SAO PAULO, Feb 3 (Reuters) - Homebuilder Cyrela Brazil Realty SA Chief Executive Elie Horn said in a newspaper interview published on Friday that he believes clients should lose their down payments if they cancel a residential purchase.
Speaking to Valor Economico, Horn adopted his stance as the government, consumer groups and homebuilders are negotiating industry rules for buyers to keep a share of a home’s value in the event they scrap its acquisition.
Cyrela’s net sales have been hurt by cancellations, keeping a lid on revenues, impacting net income and causing the company to burn through cash, according to securities filings.
Currently, there are no Brazilian industry standards for how much, if any, of a down payment should be returned to a buyer who decides not go ahead with the purchase.
“The right thing would be the buyer losing everything,” Horn told the newspaper, adding that it was not enough for clients to lose only part of their down payment.
Horn did not specify how much of the price of Cyrela-built residences were requested as down payments.
Brazilian courts sometimes have ruled in favor of homebuyers receiving all or part of their down payment should a purchase not reach fruition.
Typically, Brazilian homebuyers pay a down payment on a residence and then complete the purchase after securing a mortgage for the balance.
Press representatives for Cyrela were not immediately available to confirm the accuracy of Horn’s remarks. The company, based in Sao Paulo, is a leading homebuilder for the Brazilian high-end market.
Setting industry-wide cancellation rules would help homebuilders retain part of the revenue they have already booked while cutting general and administrative expenses, which tend to rise with the legal costs associated with the canceled purchases, Banco BTG Pactual said in a report on Jan. 29.
Without clear rules, homebuilders are “at the mercy of case-by-case rulings,” BTG Pactual analyst Gustavo Cambauva wrote. (Reporting by Ana Mano Editing by W Simon)