Actions by developers advance with government announcements

Amid the plans of the Jair Bolsonaro (PL) government to resume the launch of affordable housing under the Casa Verde Amarela program, the shares of developers traded on B3 experience some relief.

This Tuesday (22), the Brazilian Stock Exchange’s Imob (Real Estate Index), which tracks the prices of the sector’s main stocks, advanced 3.1% around 1:22 pm, while the broad Ibovespa index had more moderate gains, around of 0.9%.

In the 12-month period, up to March 21, however, the stock exchange’s real estate benchmark has losses of around 25%. The Ibovespa, on the other hand, is close to zero in the same interval.

After more than three years of stoppage, the Bolsonaro government is preparing the first contracting of new housing units subsidized with budget resources, aimed at families with an income of up to R$2,000 per month.

The new contracts will be signed in the year that Bolsonaro will seek re-election to the Palácio do Planalto. The program has been one of his political showcases and was used to expand the president’s insertion in the Northeast region, the only one where he was not a winner in the 2018 dispute.

The plans for the sector, however, are viewed with some suspicion by specialists.

“It’s almost April, we need to follow the next steps to understand to what extent the government can make the promised deliveries, or if it’s just a political announcement”, says Alberto Ajzental, coordinator of the Real Estate Business Development course at FGV ( Getulio Vargas Foundation).

Government subsidies, he says, come in an unfavorable macroeconomic environment for the acquisition of real estate, especially for lower-income segments of the population.

Expert calculations indicate that, for every 1 percentage point increase in the total effective cost (CET) involved in contracting a loan, about 1 million families lose the financial capacity to acquire a property.

In the Focus report, the median of the projections of economists consulted by the BC (Central Bank) points to a basic interest rate, the Selic, at 13% at the end of the year, with inflation measured by the IPCA (National Broad Consumer Price Index). ) of 6.59%.

According to Raul Grego, partner and analyst responsible for the real estate market at Eleven Financial, the global inflationary pressure and the increase in costs, the main factors to pressure the shares of incorporated companies more focused on the program, such as Tenda, Plano & Plano, Direcional and MRV, should continue to be quite present for some time to come.

“I think this cost pressure, which increased with the war in Ukraine, will continue to penalize developers’ margins”, says Grego.

The INCC-M (National Construction Cost Index-M), measured by the FGV, accumulates a high of 13.04% in 12 months, up to February.

Unlike construction companies more focused on middle and high income, such as Cyrela, Eztec and Even, who managed to pass on the increase in costs to property buyers, in the case of those that have an operation more focused on the federal government program, there is a greater limitation in terms of make this adjustment provided for in the contract.

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 .

At the end of February, the government had already issued a decree that increases the limits of economic subsidy to beneficiary families of the Casa Verde e Amarela Program.

By law, the new limits for production and acquisition of new or used properties are now R$ 130 thousand in urban areas and R$ 55 thousand in rural areas. The previous values ​​were R$ 110 thousand and R$ 45 thousand, respectively.

The Eleven analyst says that, given the recent devaluation of real estate shares in general, he sees good opportunities for investors’ portfolios, but with the exception that it is necessary to have a medium and long-term vision. “I see that the sales movements may have been exaggerated,” he says.

Flávio Conde, head of equity analysis at Levante Ideias de Investimentos, has a more cautious view of possible opportunities in the sector on the Stock Exchange.

Although part of the scenario of cost pressure and lower demand is already priced in the papers, Conde assesses that the drops may continue over the next few months, as the numbers for the first months of 2022 begin to be released.

“This is not the time for investors to buy shares of construction companies thinking they have already dropped too much. The numbers for the first quarter, scheduled for mid-May, should remain under pressure, and the shares may fall a little more”, says the Levante specialist.​