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Brazilian Real Estate
David Lawant55.11 3073-3037
Itaú
Sec
uriti
esB
razi
lian
Rea
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Indu
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Cecília Viriato55.11 3073-3007
Real Estate Sector Overview
SECTION 1
The Real Estate Sector and Capital Markets
- 3 -
The Real Estate Sector in Capital Markets
Source: Bloomberg and Itaú Securities
20092007 2008
Brazilian Homebuilders Ibovespa Index
100
129
111
140
124
82
37
Overall Market OutlookSECTION 2
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Outlook is Positive in Our View due to a Combination of Factors
Source: Itaú Securtities
PositiveMacroeconomic
Trend
GovernmentSupport forthe Sector
StructuralPent-upDemand
Availabilityof
Financing
Itaú’s economists forecast GDP growth of 4.8% in 2010, backed by record-low level of interest rates remaining at 8.75%
Inflation is expected to remain under control at around 4% in 2009 and 2010
Household formation is at 1.4 million per year
Quantitative and qualitative housing deficit
Number of units financed is still similar to 1980’s
Balance of savings accounts increased fromR$127 million in 2004 to R$231 million in July 2009
Working capital lines from commercial banks
Real Estate companies are returning to capital markets
“Minha Casa Minha Vida” - R$34 bn housing program
Several working capital lines provided for homebuilders
Caixa Economica Federal as financing operator for low-income housing
Overall Market Outlook
- 6 -
Overall Market Outlook
Real Estate Consumer Confidence Index (from Lopes)
Source: Lopes and Itaú Securtities
- 7 -
Overall Market Outlook
Average Price of Launches in the Metropolitan Region of São Paulo (R$/m2)
Source: Embraesp, Lopes and Itaú Securities. Note: Deflated by the INCC index.
- 8 -
Overall Market Outlook
Source: Selected Companies and Itaú Securtities
Contracted Sales (in R$ million) and Sales Speed (in %)
- 9 -
Overall Market Outlook
Source: Selected Companies and Itaú Securtities
Launches (in R$ million) and months of inventory
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Overall Market Outlook
Source: Selected Companies and Itaú Securtities
Cash Burn (in R$ million) and net debt/equity levels (%)
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“Minha Casa Minha Vida” Housing Program
Three broad income segment classes
0-3 minimum wages
3-6 minimum wages
6-10 minimum wages
Other measures
Cash flow profile of projectsfor homebuilders
Implementation Price amortization system
R$16 billion of subsidies, installments will be 10% of income with a minimum of R$50 Caixa Economica Federal (CEF) will analyze projects and contract developers
R$10 billion for subsidies, reaching up to R$23,000 per unit Guarantee fund in case of unemployment (24-36 months) and reduced rates to TR+5%
Guarantee fund in case of unemployment (12-24 months)
Reduction in life insurance embedded in the mortgage from 4-35% to 1-7% of installment Reduction in registration fees of 80-100% for the homebuyer and 75-90% for the developer
Due to legal risk, CEF only uses the SAC amortization table. The Price sales table, which yields lower initial installments is still not clear if it will be used or not
For the 0-3 minimum wages segment seems that companies will work more as contractors than as developers. Other income segments might use a scheme like “Credito Associativo”
What has is still uncertain?
Mid and Mid-high income Increase in SFH cap limit from R$350,000 to R$500,000 per unit Maximum amount financed raised to 90% from 80% previously
Other benefits outside the package
FGTS mortgage lending increased
Recent debt raising operations from Tenda, MRV and PDG Lower launches put less pressure on cash requirements
Key Investment ThemesSECTION 3
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Key Investment Themes
Key Investment Themes in a Medium Term Perspective
Low Income Exposure Profitability
Convergence to IFRS Accounting Standards
Execution RiskSustainability of the Housing Program
Geographical Diversification
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Contact Information
DAVID LAWANT – REAL ESTATE ANALYST FROM ITAÚ SECURITIES
+55 11 3073 3037
Itaú
Sec
uriti
esB
razi
lian
Rea
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Indu
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