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The Brazilian Savings & Real Estate Financing SystemMay, 2010
Brazilian Demographics
• Population: 190 million (2007)
• Population growth rate:
1.7% (average 1990 - 2000)
1.3% (average 2001 - 2007)
• Population living in urban areas/
Total population: 83.5%
• GDP per capita : R$ 13,700 (US$ 7,600)
• Number of homes: 56.3 million
2
The Brazilian GDP
3
GDP 2009
R$ 3,143billion
Source: IBGE
Housing Deficit: 7,2 million homes
4
Source: Fundação João Pinheiro Minimum Wage represents R$ 465 (US$ 260) per month
90% of the Housing Deficit is concentrated within low-income population
Up to 3
minimum wages
From 3 to 5
minimum wages
From 5 to 10
minimum wagesOver 10
minimum wages
Housing Deficit per Region:
5
Source: Fundação João Pinheiro
Housing Deficit is concentrated in the Southeast and Northeast Regions
Real Estate Financing in Brazil: Operational Model
6
MainFundingSources
Saving Accounts
FGTS
Mortgage Market in Brazil: SFH
7
SFH
FGTS SBPE
CMN
65% MORTGAGE MARKET
20% RESERVE REQUIREMENT
15% FREE
CCFGTS
RESERVE REQUIREMENT / YEAR
60% HOUSING
40% SANITATION
DEPARTAMENT OF LABOR
DEPARTAMENT OF
TREASURE
CMN
CENTRAL BANK
DEPARTAMENT OF CITIES
HOUSING OFFICE
BOARD OF CITIES
The Mandatory Destination for Saving Accounts´ Funding
8
Volume retained at the Central Bank
Savings
65% Savings
35% Savings
• Free to be used by Treasury
Volume retained at the Central Bank
Penalty calculation considering the savings volume retained at the Central Bank (per year)
Interest paid by the Central Bank = 1,6% Saving account return = 8%-Funding Penalty = - 6,4%=
20% Savings
15% Savings
• Retained at the Central Bank, however, at the same return of savings account (8% per year)
Mortgage assets
Saving Accounts Balance Historical Evolution - SBPE
9
ESTABLISHED CONSOLIDATION STAGNATION RESTRUCTURING
SFH: Establishment
10
ESTABLISHED CONSOLIDATION STAGNATION RESTRUCTURING
-
100
200
300
400
500
600
700
1964 1965 1966 1967 1968 1969 1970
Thou
sand
Uni
ts
SBPE
SFH
LAW 4.591 - 16/12/64-REAL ESTATE
DEVELOPMENT
RC BNH 25 -16/6/67- FCVS
LAW 4.380:21/8/64:
SFH, BNH,SCI, CM
. LAW 5.107 -13/9/66 -FGTS
. DL 19 - 30/8/66 –MANDATORY INDEXATION. DL 70 - 21/11/66 - APE E
FORECLOSURE
ABECIP -19/8/1967
RC BNH 29 -31/10/68SAVING
ACCOUNT
SFH: Consolidation
11
ESTABLISHED CONSOLIDATION STAGNATION RESTRUCTURING
-
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
4.500
1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982
Thou
sand
Uni
ts
SBPESFH
LAW 5.741 - 1/12/71FORECLOSURE
SFH: 1979 A 1982: 2 MILLION UNITS IN 4
YEARSRD 61 - 11/10/71BNH (SEGUNDA
LINHA)
ECONOMIC MIRACLE: GDP GROWS 8,7% PER YEAR
BETWEEN 1971 - 1980
-
1.000
2.000
3.000
4.000
5.000
6.000
7.000
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Thou
sand
Uni
ts1983 AND 1984
- AMORTIZATION INDEXATION (MW) MISMATCH WITH DEBT BALANCES
1985- 25% DEFAULT RATE
1986MAR: “PLANO CRUZADO”NOV: BNH EXTINGUISHED
1987“PLANO BRESSER”
1989“PLANO VERÃO”
1990“PLANO COLLOR”
- 60% SAVING ACCOUNTS BLOCKED- 40% FREE
FGTS COMPROMIZED BY 1991 COMMITMENTS
SFH: Stagnation
12
ESTABLISHED CONSOLIDATION STAGNATION RESTRUCTURING
Main Factors Leveraging Brazilian Market
13
Economic stability
Household income increase
Default reduction
Flexible conditions
Apropriate regulatory framework
Brazilian Mortgage Market - Origination - SBPE & FGTS
14
Source: BCB, ABECIP and CAIXA
Brazilian Mortgage Market - Origination - SBPE & FGTS
(*) Database: March 2010
15
Source: BCB, ABECIP and CAIXA
R$ Billions
9,98
4,11
1st QUARTER
2010
5,89,3
14,8
24,9
40
49,6
69
ProjectionAbecip
24%
39%
Brazilian Mortgage Market – Origination Breakdown - SBPE
(*) Database: March 2010
16
Source: BCB, ABECIP and CAIXA
50
6,22
3,76
1stQUARTER
2010
Projection Abecip
9,3
18,3
30
13%34
4,93,0
64%
47%
R$ Billions
Recent Saving Accounts Balance Evolution - SBPE
(R$ Billion)
17
13,2%
19,0%
Saving Accounts Funding vs. Credit Demand
18
SCENARIO 1 GROWTHFinancing: 50,0% a.a
Saving Accounts Volume: 17,7% a.a
34
50 75
113 16
9
253
253,
6
298,
5 351,
3 413,
5 486,
7 572,
8
25%35%
46%
59%
76%
98%
0,00%
20,00%
40,00%
60,00%
80,00%
100,00%
120,00%
0,0
100,0
200,0
300,0
400,0
500,0
600,0
700,0
2009 2010 2011 2012 2013 2014
Em R
$ B
ilhõe
s
Contratações
Poupança SBPE
Estoque Financiamentos / Poupança
Within 2013 new financingsmay exceed 65% of saving
accounts deposits
CommitmentsSBPE SavingsFinancial Inventory / Saving Accounts
In R
$ Bi
llion
Securitization Market
19
Pulverized32,2%Corporate
67,8%
CRI: Offerings (Corporate vs. Pulverized)
Base: R$ 15,2 billion accumulated between 1999 and 2010
Source: CVM: Annual Offerings
Residential Portfolios
Contact
Fernando C. Brasileiro
CIBRASEC - Chief Executive Officer
ABECIP - Senior Vice President
Phone: +55 (11) 3266-3223
20
21
Additional Information & Data
Main Factors Leveraging Brazilian Market
22
Inflation - IPCA
Household Income Increase
Average 1995 - 2000 = 9.0%
Average 2001 - 2005 = 8.6%
2004 to 2008 = 25.6%
Average 2006 - 2008 = 4.5%
2009 = 4.31%
Economic stability
Main Factors Leveraging Brazilian Market
Regulatory Framework
23
Law 10.931/04
Fiduciary Trust Uncontrovertible
Law 9.514/97
ConditionalTrust
Main Factors Leveraging Brazilian Market
24
Default reduction
1.2%
“Alienação Fiduciária”
(Conditionaltrust)
Default
Contracts signed after 1998: Mortgage and Fiduciary Lien
Contracts with more than 3 past due installments
Main Factors Leveraging Brazilian Market
Installments amounts decreased, becoming affordable considering customers’ debt burden.
25
TENORPOSITIVE CHANGES
LTV RATES
NEW PRODUCTS