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Government to Launch Class C and D Real Estate Leasing Program

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Jair Bolsonaro  (Foto: Agência Brasil / Isac Nóbrega/PR)

Bolsonaro's new program will be aimed at families with incomes between two and five minimum wages (Photo: Agência Brasil / Isac Nóbrega / PR)

President Jair Bolsonaro is soon to launch a new housing program, called Aproxima, which will provide land for homebuilders to build on housing and commercial properties.

It will be intended for families with incomes between two and five minimum wages (today, from $ 1,996 to $ 4,990), classes C and D. The idea is to make a kind of lease: the resident who pay rent until the end of the contract ( which must have a term of 20 years) stays with the property.

The rent must have a limit of commitment of the family income that is contemplated with the property. According to Estadão / Broadcast, the goal is to launch at least 200 Aproxima projects by 2022, the end of the president's term.

The program is part of the larger national housing policy restructuring plan, which will also bring changes to My House My Life (MCMV). The studies mainly involve the Ministries of Regional Development and Economy.

According to government officials, one of the advantages of Aproxima is to place the worker living in an urban area, close to work. There is a lot of criticism regarding the fact that Minha Casa builds projects especially on the outskirts of large cities, mainly because of the high value of the land.

Another difference compared to Minha Casa is free trade and services in condominiums. This allows homebuilders and developers to charge more for commercial real estate and reduce household benefits in residential real estate. The supply of land by the Union also reduces the cost of companies to build the enterprises.

The limitation on the amount of benefit that will be paid by families will vary according to region, municipality profile and income of potential residents. One of the participants in the program formulation gave the example of setting a ceiling of 20% of income for families earning up to three minimum wages (R $ 2,994). The company that can offer the largest number of residential units with this amount will have an advantage in the bidding process.

Another criterion that must be analyzed in the competition is offering the lowest condominium value. The government's plan is to set the winning bidder to keep the venture for 20 years.

According to the Secretary of Infrastructure Development, Diogo Mac Cord de Faria, the criteria for choosing the winner of the competition for the terrain will consider the project that promotes the greatest return to society.

"I run a contest of ideas from those who can ultimately generate me a greater return to society, which is the amount of families with less purchasing power living in areas they could never afford, in places close to their jobs. So it is quite innovative, both in terms of public housing policy and in terms of the possibility of this land, "he says.

Industry scholars estimate that the program has the potential to tackle one of the major problems of Brazil's housing shortage: the high value of rents. According to a 2018 survey by FGV and the Brazilian Association of Real Estate Developers (Abrainc), the excessive burden on rent payments is one of the main problems of the housing shortage faced in Brazil.

This component is responsible for homelessness for 42% of the 7.8 million families who do not have a home. FGV / Ibre Construction Project Coordinator Ana Castelo understands that if the government maintains the idea of ​​limiting rent to close to 20% of household income, the criterion may address the problem.

"In principle, for a family that is going to apply for housing finance, this is usually the reasonable value of a benefit, from 20% to 30%. Thinking that it will have housing costs, 20% still gives room for these costs."

A researcher at the João Pinheiro Foundation, Frederico Poley points out that cities have a "great shortage of real estate," and that actions that facilitate land occupation in city centers are socially welcomed. "Government has an important role in facilitating market facilities by making regulations that are effective," he says.

Aproxima should be launched with the restructuring of the national housing policy, and will require the issuing of a provisional measure to allow Union land to be allocated to private enterprise, according to the report. Dialogue with city halls should also be necessary, as in some cases municipalities will need to loosen rules on what can be built in certain areas.

Zero allowance
The Approxima should not rely on resources from the General Budget of the Union (OGU), according to the report, another difference from the MCMV. In the ten years of the housing program created in the government of former President Luiz Inacio Lula da Silva, R $ 110 billion in grants were contributed.

For next year, the estimated budget is $ 2.71 billion, the lowest ever placed in the program in a decade. The differences are also found in the FGTS funding model. At Approxima, the idea is that funding from the Fund will only be offered to companies, with a limit of 50% of the investment required to build the venture.

Municipal support
For the construction sector, the Approxima idea is good, but needs to be taken over by the city halls. Although the land is ceded by the Union, for the program to work, municipal permits will be required to build condominiums in major city centers, which may require changes to master plans – with the permission of city councils.

"Because it is a new thing, we need to deepen the discussion so that it comes out more rounded," says José Carlos Martins, president of the Brazilian Chamber of Construction Industry (CBIC). The sector intends to formally send government suggestions for the program in two weeks, after collecting suggestions from entrepreneurs.

According to the president of CBIC, another point that should be closely observed is how much the project will come out of the government. So far, the idea is that residential and commercial units are located in the same development. Martins understands that it would be better if this factor were relaxed.

"For example, I am going to do a mall (on Union land). Is it a good idea for this project to put up a social housing building, or could I use another government building, which is suddenly deteriorated, to renovate and transform into social housing? "

The president of CBIC also pointed out that the program has the challenge of being able to attract the interest of several companies, so that the competitive process is not concentrated in a few companies. Coordinator of Construction Projects at FGV / Ibre, Ana Castelo stressed the importance of good competition in the choice of projects.

As the project model is new, there is concern about how companies will adapt. "It's important that it's an interesting business for businesses and families, that's a vital issue."

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