It All Depends: Buying and Selling Houses in Rio’s Favelas

Resource Library | Author Janice Perlman | Date 2010

In this paper the author examines the real estate markets in Rio de Janeiro, comparing the way property is bought and sold in the formal city and the informal city. The informal city, consisting of favelas (squatter settlements) and illicit/ illegal subdivisions, is often referred to as the morro (the hillside) as opposed to the asfalto (the paved city.) The main distinction is that the residents of informal settlements do not have official title to the property they live on, even though they may have developed the land and built their houses on it fifty years ago. The favela communities exist outside the purview of land-use, zoning, and construction regulations; of density, health and safety standards; and of the laws of private property. Nevertheless, there are thriving real estate markets in the favelas. Buyers and sellers come to agreements on value, procedure and payment and local Residents’ Associations validate the transactions.

The Perlman study found active real estate markets functioning in Rio’s favelas (now numbering 1,025) from the most recently settled to the oldest and most consolidated. Real estate transfers in the formal city are conducted through “Registries of Assets and Properties,” which require proof of ownership, thereby excluding all favelas. In the most desirable locations, a handful of favelas have informal “real estate agencies” (un-certified,) but for all the rest, sales are advertised through word-of-mouth and posted on the walls of the local Residents’ Associations. Created by city government mandate in the 1960s, these Associations serve as liaisons between the favela communities and the government and are authorized to act with some degree of public authority within their own territories.

The majority of property transactions inside favelas take place among residents or between friends and family of residents, although some buyers come from other favelas or directly from the countryside. Property values are determined by the same general criteria as in the formal sector – supply and demand based on location, size, security, and quality. Building codes and permits, occupancy and health standards, and zoning regulations do not exist in favelas. There is no housing finance system for favela residents. Even government mortgage programs designed to reach low income populations exclude virtually all favela residents due to their inability to prove ownership, to meet minimal income criteria, or to provide proof of stable income. Purchases are generally made by full cash payment at the point of sale. These sales are documented in the Residents’ Associations where they are signed by both parties, at least two witnesses, and the President of the Association. A degree of formality is sometimes conferred to the transaction when the President’s signature is verified at the region’s “Registry of Titles and Documents” where a copy of the signature is kept on file.

Despite the apparently clear distinctions between real estate practices in the formal and informal sectors, the lines begin to blur upon closer examination. The procedures vary according to circumstance, location, political connections and money. Even in the formal city, there exist myriad exceptions to every rule – building and zoning codes are often ignored, clandestine constructions are not registered, and property taxes not collected. Neither the formal nor informal real estate markets could function without a strong dose of Brazilian jeito (a knack for making things happen and getting around the rules.) In the words of one downtown real estate agent, “absolutely nothing is impossible in Rio real estate—it all depends.”