Building in Brazil is expensive! But can costs be reduced?

Owning a home is the dream of many Brazilians. And when it comes time to perform, the question may arise: ready to build or buy? Starting a property from scratch has always been a more cost-effective choice. But lately, it’s been a long time coming. And the question remains: why is it so expensive to build in Brazil?

The main factors are macroeconomics. Mainly in a history of the last 10 years. The first point worth noting is that civil construction from mid-2012 to 2014 suffered from the global recession that the country experienced. As a result, the production of civil engineering has been much reduced. This has meant that in the last few years until 2020 many of the furniture and works production offerings as a whole have been slowed down. But the demand for new buildings, housing, commercial real estate, infrastructure works has not stopped. Thus creating a deficit between supply and demand. Demand continued and supply declined, reaching an imbalance that led to rising production costs.

Not to mention that the pandemic has worsened. The market suffered an impact as the industry had to slow down to comply with biosecurity protocols, which caused input production to fall sharply in a matter of months. And every time there are fewer inputs on the market, the value trend is increasing, the construction costs being even more expensive.

For Sérgio Botassi, master and doctor of civil engineering and professor and coordinator of the IPOG course on the cost of structures and foundations, construction management, public works and smart buildings, he says that it is possible to observe, for example, important indicators such as INCC – the index National Civil Engineering, where official data show that in 12 months of August 2021 the index had already accumulated to 16.68%, showing a higher than average inflation, which shows that civil construction has in relation to the average inflation of the economy. “So this context has significantly affected production costs. This imbalance between supply and demand, this complex scenario in which we live ”.

Sérgio also claims that another scenario that influenced this situation was that the repressed demand, which was slowed down by this lack of real estate in the last long years accumulated and was affected by the pandemic, there are figures that show that many investments due to stock market instability many investors have decided to base their resources on investments in civil engineering. Instead of investing in company shares, investors decide to migrate to invest in businesses, for example through LCIS, which tend to provide greater protection in this type of investment. The increase in demand has made this supply-demand relationship more significant around the impact.

So can we say it’s not worth building? Not! In spite of everything, it is still advantageous to build. First of all, because of the problem of lines of credit for financing the purchase of real estate. This funding increased dramatically from January to September 2021. There was an increase of 96%, recovering heavily from the loss of funding losses that had occurred in previous years. This shows great vigor in increasing financing even with rising interest rates. Allied with this, in this scenario, the savings resources, where it is the largest source of financing for real estate financing, the amounts deposited in the savings accounts have increased greatly in recent years, making you have a reserve to guarantee financing for the next few years. .

Another important reason is that the sale rate of properties in Brazil today is about 4%, one of the highest in the world. This is a global trend which shows, therefore, that even with rising prices for real estate production, the sales rate has not fallen. Which shows that it pays, these costs are transferred to the final consumer, but even so it was a great advantage to buy a property, even taking advantage of the scenario, the pandemic showed the relevance of a residential property, quality of life, people value their environment and more. their property, not least because many used it as a home office and realized the need for a suitable property. Increasing sales in this sector.

Sérgio warns against the practice of trying to reduce costs in this situation, which can lead to a number of consequences such as product quality, outsourcing and informality. Costs, we must not fall into the temptation to reduce the quality of inputs. Purchasing a lower product instead of first-line products, which can inevitably affect the performance and durability of this product in the future.

Problems in work, reprocessing and waste. As in post-work, activated guarantee savings can be in vain and a higher risk and loss for the economy.

Another reduction attempt that should be well considered is the option to outsource part of the workforce or services. Outsourcing is not a bad practice if it is well implemented, it can have a number of benefits, as long as specialized companies with experience in productivity are hired, the whole problem is outsourcing in hiring the company of lower value and incompetence, outsourcing. sometimes not the best, but the cheapest.

Informality can also have consequences. Civil construction already has a high rate of informality with a tendency to try to reduce costs and generate social damages, a risk of the entrepreneur subject to labor sanctions. Another point of non-compliance is not focused on compliance with good practices, making the executive practices of inputs that do not aim for better performance NBR 15575 effects that can be harmful.

Although the construction of the property is becoming more and more expensive, it can be seen that it is still very advantageous. If you are thinking about construction, the search for prices is important, but that this search for cheapness does not lower the quality of services and products, following these instructions will be possible to avoid inconveniences and negative consequences.

IPOG – Graduate Institute

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