With its proximity to the Equator, the Brazilian Northeast is already one of the hottest regions in Latin America’s largest nation. However, of late, what’s really heated up has been the region’s booming real estate market. The Brazilian market in general received a major boost three years ago when the federal government, having lowered, somewhat, its sky-high interest rates, passed legislation obliging Brazilian banks to follow the lead of their foreign counterparts and begin financing housing for middle class and working class Brazilians.
Says Tarcísio Mesquita Teixeira, vice president of Norcon (Sociedade Nordestina de Construções), the fourth largest residential construction firm in Brazil’s North and Northeast: “For 20 years, such financing didn’t exist in Brazil. However, as a result of these new policies, about 18 months ago, the market really took off. Having operated in this sector for over 30 years – and having constructed over 15,000 residential units – Norcon had not only built up a name and reputation, but had also perfected technology and know-how to meet the new challenges of this boom.”
Actually, Norcon has been around for more than three decades. The company, founded in 1958, in Aracaju, the coastal capital of the small Northeastern state of Sergipe, began life carrying out construction projects – most notably the city’s sanitation system – for the public sector. However, by the 1970s, frustrated by the politics involved in public contracts, and spurred on by the vast tracts of land that were available in Aracaju’s expanding urban center, the company made the strategic decision to migrate into the private residential real estate sector.
A Technological Reference
From the beginning, what differentiated Norcon from its competitors was its advanced technology. In particular, the company revolutionized the sector in the early 1980s, by building its own industrial plant where it manufactured prefabricated parts for its projects, including everything from walls and flooring to tubes and pipes. Taking matters into its own hands in such a fashion not only increased efficiency, but ensured quality and security. Explains Mesquita: “Afterwards, all we have to do is transport the material by truck and put everything together. The only work that remains to do onsite is painting. It’s a very fast and efficient system that allows us to deliver apartments to our buyers in record time. In 10 months, we can complete a 10-floor building with 40 apartments.”
Norcon’s strategy gave it a lot of leverage in the market and inspired construction groups from all over Brazil. “We became a national reference,” claims Mesquita. “Lots of students and professionals from around the country, including São Paulo, have come to study our system. A couple of other groups in São Paulo have copied our model, but nobody else has our scale.” This winning model enables Norcon to deliver between 700 and 800 units a year, although its production capacity is close to 1,200.
Along with the ability to construct buildings quickly, on a massive industrial scale, such technology has allowed Norcon to offer homebuyers housing that is much more affordable than that of its competitors. Says Mesquita: “By lowering costs, we have been able to reach a whole other market segment – of people who may want to spend under $50,000 for example. This has made us very versatile, with a presence in all social segments. While a major focus of ours has been luxury condominium complexes, we can also build simpler, low-cost residences. Our ability to do this earns us a great deal of customer loyalty and assures us future business. For instance, I can sell a client a simple, inexpensive apartment. But when he begins earning a bigger salary, he can trade up – handing over his original apartment as partial payment for a bigger and better one. We have some clients who have upgraded apartments, four or five times, in this manner. It‘s a win-win situation for everybody.”
Niche Market of the Future
Meanwhile, at the other end of the spectrum, Norcon is focusing its efforts on an emerging and potentially just as lucrative market: foreigners seeking second homes along the Northeastern coast. According to Mesquita, whereas Europeans used to buy vacation homes in Spain and Portugal, saturation of these markets combined with increased property values have transformed Brazil’s eternally sunny Northeast coast with its paradisiacal beaches and increasingly sophisticated infrastructure – not to mention accessible costs – into a magnet for vacationers.
“This niche market has already taken off in other Northeastern coastal cities such as Fortaleza and Natal,” says Mesquita. “Our plan is to lure Europeans to our region, which is more tranquil. For this reason, we’re offering high quality residential projects with features that take their specific needs and lifestyles into consideration.” Examples range from golf courses to services such as subletting. In terms of the latter, since many foreigner owners only spend a month or two out of the year in these second homes, Norcon offers to find subletters for such clients.
In the meantime, while European buyers are moving to Brazil, Norcon itself is expanding its dominion by moving into the markets of its two Northeastern neighbors: the larger, more populous states of Alagoas (to the north) and Bahia (to the south). Offering myriad attractions to foreign buyers, the capital cities of Maceió and Salvador are thriving urban centers that are also experiencing building booms. Apart from the fact that both markets are very similar to Aracaju’s, both cities are located within 200 miles of Norcon’s headquarters. As such, when Norcon launched its inaugural projects in Alagoas (in 2005) and Bahia (2006), the company encountered few obstacles. “In both markets, we experienced immediate success. We tripled our production capacity and enjoyed rapid sales. Moreover, this expansion helped us to grow by 50 percent last year,” declares Mesquita, adding he envisions similar growth rates for this year. “While it isn’t always easy to enter a new market, by forging partnerships with local commercial interests and participating in municipal life, we quickly became part of these cities’ social fabric.”
And ultimately it is not just individual dwellings, but the quality of urban life in general that Norcon is concerned with. Indeed, in Sergipe – where Norcon is undisputed leader with 50 percent of the market – Norcon acquired land in some of the most promising areas of Aracaju and then set about developing wasteland into vibrant, thriving neighborhoods. One of the best examples is Jardins, a well-to-do, attractive oceanfront district in which Norcon’s residential buildings are anchored to Shopping Jardins, an upscale shopping center also built by the constructor. Says Mesquita: “We end up having an important impact on the growth of cities. And so every time we design a project, we are always considering the effect we will have on urban development. This is why Norcon has been successful and it is why its slogan is ‘Quality of Life’.”