Outlook
The Need
South American Homes ("SAH") was organized to take advantage of a growing unsatisfied demand in a construction market with significant supply inefficiencies in sustainable popular housing communities in Brazil and Peru.
- In Brazil alone, the deficit is currently estimated at 8 million homes and growing to 22 million by 2025.
- In order to compete in this market, SAH needed to have a unique profile and sophisticated business model, which brought together the knowledge, technology, design and construction of several institutions that have been in the popular home construction industry for years.
- Those institutions, for all their skill and wisdom, have been unable to integrate those skills with one another with a view to building a top-quality, environmentally-friendly $8,000 cost house in two to three days - in a highly profitable business model that avoids bureaucracy, expedites financing and mortgaging, and ensures successful sales and record timeframes.
- SAH is completing the financing for the foundation of the holding company, which will have a subsidiary in Brazil. The holding company will provide the Brazilian SAH with the equity it needs to fund various and numerous projects throughout the region. Each project will be structured as its one special purpose vehicle (SPV). SAH has special relationships with the holding company as well as with each SPV.
- Few existing construction companies can make a reasonable profit with this type of house because of the cost of traditional materials and the relatively long time it takes to build a house.
- SAH sustainable communities offer water treatment, waste treatment and new lighting systems for each community.
- SAH and its partners will provide the necessary social support and security to maintain the viability of the community and prevent degradation into unhealthy slums.
- SAH will maintain a low overhead because it out-sources all of its critical services.
Current and Projected Market
Brazilian market: The Brazilian market currently shows a housing deficit of more than 7 million homes, representing a market opportunity of $50.4B. Projections show a deficit of 29 million homes by 2020 (Source: Brazil Ministry of Housing). Below is a description of potential of additional housing projects, pending for SAH in Brazil:
- State Government of Acre, Rio Branco (Acre): The proposed project is within the city limits of Rio Branco, and is for 5,000 houses. Local contractors currently can build a 42 sqm (452 sqft) house at a cost of $7.5K; a Moladi house of the same size can be built for $5,000 and sold for $7,250.
- Sao Paulo: SAH has an agreement with a development company to build up to 50,000 houses per year using one of the technologies, and initial pre-approval projects to construct 1,800 houses using conventional building methods. Land is available for initial development, and the houses are estimated to cost $15,400 and sell for $20,000.
- Exata, Recife (Pernambuco): Exata is a mid-sized construction company in Recife with land and project approval for 2,000 homes, 400 of which have been completed. They want SAH to build the remaining 1,600 homes and the infrastructure to support them using one our selected technologies. SAH can deliver these homes and the support infrastructure for $9,000 or 25% less than the market. The homes will sell for $20,000. There is a roster of 1,500 families to buy the homes as they are completed.
- Sao Francisco de Conde (Bahia): Sao Francisco de Conde wishes to build 4,000 popular homes, starting initially with 1,000 houses. The city government will subsidize the project by donating the land; provide or build the infrastructure to support the houses (roads, water, electricity, etc.); ensure permitting and regulatory compliance, and guarantee the purchase of each house.
SAH baseline market entry numbers: First year goal is 1,925 houses, the second year goal is 7,000 houses and the third year goal is 20,000 houses.
SAH Opportunity growth numbers by project and country:
- Brazil: Planned and pending project for construction of up to 9,500 houses; in several areas and phases over 5 years, as detailed below. Additionally, there is an opportunity to grow to building up to 50,000 homes per year in Sao Paulo.
- Peru: Construction of up to 25,000 homes over a 5-year period; reconstruction of homes damaged in a natural disaster. The government has stated an intention to subsidize the project, up to $6,000 per house.
SAH has a unique opportunity to address a neglected world-wide market - a significant deficit of affordable housing - with high-quality, low cost community development projects that can be delivered in as little as 18 months. The houses are durable and functional, sized between 38 and 68 square meters (409 to 732 square feet), in some cases with a carport, a separate covered area away from the house for the washing of clothes, and enough land for a garden. The houses are built in sustainable communities, complete with infrastructure such as roads, water, electricity, and security. The water purification/sewage system is environmentally friendly, and the LED lighting system does not attract insects as other light sources do. The houses are earthquake, hurricane, and pest resistant and can be constructed in two to three days. A number of local, regional, and national governmental agencies have offered financial, tax, and regulatory assistance to facilitate the process of getting SAH into their areas of greatest need - which could facilitate reaching lowest-income segments while attaining attractive levels of profitability. The construction practices are environmentally friendly, and the molds used are both reusable and recyclable. The projects provide much needed stimulation to local economies by relying on local raw materials and local, unskilled labor. The houses are built at an extremely low cost with the highest of quality.
