Brazil: Five golden rules for buying land

Investors can once again hold confidence in the Brazilian land market as the President of the Association for Real Estate and Tourism Development (ADIT) in the north east of Brazil has dismissed worries over proposed new restrictions on foreign nationals owning land.

Concerns over protection of Brazil’s natural resources led to President Lula da Silva reportedly calling upon ministers to tighten the laws on foreign ownership of land, however ADIT President Felipe Cavalcante, speaking with trade publication OPP, commented that “these proposals only apply to agricultural land – any changes in the future would have no impact at all on people who have already invested in real estate.”

Demand for land plots in Brazil, especially the north east, has risen significantly over the last couple of years with savvy investors recognising the potential of Latin America’s success story with its economic growth rates of 9 per cent, low levels of national debt, established international and domestic tourism industry as well as a growing middle class, and entering the market at this early stage for maximum investment growth.

Some 10 million acres of land has been registered by foreign nationals according to the Brazilian Agrarian Development Ministry (2008) and US$2.43 billion invested between 2002 and 2008.

One such investor is Dale Anderson, a property consultant who was so convinced in the future growth of Brazilian land that he purchased a plot at Caponga Beach, 30 minutes from Fortaleza in the north east. He has already seen 100 per cent growth.

Dale is often asked by other potential buyers about his purchase, and here he shares his 5 Golden Rules for buying land in Brazil:

1. Research Land Prices.
Land prices can vary quite dramatically and although cheaper plots may look tempting initially they may not offer the best return on investment. Check prices of similar developments in the area to ensure you are paying a fair price per square metre.

2. Check for planning permissions.
Land with planning permissions in place holds higher value and investment potential so check with the local land registry if the plot has the necessary permissions or if they will be easily approved.

3. Location, Location, Location.
The right location does not necessarily mean a beachfront setting. Look for key factors such as accessibility (air and road), established infrastructure, good amenities nearby and demand for accommodation either from the local or vacation market.

4. Appoint an experienced English speaking Brazilian lawyer.
The buying process in Brazil does not need to be complicated if you use a good agent and lawyer who understands the process. Appointing an experienced legal representative can cost around US$1,050, although you can provide them with a power of attorney allowing them to sign and notarise on your behalf making a visit to Brazil not a requirement. When transferring funds I recommend using an FX partner such as Voltrex, securing the rate in the UK and transferring the funds into Brazilian Reals.

5. Establish an exit strategy.
They key to any successful investment is establishing an exit strategy. With Brazilian land there are various exit strategies available; investors can choose to build a property on their plot and sell in a few years for a sizable profit as the build costs are relatively low. The other option is to simply hold the land for a number of years and then flip or sell it on to investors at a higher price as land values are expected to increase by about 30 per cent per annum over the next few years in Brazil.

A number of land investment opportunities are currently available in north east Brazil. There are still 250 sqm plots with full infrastructure and planning permission in place available at Caponga Beach from R$39,000 (US$20,450) or further south near the ancient city of Joao Pessoa, the eco-friendly five-star Tambaba Country Club Resort offers 450 sqm plots of prime Brazilian real estate with an investment from US$5,475 with a 5-year interest free payment plan and impressive return on investment of 148 per cent after five years.

Dale Anderson of Experience International wrote this column. For more information about investing in land in Brazil contact Dale at + 44 (0) 207 321 5858 or visit www.experience-international.com.