Gafisa Rallies as Payroll Tax Breaks Support Housing Industry

Gafisa SA rose the most among Brazil’s homebuilders as the government extended payroll tax breaks this week to the construction industry and analysts forecast the central bank will cut borrowing costs further.

Shares (GFSA3) of Brazil’s fourth-biggest homebuilder rallied 6.6 percent to 4.88 reais. Gafisa extended its advance since Nov. 30 to 16 percent, the biggest weekly increase since the week ended Aug. 10. The BM&FBovespa Real Estate Index (IMOBBV) jumped 4.3 percent this week.

Finance Minister Guido Mantega said Dec. 4 that construction companies will pay a 2 percent tax on sales revenue instead of a 20 percent payroll levy, amounting to savings of 2.85 billion reais ($1.4 billion) for the industry. Itau Unibanco Holding SA (ITUB4) and Banco Santander Brasil SA (BSBR) said yesterday that the central bank will make further cuts in the target lending rate after the economy grew in third quarter at half the pace forecast by economists.

“Lower interest rates attract more consumers interested in buying a house or apartment,” said Pedro Galdi, the chief strategist at Sao Paulo-based SLW Corretora, said in a phone interview. “And payroll tax breaks should also help homebuilders to improve their results.”

Itau forecasts policy makers will reduce the benchmark Selic one percentage point in 2013. Santander gave a similar outlook, abandoning an earlier view that the target rate would rise to 8.50 percent in 2014.

Gafisa has gained 18 percent this year, compared with 23 percent for the Brazilian real-estate index during the same period.

To contact the reporter on this story: Denyse Godoy in Sao Paulo at

To contact the editor responsible for this story: David Papadopoulos at

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