting investors into the Brazilian real estate market.
The financial stability of Brazil, especially on the southern end of the region, is due to foreign investors flocking into the country and grabbing properties left and right. Many foreign investors who enter the city provide more job opportunities for the locals. This is which, in turn, boosted significantly the revenue of the entire region. For one, the Brazilian Central Bank (BCB) reported an 8% jump in the region’s overall revenue, most of which is attributed to real estate.
Domestic and Foreign Investors
The market for real estate first bolstered among the locals, and later expanded when the international market started to notice the region’s potential for profit. The 2005 amendment on real estate acquisition focused on mortgage guarantees by small and large financing institutions. The inclusion of “fiduciary alienation” allows the Brazilians to become the full owners of the property when the full debt has been paid off. Though the risk with this kind of transaction may stretch the financial instability of the locals due to the 12% standard annual interest, many are still adamant to get their own property.
Foreign investors are also into real estate acquisition all around Brazil. Due to the high tourism value, as well as the sudden influx of foreign businesses, many local developers strive to create opportunities that would cater to and satisfy this need. Europeans, in particular, are hell-bent on acquiring prime real estate to be converted to tourist spots and resorts, both for commercial and recreational purposes. Residential areas are being developed to address the growing demand for proper housing, as with condos, apartments, tenements, and so on.
The beauty of the Brazilian countryside became a factor for the sudden influx of foreigners who wish to have a second home in the region. When the Brazilian government invested millions into developing transportation facilities in-and-out, including airports, roads, railroads, highways, and ports, the number of international arrivals naturally rose, as well.
The government was able to conduct a tally on the number of arrivals in Brazil in 2007. There have been a total of 70 million tourists who visit the region every year. A percentage of this opts for a second home in the area. It has been projected that around 80,000 residential areas need to be set up within the next 8 to 10 years to accommodate them.
Another reason why foreign investors seek to acquire properties in the region is the total cost of construction. The reduced taxes on construction material, coupled with cheap labor, are enough to bring around profit-hungry individuals into building a presence. Moreover, the major drop in interest rates from 25% to 12% has made the prospect of economic growth even brighter.
World Bank Helps Brazil’s Economy Rise
The Board of Directors of the World Bank approved to finance Brazil with a total amount of $505 million, to further fuel the growth of the region. The loan will be used to improve many of the existing assets, to make way for the entry of fresh investments.
One of the microeconomic improvements being set as target for the $505 million loan is the cost of Brazilian products. Reducing these will also decrease the price of these valuable goods so as to be able to compete with global products. Infrastructure will also be addressed to develop the business sector.
Technological innovations will also be a prime target so as to increase both the educational and commercial aspects of the region. These improvements will come in the form of job opportunities for well-educated individuals who benefit from the technological reforms. This will, in turn, allow them to provide quality services to foreign and local companies. In short, the future appears to bode well for the Brazilian real estate market. Now the challenge is how to actually make these plans see through smoothly, without politics getting in the way; which, of course, is another issue altogether.