Find out if it is worth exchanging IGP-M for Ivar in rent

FGV (Fundação Getulio Vargas) launched on the 11th a new index for correction of lease contracts, the Ivar (Residential Rent Variation Index).

Unlike the indices most used to adjust this type of contract, the IGP-M (General Market Price Index) and the IPCA (Broad Consumer Price Index), Ivar was created exclusively to reflect the prices of renting homes and apartments, and promises to be more faithful to the reality of the segment.

The index caught the attention of landlords who are frightened by the expressive increase in the IGP-M since the beginning of the pandemic, influenced by the increase in raw materials, the dollar and the price of commodities. Although it is in a moment of deceleration — it reached 37% in May — the index ended 2021 accumulated at 17.78%. In January, it reached 16.91%.

Meanwhile, Ivar recorded a negative value last year, of -0.61%.

As lawyer Henrique Gallo, a partner at the Orizzo Marques office, explains, there is nothing to prevent the immediate application of Ivar in new lease contracts, since it is only prohibited to use indexers linked to exchange, minimum wage and interest.

In leases that are in progress, it is only possible to change the index with an amendment to the contract, if both parties agree.

Being able to rent a property using the new index, however, is still difficult. Despite the creation of the new parameter being seen with good eyes by the real estate sector, there are reservations regarding the sample taken into account in the calculations.

Ivar is composed of data from residential leasing contracts in four Brazilian capitals: São Paulo, Belo Horizonte, Rio de Janeiro and Porto Alegre. For João Teodoro, president of Cofeci-Creci (federal council of brokers), it’s not enough.

“These are important capitals, but they do not reflect the reality of Brazil”, says Teodoro. “That’s why some administrators have expressed denial of the index.”

Moira de Toledo, director of risk and governance at real estate Lello, shares the opinion. “We still don’t feel comfortable adopting Ivar because of the regionality and the sample issue”, he says.

She points out that the FipeZap index, which measures the variation in rent using rental advertisements, showed significant increases in some regions, such as 14.17% in Curitiba, Paraná, and 11.59% in Florianópolis, Santa Catarina, the that would signal a regional discrepancy.

Paulo Picchetti, coordinator of the IPC Brazil (Consumer Price Index) at FGV-Ibre (Brazilian Institute of Economics of Fundação Getulio Vargas), which participated in the creation of Ivar, explains that the index was launched with only four capitals because of the difficulty to obtain reliable contract data, since the residential leasing sector is very dispersed.

“We are already in the process of prospecting with more market participants to extend this to as many capitals and regions as possible.”

There is still no deadline for expanding the database, but in the meantime, Picchetti defends the index’s ability to capture reality.

“Any discrepancy between the regional average and these four cities will certainly be a much smaller distortion than any other index that had been used”, he says.

The fact that Ivar was launched with a negative value can scare off realtors and lessors, but the coordinator remembers that it is possible to make negotiations, even in contracts already in progress, as has been happening with the IGP-M since the beginning of the pandemic. Covid-19.

Ivar would also be able to better capture the market trend. “The negative value draws attention, but his interpretation is more in the sense of stability”, evaluates Picchetti.

As the index is composed only of the values ​​of the lease contracts, the sector’s movements must balance it over the months. That is, if property owners manage to increase the rent price, this data will be captured by the index.

The IGP-M itself has accumulated negatives, recalls Toledo, from Lello. In 2009 and 2017, the index marked -1.71% and -0.53%, respectively. When this happens, negotiations can be made so that there is not a decrease in the lease value, in the same way that increases are being negotiated today.

“What matters to the parties is that this relationship lasts as long as possible, and for that it is necessary to have a balance in the contract”, says the director of Lello.

According to industry experts, in the future, Ivar may be another index option, but not the only one. They are against the mandatory adoption of a single readjustment index, as envisaged by the bill 1.806/2021, which is being processed in the Senate and wants to promote the IPCA as an official rent index.

The index, known as a measure of inflation in the country, ended the year at 10.06% and has been an option for new lease contracts and a reference for readjustments to contracts in progress, while the IGP-M is going through a period of rise.

“[Os políticos] if they forget that things can change up front, the IGP-M can go down and the IPCA can increase, then they will want a new law to return the IGP-M”, says Teodoro. “We prefer negotiation.”