The increasing CRI market
The Real Estate Receivables Certificate (CRI, in the Portuguese acronym) market has shown a strong growth in recent years. The volume of CRIs traded at B3 between January and September this year is 60% higher than the volume traded in the same period of 2018, according to B3 itself. It is also expected that the volume of this security in the market continues to grow next year.
This growth is due to several reasons, which include tax benefits to individuals (income derived from CRI is exempt from income tax to individuals), the low interest rate scenario in Brazil, the comeback of the real estate market and the recent movement by the Brazilian Securities Exchange Commission (CVM) in making the rules of using CRI as a guarantee more flexible.
In July, CVM published a decision allowing the use of CRI for reimbursement of expenses already disbursed from the real estate projects, and not just for payment of future expenses, which was already permitted.
Although the consultation that generated this decision by CVM was made by XP Investimentos, everyone benefits from it. This is another case where the technical area of CVM refuted such possibility and the CVM Board of Commissioners decided to move forward with the offer.
To support its understanding, the CVM Board of Commissioners argued that although it is possible to use CRI funds for the reimbursement of expenses, a time limitation is required. Therefore, it suggests that only expenses incurred in the 24 months prior to the termination of the CRIs public offering should be considered. They based this argument on the term provided for in Law No. 12,431/11.
In addition to the deadline, in order for the issuance of the CRI for reimbursement of expenses to stand still, it is also necessary that the expenses result from the acquisition, construction and/or renovation of the real estate properties. Expenses incurred indirectly to these activities, such as brokerage, registration, taxes or attorney’s fees in the preparation/negotiation of deeds are not eligible for reimbursement. In addition, it will be necessary to include in the term of securitization the details of these expenses and the individualized specification of each of the real estate properties linked to such expenses. All invoices, deeds and other documents evidencing such expenses must be presented to the trustee.
With these changes, the spectrum of use of CRIs is increased and a greater security for the market is ensured. The structure for reimbursement eliminates the risk of misusing CRI issuances since the destination will be known from the start.
By Julia Pinheiro, associate at Candido Martins Advogados