Monday, April 1, 2013

Singapore investors fork out $70m for Brazil properties

The Straits Times  |  March 31, 2013
One social housing project promises about 20% returns on their investments

A housing project to help slum dwellers in Brazil move into better homes has drawn interest among property investors here, said its developer.

Brazilian developer EcoHouse Group told The Sunday Times that the 2,176-unit Bosque Residencial project in Natal, in the north-east of the country, is one of three housing projects in Brazil that have netted $70 million from Singapore investors.

They paid as little as $46,000 each to book units in the development which was promoted most recently at Suntec City this month.

But they will not get the homes for themselves. The project is a social housing project - a public- private partnership in which the Brazilian government offers homes built by private developers to poor families at subsidised rates.

So investors being wooed here pay only to help fund the cost of building units in the project.

The promised returns of about 20 per cent - which means investors get about $55,200 per unit after just one year - are generated when the unit is resold to a Brazilian buyer at a higher price.

A key risk however, is that if buyers dry up, investors may find themselves stuck with a property that is hard to sell, given the unfamiliar environment.

The sales and purchase agreement gives an investor rights to a specific property which will be built and then sold to a Brazilian buyer, said Mr Jason Purvor, the international commercial director of EcoHouse Group, one of the private partners in the scheme.

The company's headquarters is in Natal, but EcoHouse also has offices in London, Toronto, Singapore and Dubai.

Investors can track the progress of the development by looking at pictures and videos on the company's website, or go to Brazil to see for themselves.

EcoHouse has already held two public exhibitions here. Mr Purvor, who is based in London, said more than 1,500 units in the three projects have been sold here.

Retiree Kishore Dharamsi, who is in his 50s, told The Sunday Times that he has invested about $500,000 in the Bosque Residencial project and another development. He owns property in the Philippines as well.

He said he was cautious initially about the Natal project because Brazil is so far away, and invested just a small amount. But a trip to Brazil last November with a dozen other investors to see the development convinced him to put more money down.

"There is a huge demand for social housing in Brazil where there is a rising middle class moving out of poverty. I managed to see first-hand the people living there," said the former general manager at a Swedish multinational company.

"As the investment is also placed in an escrow account, there is an added layer of security to the investment."

An escrow account, in general, ensures that a seller is paid only after certain conditions, set out as previously agreed, are fulfilled.

Financial advisers noted, however, that aside from the risk of being stuck with an overseas property that is hard to manage and gain access to, investors may also be unfamiliar with Brazilian laws that might also apply.

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C

Senior Sales Director
DTZ Property Network Pte Ltd (L3007960A)

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