Casa Verde e Amarela: inflation makes construction more expensive and affects builders

In a scenario of high inflation and interest rates, the construction sector is no exception. The cost to build has been on an upward trajectory since 2020 in the country, which represents a challenge especially for developers who build units for Casa Verde e Amarela.

The housing program has a ceiling on the sale value of the units – currently at R$ 264,000 in São Paulo, after a 10% increase in 2021. Thus, if the cost to build the apartments rises, it is necessary to reduce profit margins .

This can expel smaller companies from the segment, causing greater concentration of this market and a decrease in supply, analyzes Eduardo Fischer, executive director of construction company MRV, one of the largest in the sector.

He says that the margins of low-income units are already lower than they used to be, but that, even so, the company has a better position against small competitors.

“If I’m going to buy land, MRV’s credibility is very high, I can make a better and longer negotiation, I pay when the project comes out, I exchange, but sometimes, the small one doesn’t have that condition”, he says.

In 2021, the biggest headache for the construction sector was the price of materials, which has risen since the beginning of the pandemic. The INCC (National Construction Cost Index), which mixes materials, services and labor, remains high: it reached a cumulative 13.7% in January. The specific item on materials, equipment and services had a high of 21.25% in the last 12 months, against 6.45% of the workforce.

In addition to the high price, there were shortages of some items and extension of delivery times. To get around the problem, construction companies increased their inventories.

“It’s been a challenge, there was a lot of increase in the cost of construction and we couldn’t pass it on in the sale. We have to do the work in a shorter period, anticipate purchases of what is possible, do a lot of negotiation”, says Dante Seferian, executive director of the developer danpris.

The sector’s expectation is that there will be a deceleration in the price of construction materials throughout the year, but with values ​​still at a level above the period before the pandemic.

“If you bought something at R$5, it went up to R$8 and now it’s R$7. Today I buy less material than I did in 2019 [com o mesmo valor]”, says Eduardo Zaidan, vice president of economics at Sinduscon-SP (Civil Construction Union).

The current retraction of the dollar should make the price of raw materials more directly affected by the appreciation of the American currency, such as steel and PVC, at least stop rising, analyzes Luiz Antonio França, president of Abrainc (Brazilian Association of Real Estate Developers) .

Ely Wertheim, executive director of Secovi-SP (Housing Union), says that the cost of materials exerts less pressure on the construction chain today than it did six months ago, but remains “one of the major bottlenecks”.

The price of labor, which is a problem in the US, for example, does not have the same weight here, given the high unemployment rate in Brazil, at 11.6%, emphasizes França.

Wertheim says the costs could affect the number of launches of all standards in São Paulo for 2023 and 2024, if higher costs are not addressed this year. “We will have a drop in production above the drop in sales.”

Inflation did not change the value of subsidies granted to brackets 1 and 2 — up to BRL 47,500 and up to BRL 29,000, respectively. França, from Abrainc, says that new subsidies are being discussed at the FGTS Board of Trustees.

Faced with the greatest difficulty in buying a house, some developers specializing in the economic segment do credit consulting work, so that those who can still access financing do not miss the opportunity due to problems with the documentation.

At Danpris, there is a room in the sales shifts to help customers get their credit approved. “We help the client to assemble the documentation, there are people who need to formalize the Income Tax, decide whether to join [a renda] with his wife or not”, explains Seferian.

Sindona, a developer that operates in Osasco, Cotia and Taboão da Serra (in Grande SP), has a subsidiary specialized in this financial consulting service, Crédito do Bem. assist in the formalization, opening of a company, income tax declaration, so that this client can access the financial world”, says Bruno Sindona, founder and executive director of the developer.

The financing numbers also indicate the most challenging scenario. Data from Abecip (Brazilian Association of Real Estate Credit and Savings Entities) show a 3% drop in the volume of credit with FGTS resources used in Casa Verde and Amarela in 2021. In total, it was R$ 49 billion.

Financing via SBPE (with funds from savings accounts) used in other properties increased by 66%, reaching R$ 205.4 million.

For 2022, credit recovery with FGTS resources is expected, with a rise of 30%, and a 5% drop in the SBPE, influenced by the increase in the Selic and real estate financing rates.