SAO PAULO Feb 3 Homebuilder Cyrela Brazil
Realty SA Chief Executive Elie Horn said in a
newspaper interview published on Friday that he believes clients
should lose their down payments if they cancel a residential
Speaking to Valor Economico, Horn adopted his stance as the
government, consumer groups and homebuilders are negotiating
industry rules for buyers to keep a share of a home's value in
the event they scrap its acquisition.
Cyrela's net sales have been hurt by cancellations, keeping
a lid on revenues, impacting net income and causing the company
to burn through cash, according to securities filings.
Currently, there are no Brazilian industry standards for how
much, if any, of a down payment should be returned to a buyer
who decides not go ahead with the purchase.
"The right thing would be the buyer losing everything," Horn
told the newspaper, adding that it was not enough for clients to
lose only part of their down payment.
Horn did not specify how much of the price of Cyrela-built
residences were requested as down payments.
Brazilian courts sometimes have ruled in favor of homebuyers
receiving all or part of their down payment should a purchase
not reach fruition.
Typically, Brazilian homebuyers pay a down payment on a
residence and then complete the purchase after securing a
mortgage for the balance.
Press representatives for Cyrela were not immediately
available to confirm the accuracy of Horn's remarks. The
company, based in Sao Paulo, is a leading homebuilder for the
Brazilian high-end market.
Setting industry-wide cancellation rules would help
homebuilders retain part of the revenue they have already booked
while cutting general and administrative expenses, which tend to
rise with the legal costs associated with the canceled
purchases, Banco BTG Pactual said in a report on Jan. 29.
Without clear rules, homebuilders are "at the mercy of
case-by-case rulings," BTG Pactual analyst Gustavo Cambauva
(Reporting by Ana Mano Editing by W Simon)