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Whilst the bottom of Brazil´s real estate market is arguably some distance away, more investors have begun to examine when this turning point will actually arrive to potentially benefit from future capital gains. Yet even during such boom times, particularly for the foreigner, the risks of buying into this asset class often outweigh the positives – a phenomenon largely caused by lack of clear knowledge of mitigating the myriad of pitfalls. In an attempt to kick-start more rational analyses of doing property business in Brazil, below are some highly informative comments recently made by tax adviser David Soares da Silva. Having operated as legal counsel, tax advisor and member of board of directors of foreign funds and companies with investments in Brazil since 1993, David is well versed in a range of tax planning and international business transactions and can be contacted directly on dsilva@blslaw.com.br.

Whilst bullish investors have successfully cashed in and out of the Brazilian property boom, does the country remain too risky? Not so long ago Brazil´s massive housing shortage, incipient mortgage market, low unemployment and encouraging social indicators stood in sharp contrast to the effects of the global economic crisis, spurring unprecedented levels of overseas...

Recorded in May 2014 at the “Worktech-14″ event, Milton Jungman, Latin American director of workplace solutions at Accenture; Professor João da Rocha Lima Jr from the Polytechnic Real Estate School, São Paulo and Daniel Cherman, CEO from Tishman Speyer explore some of the pertinent questions related to the Brazilian commercial real estate market.

British insurer Standard Life´s recent decision to sell two office buildings in Central São Paulo was quoted by the FT´s Beyond BRICs blog as potentially being a “bad omen for the country´s property market.”

An extended article written by Professor Claudio Tavares de Alencar from the Real Estate Studies Department at the Polytechnic University of São Paulo (NRE-POLI ) recently explored the behaviour of the prominent publically traded development and income-generating property companies since the start of 2006 (published on the PINI real estate portal). Providing insightful detail into the patterns witnessed from this period up to late 2012 (in addition to some future perspectives), the majority of the content has been translated in this post.

A recent article on the Brasil Econômico news site pointed to the continuing boom in the property fund investment sector – growing to over 100,000 private individuals compared to 20,000 in 2011. This noticeable rise, it was stated, has been prompted by a lower national interest rate (SELIC), simplified processes (lower bureaucracy), lesser attractive savings options available in the wider market and exemption from income taxes.

Vice-president of the Trump Organisaton, Donald Trump Junior, before the holidays announced plans to construct the largest business centre in Brazil. “Trump Towers” will be located in the “Zona Portuária” in central Rio de Janeiro and will be constituted of 5 high-rise buildings built in partnership Even and MRP International.

On the back of a recent blog post – “Brazilian Property Fund Investment as an Anti-Inflationary Mechanism” – it is worth taking into account recent comments made by Brazilian economist Ricardo Torres (via his blog “Trading Café”) on the topic:

With increasing concerns of the Brazilian government´s stimulus measures backfiring in the form of unsustainable inflationary pressures, according to a series of interviews in the Exame magazine one of the principal hedging mechanisms is via property funds focused in corporate / office buildings, shopping centres and industrial / warehousing related projects.

What will be the largest real estate development constructed in São Paulo –expected to be concluded in 8 years’ time – the “Parque da Cidade” saw two of its towers containing 612 commercial units completely sell out within a week of launch.

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Ruban Selvanayagam