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Investment climate

What is the general climate of real estate investment in your jurisdiction?

Real estate prices in Brazil witnessed a strong appreciation between 2005 and 2014, supported by high rates of domestic development growth and the expansion of real estate credit.

However, for the past three years – due to low domestic development growth, high rates of unemployment, default, inflation and interest, as well as political uncertainty – real estate prices are starting to depreciate in order to accommodate the low demand.

Development in the Brazilian construction sector has also slowed in recent years, reducing new releases and increasing efforts to sell accumulated stocks. It also experienced reduced expenses for cash management improvement, as many companies in the sector suffered from debt default and an inability to perform financial obligations and were forced to discuss debt reorganisation in a judicial environment.

Despite the existing crisis in the Brazilian construction sector, the real estate market still has room for significant growth and may be an attractive investment as the country’s political and economic situation stabilises and levels of domestic consumption increase.


Who are the most common investors in real estate?

The most common investors in real estate are individual owners and investment funds, including:

  • high-net-worth investors;
  • pension funds;
  • corporate and institutional owners;
  • real estate investment funds;
  • private equity funds; and
  • all types of foreign investor.

Are there any restrictions on foreign investment in real estate?

There is no restriction on foreign investment in real estate in Brazil, which may occur through investment vehicles or directly by the foreign investor. The only exception is the investment in rural real estate, which requires special government authorisation for foreign investors, including Brazilian entities with foreign equity, according to the area of the property. Further, there are restrictions regarding the acquisition of rural properties located in the ‘boundary zone’, which is defined as territory within 150 kilometres of Brazil’s borders.

In the case of foreign investment through investment vehicles or financial instruments, such investments are subject to prior registration with the Central Bank, which is responsible for regulating and controlling foreign investment in Brazil.

Investment structures

What structures are typically used to invest in real estate and what are the advantages and disadvantages of each (including tax implications)?

The most common real estate ownership structure is holding interests in private limited liability entities, rather than directly owning the title to the real estate. Such entities can directly acquire real estate property and profit by selling or leasing it in the market. Under this structure, the investor is not liable for the title-holding entity’s debts or liabilities. The investor may profit in such a structure by:

  • selling the interest in such entities in the private market, subject to 15% or 25% income tax, depending on the investor’s origin country; or
  • receiving dividends distributed by these entities, free of income tax, but subject to the appropriate register before the Central Bank of the funds remitted to the foreign investor by the invested entity.

Another common investment structure for real estate is a real estate investment fund (REIF). The organisation of an REIF and placement of its quotas is regulated by the Security Exchange Commission (CVM). Rental income and proceeds from real estate sales received by the REIF are exempt from taxation. The inflow of funds from foreign investors into an REIF is effectively free of tax on financial transactions, and income distributed by the REIF to its foreign investors is free from income tax (Article 95, Normative Instruction RFB 1585). However, an REIF is more heavily regulated and has higher set-up and maintenance costs than a limited liability company and its quotas can be transferred only through organised over-the-counter or exchange markets. 

Foreign investors may also invest in securities specifically designed to represent real estate credits. Real estate receivables certificates (CRI) are certificates backed on real estate credit, with receivables flows based on existing payment obligations, mostly secured by real estate properties. Real Estate Finance Notes (LCI) represent credits from real estate financing, usually secured by mortgages or real estate fiduciary assignments. Foreign investment in CRIs and LCIs is subject to registration before the Central Bank and is exempt from income tax (Articles 85, Paragraph 4 and 88, Normative Instruction RFB 1585).

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