INCC - National Index for Construction Costs?

[fresh1]

Im after some advice. All the Brazilian developers we work with, say that stage payments on their developments are linked to the INCC, a federal index, which requires the purchaser to pay approx 5% interest on top of their repayments. Our lawyer in Brazil confirmed this as well.

As far as I can see, all agents selling Brazil off plan property in the UK/ Europe to foreigners dont mention this on their website or brochures.

Does anyone know if non-Brazilian developers have to charge this inflation index on their developments as well?

[deedee1]

Hi all,

I knoiw in my reservation agreement there is something similar within it!

It says to allow 5-8% costs due to currency exchange rate fluctuations etc- Dont know if this is the same thing as what youve mentioned or not???

Take care-D

[michaelbush]

As I understand in earlier years when inflation was higher, builders were allowed to make adjustments in their prices linked to inflation indices, during a build. I am not sure whether hey actually charge this now since inflation in Brasil is little different to European countries. the currency is strong as well. Guess everyone should check the contract and query if this clause still exists. This is not the same as warning to allow for currency fluctuations.

[robh]

Originally Posted by michaelbush

As I understand in earlier years when inflation was higher, builders were allowed to make adjustments in their prices linked to inflation indices, during a build. I am not sure whether hey actually charge this now since inflation in Brasil is little different to European countries. the currency is strong as well. Guess everyone should check the contract and query if this clause still exists. This is not the same as warning to allow for currency fluctuations.

Some do it and some don't is the short answer. Mainly the big traditional Brazilian developers who don't really market to europeans much. I don't agree with the practice but these developments are worth paying the extra money for in our opinion, so we sell them.

[fresh1]

Thanks for your responses.

Has anyone bought in Brazil with the INCC in the contract? Or is it not mentioned in the contract at all?

Also, deedee1, why should the price of your property in Brazil fluctuate with the exchange rate? If you purchased the property in Reais, the price shouldnt fluctuate, I would think.

[Janoulaki]

Originally Posted by fresh1

Thanks for your responses.

Has anyone bought in Brazil with the INCC in the contract? Or is it not mentioned in the contract at all?

Also, deedee1, why should the price of your property in Brazil fluctuate with the exchange rate? If you purchased the property in Reais, the price shouldnt fluctuate, I would think.

Depends on your monthly payments and whether you have fixed the rate

[JMBroad]

I do believe several posts have been made with regards to the "fixing the rate" idea - conclusion was that you can NOT fix the exchange rate for the Brazilian Real, unlike many other currencies.

However, it depends on the contract. Some developers offer the property to Europeans in Euros however put in that clause to cover fluctuations. Safest way is to make sure you know what you are paying in Reais.

Other developers put the prices in Euros and they bite the bullet if there is a fluctuation, however quite a few of them have taken a bit of a hit lately and are hesitant to keep doing that.

[JMBroad]

Oh and with regards to what the OP question was, - what Rob said.

[carlos_1]

curiously INCC is on average 0.5% per month which makes it roughly 6% a year.
That's about the mortgage rate in North America.

Is it something that can be negotiated/avoided or it's something that one would have to pay for an off plan property?

Thanks for your replies

regards

[michaelbush]

Originally Posted by carlos_1

curiously INCC is on average 0.5% per month which makes it roughly 6% a year.
That's about the mortgage rate in North America.

Is it something that can be negotiated/avoided or it's something that one would have to pay for an off plan property?

Thanks for your replies

regards

About the mortgage rate in the UK too.(6%) As I understand it, INCC was an inflation protection so builders were covered over the period of build for wage and material increases. Now that inflation is much lower in Brasil over the past few years, this practice should be stopped. I dont think it will be though. I am not certain, no doubt Ralph can answer, but if you pay the full price up front then you will not pay INCC since they have your money earning interest here, and that more than covers INCC. I would have thought the practice of increasing sales prices during the build is a simpler and easier understood method of working. It seems they want it all ways here!