Real Estate Tech in Brazil
Innovative technologies and out of the box solutions, makes Real Estate Tech in Brazil a promising bet. With large population, there is little that can prevent entrepreneurs from automating the age old real estate sector in Brazil.
Brazil is a country, which went from booming economy to an unforeseen and unprecedented financial crisis starting 2013. Today, economists predict the downturn to continue in this most populous country in South America.
Like the country’s economy, the real estate sector too also gone from boom to doom in the past couple of years for several reasons, prominent among them are unstable government and financial crisis which prompted banks to hike the rate of interest. When the property market was at its peak, a lot of realty players launched their websites and started the online business plan. Today, when the market is going through a bad phase, the property industry relies on technology along with other government initiatives and financial measures to recover.
Real estate stakeholders say the realty portals have helped expand their business base and market reach. Besides local customers, the prominent cities or famous tourists location in Brazil get a significant number of foreigners who come either as a tourist or for some business purposes. They are the client for Brazil’s realtors and brokers. The country’s deep-rooted startup culture also plays a crucial role in the bringing technology to the sector.
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Brazilians are entrepreneurial and experimental than any other communities in the world. Several reports confirm that 25% its population is engaged in self-employment and two third of job creations in private sector is due to a small business run by young and enthusiastic entrepreneurs.
Amidst political uncertainty and social upheaval, these startups and self-employed population have controlled poverty and unemployment to a great extent in the county.
In the backdrop of a strong entrepreneurial culture, several real estate technology startup companies were founded in different part of the country which can cater to property need to a wide range of people.
Real Estate Scene in Brazil and its impact on Real Estate Tech in Brazil
The real estate market of Brazil went through a booming period from 2007 to 2013 when property prices skyrocketed in almost every part of the country. The key areas such as Sao Paulo and Rio De Janeiro witnessed as much as 150% rise in property prices in the last six years. The interest cut by the central bank from 26% in 2003 to 7.25% in 2012 brought a significant momentum in the property market.
However, the countdown for recession began in the first half of 2013 when interest rate started increasing, and by April 2014 it reached 11%. Brazilian Institute of Geography and Statistics (IBGE)’s data shows that the economy of Brazil’s declined by 1.6% in the first quarter of 2015 as compared to the first quarter of 2014.
The civil unrest along with political instability hindered economic growth and led to recession hit the country. According to the International Monetary Fund (IMF), the growth was just 0.2% in 2014, and the economy declined by 3.6% in 2016 following a fall of 3.8% in 2015.
All property projections predict further turmoil in the realty sector. According to Global Property Guide, “Brazil’s housing market continues to struggle. In Sao Paulo, house prices fell by 3.75% during the year to Q1 2017. Quarter-on-quarter, house prices dropped 0.58% in Q1 2017, the ninth consecutive quarter of falling home prices.”
The office market report of Q4 of 2016 by Colliers says, “The S?o Paulo Class A + A and B office market closed 2016 with an inventory of 2,709,000 sqm and 2,058,000 sqm – totaling 4,767,000sqm – and a vacancy rate of 25% and 21%, respectively.”
Contrary to the market projections, a section of construction industry group is of the view that some areas like greater Sao Paulo area will witness a revival by the end of 2017 with 5% to 10% rise in the property prices.
Real Estate Tech in Brazil
Brazil is the first country in South America which is experimenting the use of blockchain to secure the property ownership data at the government offices. This unique initiative will keep property records on the blockchain. If successful, this will open a new chapter for real estate tech in brazil.
A USA based company Ubitquity, LLC have collaborated with Cart?rio de Registro de Im?veis [Real Estate Registry Office] in Brazil to pilot its Software-as-a-Service (SaaS) platform to make land and property transaction records accurate and indisputable.
Nathan Wosnack, founder & president of Ubitquity LLC, has been quoted as saying that the collaboration will help demonstrate to government municipalities the power and benefits of using blockchain-powered record keeping.
The use of this technology has several advantages. Besides improving accuracy, security, and transparency, this technology will help the municipalities to handle property disputes fairly. Also in case, a property owner loses his original documents, he can find a back-up with the government authorities.
Besides this new initiative, online property websites to offer search, list, and marketplace; mobile brokerage firms, property search web applications; co-working spaces are some of the instances of the innovative face of real estate in Brazil.
Most of them aim at foreigners. A foreigner who wants to buy property in Brazil needs to obtain a tax identification number, also called CPF. Besides certain agriculture properties, foreigners are free to purchase all sort of properties in the country.
The property websites often have experienced lawyers on their panel who assist in finalizing various property documentations. The process for complete property transactions takes from 15 days to about a month depending on the status of the title of the property. Lawyers often do due-diligence on behalf of the customers. The bureaucratic red tape makes property transaction a complicated process and an experienced lawyer’s assistance is inevitable.
Top players in Real Estate Tech in Brazil:
VivaReal is among the largest startups in the country. Launched is 2009, it lists approximately 5 million properties on its site and has over 15 million visits every month, says Crunchbase.
The website adds, “VivaReal is an online real estate marketplace that connects buyers, sellers, and renters with properties in Brazil. It enables its users to sell, buy, rent, or invest in residential and commercial properties, vacation homes, beach front properties, and investment properties.
VivaReal has raised $74.78 million from 19 investment companies in six funding rounds out of which the most recent one included $41.7 million in Series C funding from Spark Capital in October 2014.
Some of the prominent investors of the company are 500 Startups, Ariel Poler, Brian Requarth, Dragoneer Investment Group, Errol Damelin, Florian Otto, Gordon Rubenstein, Greg Waldorf and James Gray.
In a second acquisition, VivaReal has taken over Geoimovel, which has been operating for 15 years in real estate analytics and market intelligence.
Some of the other well-known online realty players are Imovelweb, Minha Casa Brasil, QuintoAndar.com.br, PropertyBrazil.com.
Imovelweb offers sale and rental in Brazil, and the company claims to have a broad range of houses, apartments, commercial real estate. It also claims to have its presence in smartphone through its web application.
Minha Casa Brasil provides an online advertising platform, where buyers and sellers can showcase their ready homes, apartments and other properties.
PropertyBrazil.com is a “multi-lingual Brazilian real estate portal with sales and rental listings from private owners, agents, and developers.”
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Some sites like QuintoAndar.com.br operates in the rental market. According to the company, it “simplifies the whole renting process – from expediting the search for a place to live to reduce bureaucracy and eliminating the need of co-signers. For the landlord, QuintoAndar makes renting safer by providing better information on the tenant and guaranteeing on-time payments every month.” Some foreign real estate agencies like Rightmove.co.uk also operates and assist homebuyers.
The co-working spaces in the country have also developed considerably with the presence of companies like CUBO, plug.co and Impact Hub.
Opportunities for Real Estate Tech in Brazil
Brazil is second after the United States of America in the penetration of internet in the country and use of social networking site Facebook, Twitter, and Youtube. Reports say that Brazil has more mobile phones than its total population. If the state decides to capitalize on these positive features in the realty sector, the market will bounce bank in no time, feel many experts. This will in turn drive the real estate tech in brazil.
Besides having an excellent telecommunication infrastructure, the recession-hit market in Brazil has some good news too. As a boon in disguise, global real-estate investors such as Brookfield Property Partners LP, Blackstone Group LP, and Global Logistic Properties have entered the realty market. They know that prices have already bottomed out and at this point of time a right investment can earn a good profit.
The foreign investors have also realized that the market has already touched the bottom, they should now return to the market to buy. It’s the right time for the Brazilian realty market to embrace technology and get its maximum benefit.Its a good time to set up PropTech incubators and accelerators in Brazil, they can bet up in partnership with the local real estate developers.
Way forward for Real Estate Tech in Brazil
Despite the prediction of poor performance of the property market, a section of realtors and property experts believe that outlook for the residential market is improving in some areas such as Sao Paulo. They think that the interest rate will go down as the economy has indicated to stabilize. To exploit the maximum benefit of innovative technology, the government needs to amend the outdated laws and strict tax norms which are serious impediments in the entrepreneurial initiatives of the youngsters. The country’s infrastructure needs improvement, and higher education system is in dire need of expansion.
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