Brazilian Real Estate

David Lawant55.11 3073-3037

david.lawant@itausecurities.com

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Cecília Viriato55.11 3073-3007

cecilia.viriato@itausecurities.com

Real Estate Sector Overview

SECTION 1

The Real Estate Sector and Capital Markets

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The Real Estate Sector in Capital Markets

Source: Bloomberg and Itaú Securities

20092007 2008

Brazilian Homebuilders Ibovespa Index

100

129

111

140

124

82

37

Overall Market OutlookSECTION 2

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Outlook is Positive in Our View due to a Combination of Factors

Source: Itaú Securtities

PositiveMacroeconomic

Trend

GovernmentSupport forthe Sector

StructuralPent-upDemand

Availabilityof

Financing

Itaú’s economists forecast GDP growth of 4.8% in 2010, backed by record-low level of interest rates remaining at 8.75%

Inflation is expected to remain under control at around 4% in 2009 and 2010

Household formation is at 1.4 million per year

Quantitative and qualitative housing deficit

Number of units financed is still similar to 1980’s

Balance of savings accounts increased fromR$127 million in 2004 to R$231 million in July 2009

Working capital lines from commercial banks

Real Estate companies are returning to capital markets

“Minha Casa Minha Vida” - R$34 bn housing program

Several working capital lines provided for homebuilders

Caixa Economica Federal as financing operator for low-income housing

Overall Market Outlook

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Overall Market Outlook

Real Estate Consumer Confidence Index (from Lopes)

Source: Lopes and Itaú Securtities

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Overall Market Outlook

Average Price of Launches in the Metropolitan Region of São Paulo (R$/m2)

Source: Embraesp, Lopes and Itaú Securities. Note: Deflated by the INCC index.

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Overall Market Outlook

Source: Selected Companies and Itaú Securtities

Contracted Sales (in R$ million) and Sales Speed (in %)

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Overall Market Outlook

Source: Selected Companies and Itaú Securtities

Launches (in R$ million) and months of inventory

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Overall Market Outlook

Source: Selected Companies and Itaú Securtities

Cash Burn (in R$ million) and net debt/equity levels (%)

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“Minha Casa Minha Vida” Housing Program

Three broad income segment classes

0-3 minimum wages

3-6 minimum wages

6-10 minimum wages

Other measures

Cash flow profile of projectsfor homebuilders

Implementation Price amortization system

R$16 billion of subsidies, installments will be 10% of income with a minimum of R$50 Caixa Economica Federal (CEF) will analyze projects and contract developers

R$10 billion for subsidies, reaching up to R$23,000 per unit Guarantee fund in case of unemployment (24-36 months) and reduced rates to TR+5%

Guarantee fund in case of unemployment (12-24 months)

Reduction in life insurance embedded in the mortgage from 4-35% to 1-7% of installment Reduction in registration fees of 80-100% for the homebuyer and 75-90% for the developer

Due to legal risk, CEF only uses the SAC amortization table. The Price sales table, which yields lower initial installments is still not clear if it will be used or not

For the 0-3 minimum wages segment seems that companies will work more as contractors than as developers. Other income segments might use a scheme like “Credito Associativo”

What has is still uncertain?

Mid and Mid-high income Increase in SFH cap limit from R$350,000 to R$500,000 per unit Maximum amount financed raised to 90% from 80% previously

Other benefits outside the package

FGTS mortgage lending increased

Recent debt raising operations from Tenda, MRV and PDG Lower launches put less pressure on cash requirements

Key Investment ThemesSECTION 3

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Key Investment Themes

Key Investment Themes in a Medium Term Perspective

Low Income Exposure Profitability

Convergence to IFRS Accounting Standards

Execution RiskSustainability of the Housing Program

Geographical Diversification

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Contact Information

DAVID LAWANT – REAL ESTATE ANALYST FROM ITAÚ SECURITIES

+55 11 3073 3037

DAVID.LAWANT@ITAUSECURITIES.COM

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