The Bank of Brazil has just launched a new line of credit products designed for the purchase of properties off-plan or in construction by individuals. The new products, mortgages, will be directed to the sale of units whose construction has been financed by another BoB program directed at builders and is also available to builders in the government backed Minha Casa, Minha Vida (My House, My Life) housing initiative.
BoB officers said the Bank expected the new products to join the easing of conditions for the buyers, with facilitating business for the selling developers, blending steps in the process almost seamlessly. It will now be easier for the buyer because his mortgage is in place from the beginning and for the builder by improving his cash flow and greatly facilitating the sale of units. Traditionally builders have financed purchases off plan and during construction and, on delivery of completed units, selling remaining balances as receivables with real estate collateral.
Special terms for the new style mortgages include interest rates as low as 8.4% per annum, with terms up to 30 years and up to 80% loan to value, in private developments, and up to 90% in the government backed Minha Casa Minha Vida. The interest rates may seem high compared with EU and US rates, but they are very low for Brazil where conventional mortgages range from 10.5% to 12% and can be much more. Also as part of the special terms is a six month grace period, from the completion of the construction until the scheduled paydown of principal begins.
Officials said that BoB - which is a federally owned commercial bank and NOT the Central Bank of Brazil - hopes to expand and consolidate its position in the mortgage market broadening its product portfolio and client relationships.
Real estate lending hás already shown robust growth since BoB began mortgage operations with private individual borrowers in2008. At the end of the third quarter of 2011 BoBôs mortgage portfolio totaled R$5 Billion, 19,8% more than in June 2011, and an increase of 105.1% ahead of year ago Q3 2010.
Adding to this total of loans to individuals the amount lent to companies, builders, developers and the like, reaches R$6.3 Billion.
BoB hás also financed 7540 housing units in the government backed program in the three quarters of 2011 and expects the total number of units financed in the program to date to reach 36 thousand by year end.
Steven Glazer, Fortaleza
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