The research conducted by Matteo Cortese (KSM ’09), Allison Dick (KSM ’09), Sid Shah (KSM ’09) and Sima Sistani (KSM ’09) has validated the original assumption of their Global Initiatives in Management (GIM) paper that the Brazilian real estate market is primed for growth and expansion. Changes in real estate foreclosure and mortgage lending laws will spur Brazilian banks to increase their lending in all facets of real estate. An increase in credit status to investment grade credit will ensure to the world that Brazil’s economy has finally stabilized and is ready for foreign investment. Specifically, the residential and retail sectors of real estate stand to gain the most from the current conditions in Brazil.
Their recommendation for the residential sector is to continue development of affordable housing projects. This is the most untapped market in Brazil and with financing finally becoming affordable, demand for housing will be steep. Foreign developers need to partner with local players with a strong knowledge of the market to ensure costs are kept to a minimum. This is the best opportunity for foreign investors to tap into an unexploited segment of the market.
The team also sees huge potential in the retail segment of the market in Brazil. With such a fragmented market, they feel that it is key for operators to begin consolidation through expansion. Consolidation will allow firms to capitalize on the efficiencies gained by owning and operating several retail malls. Because there is still lack of liquidity in the real estate market, operators will need to partner with outside equity sources to finance expansion. The first movers in this market will gain the most in the long run. BR Malls is a great example of implementing this strategy in the current market. According to them, the real estate markets have a lot of room for growth and this is only the beginning of a long cycle of development and expansion in Brazil.