ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

[BUYING AND SELLING REAL ESTATE IN BRAZIL]

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3. TYPES OF REAL ESTATE DEVELOPMENTS Brazil law basically recognizes the following types of land development: a) Urban properties: a.1) Allotment - the division of a plot of land into lots with the installation of the necessary infra-structure, i.e., serviced lots (e.g., streets, water, sewage, electricity for transfer to public agencies upon conclusion) prepared and ready for sale. There has been a notable impact on this type of development following the enactment of new Federal Law no. 13,465/17 that now permits a local municipality to control access to allotments, which has resulted in a fierce debate about the legality of access control to such allotments which, as a result, ended; a.2) Land division - the division of a plot of land into lots without the installation of infrastructure (because the plot already has access to the necessary infrastructure); a.3) Real Estate Development - real estate developments are regulated by Law 4,591/64, thus created by dividing a piece/portion of real estate into several individual/separate and private constructed units, whereby an undivided interest in the real estate is established/registered in each unit. For the development and sale of hotel units with the hotel and lease administrations included the Securities Commission’s Normative Ruling nº 602/18 must be also observed; a.4) Plots under the condominium regime - brand new type of real estate development also regulated by new

Federal Law no 13,465/17, this type of condominium entails division of plots into lots, without improvements, created/developed as individual units with the remaining areas registered as communal property.

b) Rural properties: b.1) Allotment - same concept as above; b.2) Land division - same concept as above. The development of urban real estate projects in Brazil typically occurs through a sales process that begins prior to construction of the project where buyers purchase units 'off-plan', i.e., based on architectural plans and models. A typical urban real estate project would comprise the following stages: a) Land Analysis. Mainly involves the calculation of the: a.1) Maximum amount of built area that could be constructed on the land, as prescribed by local zoning, and use category legislation; a.2) Unit sale price, which varies according to project and the property location, its distinctiveness, as well as the characteristics of the units on which the analysis is based; a.3) The cost of the project, which primarily comprises construction costs, marketing costs, brokerage expenses and taxes; and a.4) Environmental and zoning requirements pursuant to local regulations (Federal and State regulations) might be also applicable. b) Project approval. Any real estate project must be approved by the relevant Municipality prior to the commencement of the project.

ILN Real Estate Group – Buying and Selling Real Estate Series

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