Real Estate Sector in Rondônia: Zoghbi Negócios Imobiliários

Interview with Cezar Zoghbi, Director of Zoghbi Negócios Imobiliários

Let’s begin by talking a bit about the real estate market in general in Rondônia, what are the characteristics of this state?

The economy in this state has different strengths; in the interior the economy is focused around agriculture and cattle breeding. This area has been developing and there are now more than 50 municipalities. Then there is the capital city of the state, with approximately 500 thousand inhabitants, almost half the population of the state which totals to 1.2 million. Here in the capital the economy is more balanced, with many public servants for the federal and municipal government. Commerce is a also a strong part of the economy here. Therefore I would say the economy of the interior of the state is based on areas such as agriculture and cattle breeding and also the mineral sector. Here in the capital city the main sectors are civil servants and also the services sector.

In the real estate market, what differentiates Rondônia from other states?

Rondônia had in the past really repressed demand in the property market. Until the mid 2005 or 2006 there were hardly any real estate projects launched in the capital or the interior. I will talk mostly about the capital as this is where we personally work. Until the middle of 2005, when studies were carried out in order to look at the viability of the two factories that were being built in Jirau and Santo Antônio, we had a population that was between 300 and 350 thousand inhabitants. The demand for real estate was high but we had a chronic problem here with documentation. At that time there were few options facilitating access to credit for purchasing property. We also had the problem of high interest rates so it was a very complicated situation.

However now that the economy here in Brazil has changed and with the arrival of these factories here in Porto Velho we can see that the scenario changed quickly. In 2007 with the approved auction of those factories we had a race between many companies coming to prospect for business here in the capital over a period of about a year between 2007 and 2008. With the arrival of these factories the expectations were for the population to double over a period of less than 10 years. Today, five years after the process was initiated we have a population of 500 thousand inhabitants. So in this time the population has grown by 150 thousand inhabitants.

This has caused a huge impact on our economy, and our real estate sector. We have seen the arrival of large national construction companies, who looked at this market and saw the opportunities and niche areas. The local construction companies who perhaps didn’t previously have much interest in investing a great deal in real estate made the most of the increasing opportunities and launched many projects both vertical and horizontal. Today when you walk around the city Porto Velho, you will notice a great difference from 2 or 3 years ago. There are many large condominiums now whereas some years ago there were very few. We are now heading towards having 300 condominiums.

How do you see the future for both residential and commercial properties?

The residential sector has grown very much. It has experienced the most investment. 80% to 90% of projects launched have been destined for residential purposes. Now we are in the stages of handing over these projects after 2 or 3 years of construction. We are seeing an internal transference of people who used to live in houses they either owned or rented, but were in places with poor infrastructure, poor safety or little leisure facilities. These people are moving to new houses and buildings, mostly into apartments or residences within the condominiums as they want to have an improved quality of life. We also now have a quantity of properties that we never had on the market before. These people are moving homes and are therefore able to sell their previous properties and use them to finance their new houses, or to rent out their previous property to generate income for themselves. It is a very interesting time for us here.

We are excited about 2013 because we are seeing a change in the behaviour of the market. Generally in January the real estate market used to be a bit slow. It is a time when many people travel or have had their holidays and so it is a slow month for real estate. However this year there are lots of properties that were not ready before but are now and these new properties are ready for financing, which goes against what we have been used to here. We have always had high demand but we have not always had open lines of credit and the interests rates used to be very high. Now this has changed and we have many properties that have become available now over the last 3 or 4 years and they are all apt for purchasing on finance. So we believe that the residential market is going to continue growing for a good while to come not necessarily at the speed that we have experienced during the ‘factory boom’ in 2008 to 2010, where growth was exponential. Now the growth is more natural and steadier. In business now there is no longer the aspect of real estate speculation that happened at the time of the boom, the tendency that we are experiencing on the market has changed. The properties were expensive in market value and now the transfers on them are becoming higher. Therefore I feel sure that the residential market is going to continue growing, more slowly than before but constantly. Those who invest in the market know that they are going to see good returns, it’s a good time to buy, there is a high demand and there is access to finance.

The commercial market is where we still have a large void. Our company also deals with leases, and for everyone who deals with leases and sales they know that very little was launched for corporations. Therefore those who need premises to place their business here in this market encounter very little on offer in this city, which is obviously a problem for them. When I analyse the market at the moment I can see that this area of the market has barely been explored and that there is lots of room for growth over the next few years.

What advice would you give to a foreign investor who would like to invest in this area?

Firstly, I would say to have a good assessment of the market because there are many areas with high demand here. You have to get to know the market well, especially the competition in the field that you wish to set up in. We have had and still have many foreign investors here, and I am sure that more will come due to the great opportunities that Brazil, this region and the Amazon have to offer. Porto Velho is a very attractive place for business because the internal consumerism and demand is very high. So I would advise anyone interested in doing business here to carry out a good assessment of the situation, to know where the demand is, whether it is in corporate investment, residences or allotments. We have a shortage here in industrial areas; this kind of thing doesn’t exist here yet. As someone who works in the area of property rentals, we are often asked for this kind of product by small or medium sized companies that have set up here who need warehouses of 1000 m2 or more, etc. These kind of products are scarcely available on the market at the moment. We haven’t had a flood of investment to deal with this demand in the market.

I would definitely say it is important to do an in depth assessment to identify the excellent opportunities that exist here, and then obviously to become familiar with the legal aspects, of how foreign capital enters the country, the taxes, etc… so that you aren’t surprised later on.

Could you please tell us a little bit about your company Zoghbi, how the company started and a few key details?

I entered the market as a realtor in 1998. I come from a very traditional family here in Porto Velho; my father who is the patriarch of our family arrived here in 1949. He was always a businessman and a trader. He launched allotments in the 80s and I entered this business in 1998 after having studied in São Paulo. I worked for three years in real estate then I worked in academia before returning to work in real estate in 2005 when my wife and I started this company. Originally it all started just with me as I put all my academic skills into this business. We saw that there was going to be a lot of growth here in this market with the arrival of the factories. We began to invest a lot into the company; I went many times to São Paulo to investigate the large property estate agents for example Fernandez Mera, López and Lello Condominiums among others. We noticed that our market demands a lot of professionalism so we began to structure ourselves properly.

Our company is only 7 years old. Today we act as a project launcher. Since 2007 we have launched nearly all the projects that have come into the capital. We have carried out many market studies for various construction companies that we know very well. We have carried out lots of analyses for other types of investment also. We work in partnership with construction companies; we are also bank correspondents, so we have dominium of the lines of credit, specifically with Caixa Economica. We deal principally with ready for sale properties, this is our strength and was how I started when I was setting out at the beginning and working on my own. We now have about 45 to 50 people working for the company depending on the trades that are going on within our company.

Another area that we are very strong in today and is an area that we have invested a lot in over the last 3 years is property administration and rentals. The service aspect is growing a lot. We have identified that after launching projects, the second most important area of this business is that of services. Last year we began our new branch of condominium administration. We have done a lot of research into this area; over 2 and a half years we went many times to São Paulo to research the largest condominium administration companies. We really studied the market to be able to enter this market last year and we are growing in this area.

We know that sales are never going to stop here in this market. The area of services is only going to increase especially rentals as there are many properties available and now we have the area of condominium administration that is looking very positive. We have been structuring the company, making it very professional but we mustn’t have the pretention of being the largest property agent. With our knowledge we want to be able to offer the best service available with a lot of credibility. The name Zoghbi is not just the name of a company; it is a surname that has been here for 60 years and we have to preserve the patrimony of this name, which is associated with good service by all of our clients in all areas.

Continuing with the strengths of the company, do you see a great difference in comparison with the competition?

Thanks to the investment that we have made in terms of management, we have over the last 4 years had the opportunity to hire the best business consultant in the state, who came to our company and made many improvements in terms of our routines and the way we deal with certain aspects, so that we can be sure that we are always offering the best service possible. We also work with local builders who pass over their sales to us and also the coordination of those sales. We work in partnerships with our colleagues who also own real estate agencies. We know that there is competition, but it is healthy competition. We have excellent relations with almost 100% of the other real estate agents that are structured to be able to launch projects. We launch a project and coordinate the sales. We have a team that organises the sales but we also call in the other companies to be able to offer sales. This is really important strategically, we need to have good alliances with the property agents, because one moment we are selling one product but in the next moment we will move on to something different and we need to be in partnership for this. We also work together to agree on the level of qualifications of the professionals that are working in this industry. Who gains from this in the end? The construction company wins because they have a good team of people to sell their properties and also the public who are our clients whom we approach when we sell these products.

What differentiates us from our competition is that we work in the four areas of the market, whereas most agents just work with sales, or sales and rentals. We are excellently placed in the market today, we are well structured and we are able to see to all these demands. This is all because we dedicated years of investment in good management, research and we have excellent partnerships in the property sector. We really invested in learning how to work on par with the best estate agents in the country. We are very dedicated to giving the best service here in Porto Velho, Rondônia.

What are the greatest challenges faced by Zoghbi?

Our challenges are to maintain the growth that we have been experiencing. We must also consolidate our portfolio in terms of condominium and property administration which are the services we offer. In this area we need to hire the right people, and a problem that we have here in Porto Velho, the same as in other cities like Manaus, Belem, São Paulo, etc. is the lack of qualified workforce. A lot of time is lost in training employees when in many cases these employees only stay for a short while with the company because they move on to another location. Here in Porto Velho many people study and want to gain scholarships to go into the public sector which they see as offering stability and so they do not invest in studies to enter the private sector. Therefore obtaining a good workforce is a limitation on our growth and one of our challenges.

Motivating our sales team and our partnerships with good products is my responsibility. As Director of the company I have to make sure I am offering excellent products and new deals. A realtor that works with Zoghbi works with a whole variety of products throughout the year. We have to maintain high quality sales to be able to keep our doors open to prospective businesses who want to launch projects here and for property or land owners who want to sell or rent out their properties. These clients come to us because they know that we carry out extensive research and we know all the legal and financial aspects, etc.

We are very well prepared to be able to offer the best possible service to all of our customers. This really is one of our main challenges, to maintain this quality of service for all our clients, in this new phase of the property market that we are experiencing currently.

What is your vision for the company in 2 or 3 years’ time?

We are working really hard in this company. We want to follow the growth and maturity that we are seeing in this state. Rondônia is a really young state; there are still so many opportunities here for investment and growth. Porto Velho is going through a transformation, and growth is going to become much more structured in comparison to the commotion we saw in the 80s and recently with the factory boom. The service sector is going to grow to fulfil the increased demand, and will be of high quality and fair price. Here in this state, the main factors which enable a business to remain on the market are credibility, quality and fair prices. This means that you have to have a cohesive team to be able to survive in this market and follow the growth of this sector.