January 17, 2017 / 4:54 PM / a year ago

UPDATE 1-Brazil, homebuilders near decision on sales cancellation rules -sources

By Gabriela Mello and Ana Mano

SAO PAULO, Jan 17 (Reuters) - Brazil’s government and homebuilders are nearing an agreement on new industry rules giving companies the right to keep a defined share of the value of the home in the event of a canceled purchase, according three people briefed on the matter.

A meeting to confirm the potential agreement was scheduled to take place on Tuesday in Brasília but was delayed until Jan. 26 by the Planning Ministry, according to another person, who was not authorized to discuss the matter publicly.

Under the proposal most likely to be adopted, homebuilders may be allowed to retain an average of 9 percent to 15 percent of the value of units if buyers cancel a purchase, one of the industry sources said on condition of anonymity because the agreement was not finalized.

A Planning Ministry official said there was no meeting scheduled on the matter.

The talks underscore attempts to define clearer rules, and mitigate the impact of sales cancellations on real estate companies amid Brazil’s harshest recession on record. The potential agreement on new industry rules was first reported by newspaper O Estado de S. Paulo on Saturday.

“Sales cancellations battered the companies and made the government worried,” said the second industry source.

Through October, sales cancellations reached 37,702 units, according to real estate developers group Abrainc.

According to the third industry source, the cancellations provoked a surge of litigation. Aside from the liabilities arising from contradictory court rulings, cancellations have caused companies to miss sales targets, while raising the risk that banks could cut financing for projects, the same source said.

Another proposal under consideration would give builders the right to retain 10 percent of the value of the contract depending on the size of the payments buyers already made, the third industry source said.

Shares of Brazilian homebuilders rose on Tuesday after Reuters reported on the likely accord between the government and homebuilders.

An index tracking real estate firms listed in the São Paulo Stock Exchange rose 0.93 percent on Tuesday afternoon, trading at a nearly three-month high.

Once the companies and the relevant government agencies agree on the new set of rules, a decree or bill will have to be approved in Congress before they can be enforced, one of the industry sources said. (Reporting by Gabriela Mello and Ana Mano; Editing by Chris Reese)

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