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Real estate developers are involved in creating various projects that you may have encountered without realizing it.
Real estate firms have experienced substantial growth in the last two decades, extending beyond major cities to rural areas, thanks in part to improvements in industry regulations.
There is a lot of uncertainty regarding the involvement and specifics of the activities carried out by real estate companies. This text aims to provide comprehensive information on the subject.
Who are real estate developers?
Who are real estate developers?
Real estate firms are accountable for constructing and selling independent units in various types of buildings as regulated by Law 4.591/64 in Brazil.
These companies manage the complete process from acquiring land and obtaining project approval to constructing and selling units. Buyers can often invest in the project before it is finished as a unique feature.
The company needs to provide the incorporation memorial, outlining their promise to deliver the property according to the approved project, to guarantee buyer safety. Furthermore, the process is overseen by the Consumer Protection Code (Law No. 8.078/90) to protect customer rights at all stages.
What does alienation mean in real estate development?
Understanding real estate incorporation helps clarify the concept of “total or partial knowledge” in the law. According to the Michaelis dictionary, alienation refers to transferring property ownership to another person, which applies to real estate incorporation in two different ways.
At the start of the negotiation, the shipowner typically pays the landowner by offering units in the building in exchange for the land where construction will take place.
Alienation in real estate development also takes place once the project is initiated, as the company begins promoting the property to potential investors or tenants.
The funds will be utilized to finance the completion of the construction, which serves as both the primary advantage and the major risk factor of real estate development. If the project fails to attract sufficient interest, it may face a shortage of resources, leading to prolonged legal proceedings, substantial debts, and a series of defaults.
How does the process of real estate incorporation function?
Real estate construction involves four key entities that play a role.
- The builder who will oversee the construction work and raise the structures.
- The landowner is required to allocate his land for the construction project.
- The company is responsible for assessing the economic feasibility of the project, as well as facilitating the partnership between the construction firm and the property owner, and overseeing property sales.
- Investors or prospective renters will purchase the real estate units and provide the necessary funding for the project.
Engaging individuals with diverse interests is crucial for a successful real estate development. The corporate company’s strong performance is vital as it plays a leading role and is primarily responsible for the project’s success.
Real estate incorporation involves a high level of trust among all parties due to the need for continuous support from new buyers.
How is the process of incorporating real estate carried out?
The real estate development involves construction projects that are either in progress or about to begin, necessitating investors to purchase properties that are still in the planning stages. This underscores the importance of trust among buyers, property owners, builders, and corporate entities in the project.
In the past, many ventures failed to materialize due to economic instability or lack of interest from potential investors, leading to concerns among investors and impacting the funding for other projects.
The federal government and Congress implemented Law No. 10.931/2004 in response to this situation, creating the Special Tax Regime of the Affestation Heritage for real estate incorporations. This legislation focuses on the concept of patrimony of affection.
What does emotional heritage entail?
The patrimony of affection, as described by ABRAINC, is a voluntary system in real estate development where assets related to a project are separate from the company’s general assets and are not liable for its debts, including bankruptcy.
The Approval Heritage Law ensures that real estate units will be constructed and delivered to buyers, owners, and developers, regardless of the financial status of the developer.
Law No 10,931/2004 guarantees that property owners will still receive their property even if the real estate company goes bankrupt, reducing legal uncertainties for investors and boosting the real estate market.
Alienation and mortgage are contingent upon the capacity to dispose of property as outlined in Article 756 of the Civil Code. Once the transaction is recorded in the registry, the company forfeits the authority to sell the units that have already been purchased.
How is love characterized?
To establish ownership of real estate within a real estate development, it is essential to register a document signed by all parties involved in the Real Estate Registry. This registration can be completed separately or as an attachment to the incorporation documentation.
The preparation of these documents only needs to specify that the project is subject to the patrimony regime of affectation, as stated in Law No. 4.591/64.
Other documents are essential for real estate incorporation and must be registered in a registry office along with this term, as required by law.
- Land ownership document
- Tax revenues showing a deficit (federal, state, and local levels);
- Property background over the past two decades.
- Construction project authorized by the relevant authorities.
- Calculation of the areas of units.
- Debits with Social Security have an unfavorable accuracy.
- Descriptive documentation of the project.
- Assessment of the total expenses of the business.
- Identification of the optimal land divisions within the independent units.
- Minutes from the upcoming condominium meeting.
- Certificate of financial illness provided by a financial institution.
- Statement including examples of plants, regarding the potential and arrangement of parking spaces.
Refer to Law No. 4.591/64 in its entirety for a comprehensive understanding of all specifics.
Contact IPOG to learn about the opportunities available for students interested in advancing their understanding of incorporation and Real Estate Law at a graduate level.
Difference between incorporator and builder?
Some individuals question the capabilities of developers and builders, suspecting they may overlap in their roles. While a builder could transition into a developer, it remains crucial to distinguish the responsibilities of each aspect within the company.
The constructor is hired by the project’s developer to carry out the work, including drafting architectural and engineering plans, sourcing materials and labor, and ensuring timely delivery.
The incorporator is in charge of property delivery and oversees all aspects of business administration, including unit sales and relations with landowners, buyers, and builders.
Who is eligible to become an embedr?
The real estate developer can be an individual or entity, as long as they meet one of the specified criteria.
- Own the land;
- Prospective buyer.
- be the creator;
- Become a real estate agent.
The integrator can bear most of the responsibility and also receive most of the rewards when engaging in real estate development instead of relying on financing from a financial institution.
Even when the SELIC, the economy’s primary interest rate, is at its lowest historical level, the long-term interest rate crucial for real estate development continues to be too high and impractical for many business owners.
Real estate incorporation is a more affordable option for real estate financing compared to other methods. Additionally, successful real estate incorporation can generate profits that surpass production costs without being affected by financing interest.
Melhim Namem Chalhub (2005, p.11) describes the defining aspect of the activity as “selling apartments in a future building,” which serves as a way for the developer to secure the necessary funds for the project.
What paperwork is required to establish a real estate corporation?
Creating a real estate company involves a complex and bureaucratic process, including a visit to the registry office and the submission of numerous documents.
Here is a list summarizing the necessary documents for establishing a real estate company:
- Condominium Institution registration.
- Registration requirement for incorporation.
- Land Scripture
- Negative documents.
- Protest Title on Record;
- Architectural design for construction.
- Construction license;
- Land fractions discrimination.
- Standard agreement.
Investing in real estate can be less complicated than that.
Real estate development can be a beneficial opportunity for many individuals, particularly if they already own a piece of land suitable for a specific purpose.
If you are looking to invest in real estate, there are simpler, more secure, and more lucrative investment opportunities available.
You can trust a manager to purchase shares in various projects like hospitals, buildings, and shopping centers through FIIs.
FIIs offer a quicker and less complex way to start investing, with the added benefit of diversification. Instead of investing in a single property, you can invest in multiple properties, reducing the impact of any underperforming assets.
If you prefer not to compensate a fund manager, a superior alternative is real estate crowdfunding.
Investing in real estate through investment crowdfunding enables you to invest without any fees and with predetermined returns, providing greater security and predictability.
After the construction is finished, you will receive your funds along with interest regardless of the property’s future performance.
Summary
Real estate incorporation plays a crucial part in urban and economic growth, but it faces various complexities and challenges. However, there is a significant lack of clarity regarding its specific aspects.
The real estate development process relies on a complex web of individuals, including builders, developers, landowners, and investors, who need to trust each other for the project to succeed. Central to this success is the consistent influx of new buyers.
The implementation of laws like the Heritage Certification aims to reduce risks and offer security to participants, which helps stimulate the real estate sector.
Despite the difficulties it faces, this industry remains vital for city and economic growth, providing investment prospects. However, simpler, safer, and more affordable options like Real Estate Investment Funds (FIIs) and real estate crowdfunding are becoming more appealing to investors seeking security and profitability.
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