North east Brazil developer waives interest on staged payments

Overseas buyers in Brazil can get an unexpected shock when they find they are paying interest on staged payments, experts point out.

The country’s National Civil Construction Index (National da Construcao Civi) adds interest onto staged payments and was brought in some years ago to protect developers from inflation when selling off plan.

With a lack of available finance, developers were effectively banks offering loans to people to purchase their product. This led to several company collapses and half finished buildings. Developers now have the right to add this inflationary charge to the outstanding balance which takes into account the changing costs of labour, building materials and so on.

According to Samantha Gore, sales manager for local Brazil estate agent, explained that many people enter into the Brazilian property market completely unaware of the INCC.

‘If you buy an off plan apartment from a Brazilian developer and pay 20% at outset, the remaining 80% will go up by the INCC each month until it is paid. The charge is added to each instalment amount and is cumulative,’ she said.

‘And, as the INCC fluctuates month to month, this leaves buyers in a position where they have no idea how much their apartment will end up costing. At we prefer to work with developers who specify prices from the outset,’ she added.

Natal based developer behind Golden Fields has chosen to ignore this inflationary measure and instead fix prices at private contract.

‘Buying through a developer that does not link to the INCC is becoming more important as labour costs in particular are now rising especially in the north east region. According to the Brazilian Chamber of Construction Industry, average per square metre labour costs now exceed material costs as employers are spending their resources on increased wages and employee training to combat the lack of qualified labour force,’ Gore pointed out.

‘As Brazil looks forward to the 2014 World Cup, it is hoped that manpower costs do not impact the business opportunities afforded to the construction industry,’ she added.

In July, Brazil’s INCC dropped to 0.85% after a record high of 1.31% for June and this gives an accumulated variation of 5.87% for the year to July 2012 and 7.31% across the last 12 months.  In July 2011, the index was just 0.59%.  The next price adjustment is expected on 23 August.
Golden Fields, located in Capim Macio, one of Natal’s top four income per capita suburbs, it is described as an ideal hands free investment for foreigners as it cannot fail to deliver returns based on simple supply and demand principles in a local market that is being fuelled by increased wages and domestic mortgage lending.  The 50 unit gated development is in a chic city beach hotspot and has 24 hour security alongside a deluxe swimming pool and leisure area.
Golden Fields offers early investors the chance to gain maximum ROI when their unit is resold to the local market upon completion and conservative estimates put this at 40% between now and completion in the middle of 2014 or rented out with a 6% four year renewable rental guarantee. 

Prices start from 162,908 Brazilian Reals, around €65,814 or £51,598 and staged payments are not linked to the INCC.  The developer has a limited period special offer of a further 10% off asking price for those who can pay more quickly, bringing the price down to 31% below the nearest market comparable.

In addition, those who reserve a property before 20 August 2012 will be given a free one week trip to Natal including flight and accommodation. Conditions apply.