27.09.11
Paulo Safady Simão CBIC President
City of Cape Town - South Africa
NATIONAL AND INTERNATIONAL REPRESENTATIVE FOR BUSINESS ENTITIES IN THE CONSTRUCTION INDUSTRY AND REAL ESTATE MARKET
6226
entities
states and FD
Real estate
market
Sanitation
Road
projectsConstructio
n segments
TRADE UNIONS, BUSINESS ASSOCIATIONS, AND CHAMBERS
GENERAL INFORMATION
BRAZIL
COMPOSITION OF GDP GROWTH
Source: Brazilian Institute for Geography and Statistics (IBGE.) Prepared by the Ministry of Finance.
In 2010, the Brazilian economy grew 7.5%, with a significant contribution from Civil Construction, elevating, further, the expansion of fixed investments in relation to GDP.
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GDP GROWTH RATES
Source: Brazilian Institute of Geography and Statistics (IBGE). Preparation and estimates by the Ministry of Finance.
In the period 2011-2014, the consolidation of investments (driven by construction) and increased domestic demand is expected to spur average annual economic growth of 5.1%.
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GDP GROWTH – DEMAND
Source: Brazilian Institute of Geography and Statistics (IBGE). Prepared and estimated by the Ministry of Finance.
Domestic demand will continue to be the principal driver of inclusive and sustainable economic expansion.
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GROWTH WITH POVERTY REDUCTION
Source: Getúlio Vargas Foundation (FGV). Preparation and estimates by the Ministry of Finance.
Sustainable growth associated to inclusive policies produced a 52% reduction in poverty in the period 2003-2010.
POPULATION IN POVERTY (%)
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MIDDLE CLASS ACCOUNTS FOR MORE THAN HALF OF BRAZILIAN POPULATION
Note: Monthly household per capita income by class at 2009 prices: Class A/B: more than R$ 4,800.00; Class C: R$ 1,115.00 – R$ 4,800.00; Class D: R$ 804.00 – R$ 1,115.00; Class E: up to R$ 804.00.Source: Getúlio Vargas Foundation/National Household Sample Survey (FGV/PNAD). Prepared and estimated by the Ministry of Finance
Enhanced income distribution has added 29 million to middle class (Class C).
DISTRIBUTION OF ECONOMIC CLASSES IN BRAZIL (% POPULATION)
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RECENT GLOBAL FINANCIAL CRISIS
A development strategy based on investment and mass consumption (domestic market) was adopted; and ...
Monetary policyReserve requirementReduced interest ratesForeign trade (reserves)
Fiscal policyReduced taxes on productionInvestments in construction
BRAZIL
“The stability of the economy and of the country’s democratic institutions as well as frank dialogue between government and civil society were decisive in successfully confrontingthe crisis”
Source: Brazilian Central Bank (BACEN). CBIC Database.
CREDIT TRANSACTIONS BY FINANCIAL SYSTEM IN 2009
(AT THE HEIGHT OF THE CRISIS)
Steering of funds at low cost was decisive for maintaining credit levels at the height of the global crisis.
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ECONOMIC OUTLOOK
Fontes.: Ministério da Fazendfa, CBIC
Economic stability;
Average growth of approximately 4.0% per year;
Growth driven by internal demand and by investments in infrastructure
and housing;
Investments projected to grow by at least twice the rate of GDP in the
coming 4 years;
Notwithstanding forecasts pointing to a renewed global downturn,
domestic demand remains robust, international reserves and reserve
requirements are higher than in 2008, and the fiscal situation is
stronger.
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GENERAL INFORMATION
CONSTRUCTION
Represents approximately 19% of national industrial output;
More than 2.5 million formal workers;
More than 100,000 licensed companies;
Accounts for nearly 38% of fixed investments in Brazil.
THE CONSTRUCTION INDUSTRY IN CONTEXT
Product with an extended maturity time;
Requires long-term financing;
Principal current funding sources: FGTS (Government Severance
Fund) and Savings Accounts;
Funding not contingent on market interest rates;
Still marked by a high degree of informality.
CHARACTERISTICS
VARIATION IN GDP OF BRAZIL AND THE CONSTRUCTION INDUSTRY
Source: Brazilian Institute for Geography and Statistics (IBGE) and Brazilian Central Bank (BACEN).16
REAL ESTATE MARKET
PROVISIONS OF LAW NO. 10931/2004
Law No. 10931 represented a milepost for the real estate segment
by establishing a new regulatory framework for real estate brokers
and agents, namely:
A special tax regime aimed at promoting the adoption of detached assets
system;
Regulation of the payment of undisputed amounts;
Consolidation of statutory liens in real estate financing agreements.
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LAW NO. 10931/2004
Reduced
interest
rates
Lower
costsIncreased
Employment
levels
Increased
demand for
real estate
Increased
funding
for real estate
market
VIRTUOUS CYCLE FOR
REAL ESTATE MARKET
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Source: Brazilian Central Bank (BACEN), Brazilian Association of Real Estate Credit and Savings (ABECIP), and Federal Savings Bank (CEF) – FGTS Channel. CBIC Database.
GROWTH IN REAL ESTATE CREDIT 2002 – 2010 (financing volume)8
20
Source: Brazilian Central Bank and Brazilian Association of Real Estate Credit and Savings (ABECIP)
Brazilian Savings and Loan System (SBPE) – Agreements with more than 3 outstanding installments signed after 1998
Mortgage Guaranty + Fiduciary Lien
HIGH QUALITY REAL ESTATE CREDIT
Fiduciary Lien
21
Low participation of real estate credit
EXPANSIOM OF CREDIT BY SEGMENT
Source: Brazilian Central Bank (BACEN).
22
Source: Brazilian Central Bank (BACEN) and Brazilian Association of Real Estate Credit and Savings (ABECIP).
REAL ESTATE FINANCING AS A PERCENTAGE OF GDP
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Source: Brazilian Central Bank (BACEN) and Brazilian Association of Real Estate Credit and Savings (ABECIP)
REAL ESTATE FINANCING AS A PERCENTAGE OF GDP
ABECIP projections indicate that real estate credit could reach 11% by 2014.
Weight of housing credit in Brazilian GDP (%)
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RECENT MEASURES
Finance Bill:
Establishment of Finance Bill (Law No. 12249 of 2010);
Elimination of tax on required reserve (BCB Circular No. 3513 of
2010).
Rules on Resource Steering for Savings (CMN Resolution No. 3932 of
2010):
Permission for temporary and partial entry of portfolios assigned
for securitization – deduction of 1/36 in value of assigned portfolios;
Prohibition as of March 2010 on accounting entries of Real Estate
Receivable Certificates (CRIs) not backed by real estate in financing
agreements executed for the purpose of resource steering.
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Implementation of Positive Registry (Law No. 12414 of 2011):
Enabled constitution of credit histories for individuals and legal
entities, reducing asymmetries in information between creditors and
debtors.
Financial Transaction Tax (IOF) on private security transactions
conducted in periods of less than 30 days:
Reduced to zero IOF on private security transactions (Decree No.
7412 of 2010);
Restricted zero IOF rate to transactions involving debentures,
finance bills, and CRIs ( Decree No. 7487 of 2011).
RECENT MEASURES
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“Incentives for Long-Term Financing” (Law No. 12431 of 2011)
Reduce to zero IT on non-resident investments in long-term private
bonds.
RECENT MEASURES
COMPOSITION OF REAL ESTATE CREDIT MARKET – FINANCIAL AGENTS
Source: Bank of Brazil.
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HOUSING NEEDS(millions of units)
Source: Civil Construction Industry Trade Union of São Paulo (SINDUSCON-SP), São Paulo State Federation of Industry (FIESP), Getúlio Vargas Foundation (FGV). CBIC Database.
ADDITIONAL GROWTH INDICATORS ...
5.81Cumulative shortage - 2009
23.492010 -
2022
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DEMOGRAPHIC BONUS (increase in economically active population).
Source: Brazilian Institute of Geography and Statistics (IBGE).
ADDITIONAL GROWTH INDICATORS ...
Absolute Age Pyramid
MEN WOMEN
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MY HOME, MY LIFE PROGRAM
LOW-INCOME HOUSING – RECENT HISTORY
In Brazil, civil society, lawmakers, and government have approached the issue from the standpoint of modern construction concepts;
In a short time, the housing question was introduced on organized civil society’s agenda.
Governments and society do not always attach due importance to the lack of housing, as a result of which a number of countries (developing nations) have yet to adequately addressed the issue.
SOCIAL INTEREST HOUSING
33
My Home, My Life Program (organized civil society and governments).
Dignified Housing Project (CBIC);
IT IS ESSENTIAL TO UNDERSCORE THE IMPORTANCE OF CIVIL SOCIETY PRESSURE IN
PRIORITIZING GOVERNMENT ACTION
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SOCIAL INTEREST HOUSING
THE PROJECT
GOAL: To implement the National Housing Plan by building 1 million homes for families with a monthly income of up to 10 minimum salaries
Increase home ownership for low-income families Families with monthly incomes of up to 3 minimum salaries – full
subsidy with insurance waiver Families with monthly incomes of 3 to 6 minimum salaries –
increase of partial subsidy for financing through reduced insurance costs and access to Credit Guarantee Fund (Fundo Garantidor)
Families with monthly incomes of 6 to 10 minimum salaries– incentives to buy through reduced insurance costs and access to Credit Guarantee Fund (Fundo Garantidor)
PMCMV – STAGE 1
HOUSING PACKAGE
Source: My Home, My Life Program36
Urban infrastructure;
Technological development of companies.
OTHER FINANCING ARRANGEMENTS ASSOCIATED TO THE PROGRAM
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CHARACTERISITCS AND DISTINGUISHING FEATURES
PMCMV – CHARACTERISTICS
Source: My Home, My Life Program
Substantial funding for subsidies;
Tax deductions on final product;
Production by private sector;
Direct subsidies for families;
Financing for technological development of companies;
Attuned to housing shortfall;
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Source: My Home, My Life Program
For households with an income of up to 3 minimum salaries, construction companies serve as developers (not responsible for sales).
In some localities, the maximum values established at the federal level have proved insufficient, with local governments stepping in to provide necessary resources.
The Program has prioritized full formality of the entire processproperly registered properties,licensed construction companies, andregistered workers with employment cards.
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PMCMV – CHARACTERISTICS
CONSEQUENCES AND OUTCOMES
CONTRACTS UNDER PMCMV 1
The first stage was completed on 12/31/2010 and 1,005,028 housing units were contracted
ALIGNMENT OF PROGRAM WITH GUIDELINES
Source: Federal Savings Bank. Database.42
ALIGNMENT OF PROGRAM WITH REGIONAL DEFICIT
Source: Federal Savings Bank. Database.
CONTRACTS UNDER PMCMV 1
ECONOMIC ASPECTS – PMCMV
GROWTH IN CONSTRUCTION WORKFORCE
Source: Annual Registry of Social Information/General Registry of Employed and Unemployed Persons (RAIS/CAGED), Ministry of Labor and Employment. Database. 44
Citizenship (option for “excluded”)
More effective occupation of urban land (orderly settlement of urban areas);
Healthy living through enhanced hygiene and safety/security (reduced public expenditures on health, security, and education);
Compliance with legal and constitutional commitments in meeting the basic needs of the population.
POLITICAL AND SOCIAL ASPECTS – PMCMV
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FUTURE OF PROGRAM
GROWTH ACCELERATION PROGRAM 2 – PAC2
Source: PAC 2 Report
Incorporated in PAC
47
Incorporated in National Housing Plan (Plano Nacional de Habitação – PLANHAB) and PAC;
Transition of Urban Development Department (GIDUR/CAIXA) processes through adoption of improved finishing specifications (over 140,000 units encompassed);
Greater protection to women head of households;
Increased focus on sustainability
(solar energy)
PMCMV – STAGE 2
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Source: Civil House of the Office of the President
PACPROJECTED INVESTMENTS
Source: PAC 2 Report
R$ Millions PAC Projects 2011-2014 Pos 2014 Total PAC Better City 57.1 - 57.1 PAC Citizen Community 23.0 - 23.0 PAC My Home. My Life 278.2 - 278.2 PAC Water and Electricity for All 30.6 - 30.6 PAC Transportation 104.5 4.5 109.0 PAC Energy 461.6 626.9 1.088.5 TOTAL 955.0 631.4 1,586.4
Based on PAC 2 Report of March 2010
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Increase in number of housing units:
PMCMV – STAGE 2
One million to two million units contracted through 2014.
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Expanding volume of investments:
Entry of an additional financial agent (Bank of Brazil) for first income bracket served by the PMCMV 2
TOTAL – R$ 125.7 billionSubsidy – R$ 72.6 billion
Financing – R$ 53.1 billion
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PMCMV – STAGE 2
Fonte: Anúncio do PMVMV 2
Expansion of Income Brackets:
URBAN – MONTHLY INCOME
RURAL – MONTHLY INCOME
INCOME BRACKETS PMCMV 1 PMCMV 21 Up to R$ 1,395.00 Up to R$ 1,600.002 R$ 1,395.00 – R$ 2,790.00 R$ 1,600.00 – R$ 3,100.003 R$ 2,790.00 – R$ 4,650.00 R$ 3,100.00 – R$ 5,000.00
INCOME BRACKETS PMCMV 1 PMCMV 21 Up to R$ 10,000.00 Up to R$ 15,000.002 R$ 10,000.00 – R$ 22,000.00 R$ 15,000.00 – R$ 30,000.003 R$ 22,000.00 – R$ 55,800.00 R$ 30,000.00 – R$ 60,000.00
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PMCMV – STAGE 2
Source: PMVMV 2
Priority for lower income families:
Household Monthly Income Number of Households %
Up to R$ 1,600.00 1.2 million 60R$ 1,600.00 – R$ 3,100.00 600 30R$ 3,100.00 – R$ 5,000.00 200 10
40% for households with a monthly income of up to R$ 1,395.00 in Stage 1, to60% for households with a monthly income of up to R$ 1,600.00 in Stage 2
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PMCMV – STAGE 2
Source: PMVMV 2
Improved unit specifications:
ITEMS MCMV 1 MCMV 2
Home: 35 m2 Home: 39.6 m2
Apartment: 42 m2 Apartment: 45.5 m2
Increased area for improved access
Average price of housing units R$ 42,000.00 R$ 55,188.00Ceramic floors in bathroom, kitchen, and pantry areas
Ceramic floors throughout unit
Tile on walls around water points
Tile on all kitchen and bathroom walls
Solar heating in 40,000 units
Solar heating in all homes
Minimum limit for exterior doors (0.8 m)
All doors 0.8 m and larger windows for improved lighting and ventilation
Specifications
Minimum Size
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PMCMV – STAGE 2
Strengthening rules:
New rules on property transfers;
One-time subsidy to real estate property;
Inclusion of renovation modality for low-income rural housing;
Expanded partnership with local governments in social initiatives.
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PMCMV – STAGE 2
Increase in maximum value of real estate properties for incomes above R$ 1,600.00 was adjusted:
In the metropolitan areas of São Paulo, Rio de Janeiro, and the Federal District, value raised from R$ 130,000.00 to R$ 170,000.00.
For all other state capitals and municipalities with a population of more than 1 million inhabitants, value boosted from R$ 130,000.00 to R$ 150,000.00.
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PMCMV – STAGE 2
For municipalities with more than 250,000 inhabitants or residents of metropolitan areas, maximum amount to rise from R$ 100,000.00 to R$ 130,000.00.
For municipalities with populations equal to or more than 50,000 and less than 250,000 inhabitants, from R$ 80,000.00 to R$ 100,000.00.
For all other municipalities, amount to remain R$ 80,000.00.
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PMCMV – STAGE 2
MOST RECENT PROJECTION ON RESOURCES FOR THE HOUSING SEGMENT
R$ BillionsSOURCES 2011-2014
FGTS 92.0
Brazilian Savings and Loan System - SBPE
240.0
Federal Budget - OGU / Social Development Fund - FDS
78.0
TOTAL 410.0
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Opening of cost plans underlying government studies;
Expansion of unit value for application of the Special Tax Regime (RET); and
Priority review of the National System of Civil Construction Prices and Indices (SINAPI) and approval of new technologies.
CBIC PROPOSALS
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PEC 285 – allocation of 2% of federal revenues to investments in Social Interest Housing (long-term maintenance of resources and programs);
Qualified workforce;
Need for new sources of funding;
Urban properties;
Innovation;
Sustainable construction;
Sanitation.
NEXT STEPS
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www.cbic.org.brPhone: +55(61) 3327-
1013Fax: +55(61) 3327-1393
Brazilian Construction
Industry Chamber