Building companies target at average and high income
Valor Econômico
It is undeniable. If there was a translation for the real estate market in 2009 it could not be another but low-income. After the release of the "My Home, My Life" ("Minha Casa, Minha Vida") program, the segment became the target of absolutely all building companies - some with a lot of experience in the segment, some with little and some that had never built a single low-income building. But, quietly, the celebrated low-income begins losing its charm. And, in a kind of "hedge", the cyclic real estate market goes back to its origins. It has already elected the average and high income, especially in the capital of São Paulo, as an alternative of operation.
In the group of the large home builders, the order is to diversify. They don't want to be bond to a complex market that is so dependent on the decisions both of the government and of Caixa Econômica Federal (Brazilian Federal Savings Bank). PDG Realty and Rossi still have most of their revenue coming from low-income buildings, but they have opened business units directed solely to the market of middle class and high income in the capital of São Paulo. The medium-sized companies, on the other hand, have simply gave up on the low-income housing - that is the case of Helbor and JHSF, which left the partnership it had created to operate in such market.
On the one hand, there is indeed a strong market recovery in the middle and in the high income class. But the movement is also a response to the challenges of the low-income building. Launching and selling was easy - even because the response of the demand, backed up by the Governmental grants, was swift and fueled the sales during the financial crisis. But when they started the works, or even before that, the companies realized earning money in low-income construction is not an easy task. It requires know-how - both in construction, and in operation with the CEF (Federal Savings Bank). "The market has become inebriated with the demand, but many people are already discouraged", says an Executive of the sector. "During the crisis, that was the only option, but now, with the recovery of the middle class, the temptation to return to the comfort zone is huge. Not to mention that dialoguing with private banks is much easier", considers the source.
The widespread migration for the low-income already has reflexes in the results of the sector. The gross income of the publicly held land developers that in 2007 amounted to 39% fell to 35% in 2008 and, last year, it went to 31%. The exception, according to analysts and to the very companies, is MRV, that has always worked in this market, and that was able to maintain the high margins - it had the third highest net margin of the sector, of 21.1%.