Between 2020 and 2021, the increase in the dollar rate, tied to the high demand for commodities, triggered a significant rise in the General Market Price Index (IGP-M), usually used as an indexer to correct the values of lease agreements.

The increase in the IGP-M (which closed 2021 with 17.81% and accumulated, in May of the same year, a positive variation of 37.04% in 12 months) established a crisis in lease relations and evidenced a problem: the absence of an index that effectively reflects the variations in agreements.

The IGP-M is an index directly affected by the situation of the foreign market and does not have any relationship with the cost of housing in its calculation. For this reason, with the increased reality of the country recorded in the years 2020 and 2021, lessors and lessees began to renegotiate how to correct the values of the contracts.

One of the widely used solutions has been the replacement of the IGP-M by the  Amplified Consumer Price Index (IPCA), which is based on the "inflation of a set of products and services marketed in retail, referring to the personal consumption of households" and which, therefore, also has no direct relationship with variations in the real estate market.

There is, then, an unstable scenario, since both the IGP-M and the IPCA are indices intended for other purposes and do not reflect the changes in the real estate market.

With the proposal to "fill a gap in national statistics" in the niche of lease agreements, the Getúlio Vargas Foundation (FGV) created, on January 11, 2022, a calculation-based index that specifically considers the rental variations, the Residential Rent Variation Index (Ivar). Reported on a monthly basis, the index is part of the fixed calendar of indexes published and calculated by the institution.

To create Ivar, FGV searched for partnerships with real estate management companies, in order to collect data on the values of new agreements and adjustments of existing ones, as well as information on the characteristics of each property. It is important to note that Ivar was designed primarily with the objective of creating an index based on effective agreements data, and not, for example, on rental offer ads.

In its methodology, Ivar applies the weighted average of the data obtained from about ten thousand residential property leases in force in four Brazilian capitals: São Paulo, Rio de Janeiro, Belo Horizonte and Porto Alegre. The expectation is that more cities will be added to the calculation of the index so that it more accurately reflects the situation of the country.

The index also sought to monitor the advances of these lease agreements in the last three years, including both extraordinary variations and pandemic periods, as well as ordinary variations, which commonly result from leases, such as contractual adjustment. In January 2021, the index recorded an increase of 1.86%, while in February 2021, the accumulated change in 12 months was 2.92%.

It is a revolutionary index, which promises to solve the main point of conflict in lease relations and ensure greater predictability in the agreement relationship. However, we understand that there is a long way to go for Ivar to be incorporated by the real estate market, especially in relation to the expansion of the data used for its calculation.

According to a survey conducted in 2018 by the Brazilian Institute of Geography and Statistics (IBGE), Brazil has approximately 12.9 million properties rented for residential purposes. A base composed of ten thousand contracts, located in four capitals, therefore, is not enough to consolidate an index that aims to solve a problem of leases throughout the Brazilian territory.

In addition, Ivar has also limited  nature of the occupation of the property. The index seeks to analyze only variations in residential leases and does not apply to agreements for commercial purposes. In fact, FGV does not yet have robust information about this rental segment. We emphasize that there are no legal impediments to adopt Ivar also in commercial relations, but, as the index is composed today, it will not reflect the reality of these leases and will not be able to resolve the existing controversy.

The moment, therefore, is for caution. It is important to wait for the index to be consolidated and with sufficient data to more fully reflect the real estate reality of Brazil.