Real Estate Fund, Brazil, Asset Management

RE Review Q3/08

Residential Market The deficit of 8 million homes in 2005 is expected to take up to 2030 to be met. The current annual investment of R$ 165.2 billion in 2007 is expected to increase to R$ 446.7 billion. The improvement of the regulatory system, the increase of the purchase power from families and the availability of financing lines will contribute to this target. These projections are based in the assumption of an annual growth of 4% to 5% of the NGP and the positive effect on the families’ income. Demographic factors like the increase of the life expectation of the population and an increased participation of women in the workplace will also contribute to growth in demand. In the period until 2030 it is expected that the number of Brazilian families will increase from 60.3 million (population of 190 million) to 95.5 million (233 million people) with a growing of 58% in parallel with a reduction of the size of the families from 3.1 people per household in 2007 to 2.4 people per household in 2030. The trend is that 91.1% of the inhabitants will be concentrated in urban regions, mainly concentrated in cities on or close to the coastline, with an average age of 36 years being 60% close to 30 years able to form a family and increase the demand for houses. Residential Demand/Deficit The combination of economic growth with high social mobility, active participation of private companies to attend the demand for habitations, gradual reduction of interest rate and longer periods for financing houses and increased subsidies will contribute to the target of 93 million houses in 2030. This is equivalent to the construction of 37 million new houses at a rate of 1.7 million houses per annum until 2030. Market Factors Two main factors have contributed to improve the rules of the residential real estate market: The law 9517 from 20 Nov 97, creating the rules for securitization companies of real estate credits The law 10.931 from 2 Aug 04, establishing rules for each residential project be treated as a specific purpose enterprise, bring protection to the purchasers. With the consolidation of the new rules, simplifying the retaken of the properties as guarantee of the financing the investment in habitation returned to be attractive to the financial market increasing the amount of resources allocated to the construction sector from R$ 4.8 billion in 2002 to R$ 25 billion in 2007. The consistent economic growth experienced in the last few years and the proper management of reduction of the interest rate are forming the basis of a sustainable growth process. Construction and Refurbishing A study from Ernst & Young and FGV estimate that the habitation stock will have an increase of R$ 4.6 trillion in construction and refurbishing of habitations until 2030. The rate of expansion is expected to be of 4.7% p.a. until 2017 focused on families of low acquisitive power demanding houses in the range R$ 35k till R$ 70k (in 2007 prices). From 2017 the medium class will grow and the construction companies will concentrate in houses from R$ 70k till R$ 150k. Office Market Introduction The data presented here focus

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