What Brazil Can Learn From U.S. Real Estate Credit
- How international trends could unlock a new funding phase in Brazil’s market
Brazil’s real estate financing system is undergoing a structural transformation in its operating logic. As previously explored by REsource, the environment of high interest rates and tighter credit conditions has reshaped capital flows in the sector, shifting the protagonism away from the traditional banking model toward more hybrid structures, with greater participation from equity investors and institutional vehicles such as real estate investment funds (FIIs).
Amid this new cycle, a key question emerges: how can international experience — particularly that of the United States, where the market operates with more sophisticated instruments, diversified funding sources, and deeper capital markets — influence and accelerate the evolution of Brazil’s financing model?
To better understand the American logic, REsource interviewed Marco Antonio Allegro, an attorney specialized in real estate and contractual law.
Key Structural Differences
To assess opportunities for inspiration from the U.S. model, it is essential to clarify the structural differences between the two systems. Allegro highlights that the central discrepancy lies in the origin of capital and the diversity of funding sources:
“In the United States, financing is predominantly capital-markets-based and supported by a network of thousands of regional banks. In Brazil, credit is concentrated in a few retail banks and heavily dependent on earmarked funding sources such as savings accounts and the FGTS.”
Another important distinction involves liability structures. The U.S. market widely adopts non-recourse debt, in which collateral is limited to the property itself. In Brazil, financing structures still require corporate guarantees, bank sureties, and often additional shareholder backing — increasing both cost and credit restrictions.
Where Does Credit Supply Come From?
According to the specialist, the abundance and predictability of credit in the U.S. stem from the depth of the secondary debt market. Through securitization instruments such as Commercial Mortgage-Backed Securities (CMBS), risk is distributed among global investors, freeing up banks’ balance sheets for new lending.
“In Brazil, volatility in the benchmark interest rate and legal uncertainty surrounding collateral enforcement create an environment of excessive caution.”
While in the U.S. predictability is supported by a relatively stable long-term yield curve — allowing financial planning horizons of 10 to 20 years — Brazil still operates within shorter timeframes, subject to abrupt cycles.
The Role of Regional Banks
In the United States, regional banks form the backbone of local development:
“They finance mid-sized projects with deep knowledge of their markets, while capital markets — through debt funds and REITs — absorb larger-scale developments.”
In Brazil, banking concentration and regulatory costs make replication of this model more challenging. Still, the growth of private credit funds and real estate receivables funds (FIDCs) signals early steps toward decentralization.
Leverage: Who Can Do More with Less?
In the U.S., Loan-to-Cost (LTC) ratios in construction financing typically range from 60% to 75%, often enhanced with mezzanine debt. In Brazil, LTC rarely exceeds 50% to 60%, limiting developers’ leverage capacity.
Underwriting: Technical Analysis vs. Guarantees
The U.S. risk assessment process is more technical and asset-focused. Metrics such as DSCR (Debt Service Coverage Ratio) and Debt Yield guide lending decisions by projecting the property’s cash flow generation capacity across different cycles.
“Brazil could evolve by depersonalizing credit and strengthening technical analysis of real estate fundamentals, such as structural vacancy, absorption rates, and building durability.”
Pre-Leasing as a Risk Pillar
In the U.S., pre-leasing is nearly mandatory for construction financing approval. Contracts signed with anchor tenants ensure predictable cash flow and reduce lender risk.
“In Brazil, speculative construction still predominates. The Built-to-Suit model already incorporates pre-contracting logic, but it could expand to multi-tenant projects, with credit released in tranches according to pre-leasing performance.”
Structured Instruments: Where to Advance
The American market widely uses mezzanine debt, preferred equity, and sale-leaseback structures. In Brazil, although CRIs (Real Estate Receivables Certificates) have grown, liquidity for higher-risk securities remains limited.
“Real estate investment funds could act more strategically as mezzanine debt providers, filling the gap between senior credit and equity, creating more sophisticated capital stacks.”
Capital Markets: The Missing Piece
In the U.S., capital markets account for a dominant share of real estate funding — in some segments, nearly half of the total. In Brazil, traditional bank credit still prevails.
To expand the capital markets channel, Allegro points to three essential steps: consolidation of securitization, greater data transparency, and contractual standardization.
The creation of robust price and vacancy indices would enhance confidence among institutional and international investors.
Legal Certainty: The Decisive Factor
One of the greatest differentiators of the U.S. model lies in legal predictability. Collateral enforcement is fast and standardized. In Brazil, judicial delays and uncertainty surrounding fiduciary lien execution increase perceived risk.
The Necessary Reform
To accelerate the development of Brazil’s commercial real estate market, the priority would be clear:
“Modernizing and streamlining debt securitization while definitively consolidating legal certainty around real estate collateral.”
According to Allegro, ensuring that creditors can repossess and liquidate assets efficiently would allow banks to transfer loans to capital markets more effectively — unlocking a new phase of funding for Brazil’s commercial real estate sector.
