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Property Builders in Brazil Get Bigger

As the Brazil property market expands so do Brazilian homebuilders. The recent merger of two property giants, PDG Realty and Agre Empreendimentos Imobiliarios, is the latest indication of how real estate in Brazil is adapting to its new and booming market.

Before it bought Agre, PDG Realty was already the second largest property developer in Brazil by market value. The acquisition makes the company the biggest in a market place where there are already several major players.

The property market in Brazil is transforming fast as developers adapt their strategies to the huge demand for housing in Brazil, particularly from the lower-income sectors of society. Part of this demand is being met by the government-backed social housing programme, Minha Casa Minha Vida. The scale of the programme is huge. In total, Minha Casa Minha aims to build 3 million low-cost homes by the end of 2014. And one million of these will be built by December this year.

Construction under Minha Casa Minha Vida is already intense and analysts report that the building industry in Brazil experienced strong growth in the first quarter of this year. Much of this growth came from the social housing programme as many developers move into this sector of the Brazil real estate industry. Attracting developers are tax breaks and full financing from the government-owned Caixa bank.

Major players such as Cyrela, Gafisa, PDG Realty and Rossi have reported high first quarter profits. PDG Realty saw a quarterly rise in profits of 12% with sales totalling R$842 million. New projects started between January and March had a value of R$846, a massive 79% increase on those started in the same quarter last year. Gafisa also reported huge gains in profits. These rose by 77% to R$64.8 million compared with R$36.7 million a year earlier.

The latest Obelisk investment is also part of the Minha Casa Minha Vida programme. Like the main property developers in Brazil, Obelisk has also seen the enormous potential for return from the social housing scheme. A capital investment into the scheme through Obelisk can expect 70% in profits over just two years plus full return of the initial investment.  

This is no doubt that Minha Casa Minha Vida is a major engine behind the spectacular increase in profit margins and the giant leap in number of new projects. As all areas of Brazil see the start of social housing projects, this tendency can only continue. And Minha Casa Minha Vida is just the tip of the iceberg. According to the Brazilian Association for the Construction Material Industry (ABRAMAT), some 13.7 million homes will be built in Brazil by 2016.

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