By Eduardo Cramer Ono and Luiz Antônio Althoff
Brazil’s real estate financing model has traditionally relied on savings deposits as one of its main pillars. Funds raised through this mechanism are channeled, via the Brazilian Savings and Loan System (Sistema Brasileiro de Poupança e Empréstimo – SBPE), into credit lines for real estate development and housing finance at historically competitive rates. In recent cycles, however, savings accounts have recorded net withdrawals exceeding inflows, a trend associated with competition from investments offering more attractive returns and with higher Selic interest rates. In practical terms, this has reduced banks’ capacity to originate real estate loans under the conditions and at the volumes to which companies in the sector had become accustomed.
Against this backdrop, real estate developers and land development companies have increasingly been required to diversify their funding sources, turning more frequently to the capital markets, securitization structures, and structured credit facilities provided by financial institutions and private investors. This transition, however, is not without challenges. Structured financing transactions involve rigorous credit analysis, robust collateral requirements, financial covenants and, above all, a level of due diligence on the borrower’s corporate governance that many companies in the sector are not yet prepared to meet.
This is where corporate governance begins to directly influence credit assessments and the conditions under which funding can be accessed. A lender’s assessment is not limited to the economic viability of the development project; it also extends to the company’s decision-making structure and its ability to produce reliable information, manage risks, and demonstrate adequate internal controls. In this context, relevant factors include the quality and timeliness of financial statements, the existence of consistently prepared budgets and cash flow projections, the segregation of duties between technical and financial departments, clearly defined levels of authority for incurring debt, granting collateral, and making investments, as well as the company’s ability to present an organized track record of the performance of previous developments.
From this perspective, corporate governance also serves as a mechanism for reducing information asymmetry between the company and the lender. Clear decision-making structures, adequate internal controls, and timely and reliable financial information enable creditors to better understand the risks associated with the transaction, monitor compliance with the obligations undertaken, and identify potential deviations at an early stage.
Family-owned businesses, in particular, face the additional challenge of ensuring appropriate asset and financial segregation among shareholders, holding companies, operating companies, and special purpose entities (SPEs), preventing internal relationships within the corporate group from compromising the transparency required for the lender’s assessment.
The practical recommendation is clear: companies should establish formal financial and budgetary governance processes in advance, even when they are not actively seeking financing. This includes standardizing management reports, formalizing budget approval policies, defining levels of authority and procedures for approving investments, indebtedness, and the granting of collateral, establishing rules for related-party transactions, and maintaining organized corporate and contractual documentation. Depending on the organization’s size and complexity, establishing boards or advisory committees may also contribute to greater consistency and predictability in the decision-making process.
Companies that enter negotiations with this level of preparation tend to secure more favorable terms regarding maturity, interest rates, and collateral requirements, while also significantly reducing the time required to originate financing transactions.
In a market where traditional funding sources are losing momentum, well-structured corporate governance is no longer merely a competitive advantage—it is becoming a prerequisite. Real estate developers and land development companies that invest in this level of preparedness will be better positioned to negotiate credit with private banks and to sustain their growth regardless of fluctuations in the savings deposit market.
