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My House My Life Brazil s Low Cost Housing Programme





*** BACKGROUND ***

The Minha Casa, Minha Vida (My House, My Life) campaign was announced by the Federal Government in March 2009 as one of the means of reducing the inequality gap and housing deficit in Brazil (of over 10 million houses).

With an initial governmental investment of over $64 BRL billion, 1 million houses are planned to be built and allocated to families on a means tested basis:

- Households with a total income of up to 3 times the minimum wage (currently at $465 BRL per month) can access the full allowance without any insurance and notary registration costs to pay;

- Households with a total income between 3 and 6 times the minimum wage can gain income supplements for loans; a discount on the cost of insurance; a 90% reduction of the notary registration cost and access to the ‘guaranteed’ fund (which will cover in the case of unemployment, death or other specified circumstances);

- Households with a total income of between 6 and 10 the minimum wage can receive lower costs of insurance, an 80% reduction of the notary registration cost and access to the ‘guaranteed’ fund.

*** ADMINISTRATION ***

Under the program (administered and governed by the Caixa Econômica Federal), households are able to purchase a house with a close to zero interest rate and refinance it over 36 months. As an example, those households that are earning up to 3 times the minimum wage will be allowed to purchase a house up to the value of $BRL 52,000, for which the scheme will contribute $BRL 46,000 leaving the buyer to provide the remainder $BRL 6,000 – this would (usually) be borrowed from the Caixa Econômica Federal. Those in the higher income brackets are able to access smaller subsidies and finance packages. The maximum loan-to-value (LTV) ratio is 90 percent (80 percent for higher-income brackets) with interest rates ranging between 5 and 8 percent.

A number of incentives have also been granted to the Brazilian construction industry including loans at 1% above the TJLP (the long-term interest rate); reduced or completely eliminated tax structures; and extended repayment / grace periods. The Caixa Econômica Federal approves each housing development in conjunction with state or municipal governments.

Homebuyers only have to make their first payments after they move in (whereas most developments would require payments pre-construction and usually a down-payment of some sort).

*** PRACTICALITY ***

Minha Casa, Minha Vida has received some criticism from academics, the media and the Brazilian public themselves. One accusation is that the government developed the programme to attract voters; there is the fear that placing political interests above the financial practicality of sustaining the scheme is a dangerous game. Effectively giving loans to poor families has also been looked at as risky, particularly as this was the root cause of the US financial crisis. However, those managing the programme are firm that the Brazil’s orthodox banking system necessitates for sufficient precautions to be in place where lending decisions are made (only after the thorough checking of earnings declarations and credit records, for example).

Many middle class citizens express their frustration with the fact that they continue to pay high rates of interest with no comparable breaks.

*** MINHA CASA, MINHA VIDA'S FUTURE ***

The employment benefits of the increased construction workers required to meet the ever rising demand of the program has been noted and it has been one of the contributory factors of Brazil's withstanding of the effects of the global financial crisis.

Furthermore, with a massive under supply of housing throughout the country, the building of new residential developments has long been called for - particularly amongst the lower-working classes.

Perhaps most importantly, the breakthrough in the ability of the poorer end of Brazilian society to better their lives cannot be underestimated and the majority see it as a long-overdue national project which will assist the country’s long-term growth. According to Milton Goldfarb, of Goldfarb Developments Brazil: “this is a revolution ... Brazil has never had a policy so clearly designed to provide housing for the poor and the lower middle classes.”


About Author Ruban Selvanayagam :

We provide FREE e-books, news, facts, figures, area guides, hints and tips for anyone with an interest in real estate and land investment in Brazil: <a href="http://www.brazilinvestmentguide.com/" target="_blank">http://www.brazilinvestmentguide.com/</a>


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Article Added on Thursday, July 8, 2010
LD
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