Glossary

Portuguese property development, term by term.

The words on an architect's area table, in a purchase contract, on a tax bill and in a bank's term sheet, each explained in two or three sentences.

Areas and drawings

Área bruta privativa(ABP, gross private area): The total area of a home or unit, measured by the outer perimeter of its exterior walls and the centre line of the walls it shares with other units or with common parts. Closed private balconies count in. It is the area most Portuguese sale prices per square metre refer to.
Área bruta dependente(dependent gross area): Covered, closed areas for the private use of a unit that serve its main use: a garage, a storage room, an attic or a basement that can be reached. They are listed apart from the gross private area and are usually valued at a lower price per square metre.
Área bruta de construção(ABC, gross construction area): The sum of the areas of all floors of a building, measured by the outer face of the exterior walls. It includes common parts such as stairs and corridors. Builders usually quote a cost per square metre on this area, so it is larger than the sum of the homes' private areas.
Área de implantação(footprint): The area of ground the building stands on, measured by the outer perimeter of its ground floor. Averu uses it as a sanity check on an estimated area.
Área útil(net internal area): The floor area inside a home that can be walked on, measured between the inner faces of the walls. It is smaller than the gross private area, which also counts the walls.
Quadro de áreas(area table, mapa de áreas): The table in the architect's drawings that lists every unit with its floor, typology and areas. It is the first thing an analyst needs. When a drawing set has no table, the areas must be measured on the plans.
Tipologia(T0, T1, T2, T3): The size of a home by number of bedrooms: a T0 is a studio, a T1 has one bedroom, a T2 two, and so on. A duplex is a home on two floors.
Fração autónoma(unit): A part of a building that can be owned and sold on its own: a flat, a shop, a parking space with its own title. A building divided into such units is in horizontal property (propriedade horizontal).

Buying and selling

CPCV(contrato-promessa de compra e venda, promissory contract): The contract in which buyer and seller promise to complete a sale later. The buyer pays a deposit (sinal), often 10% or more. Developers sell flats off plan with a CPCV and receive the balance at the deed.
Escritura(deed): The public deed that transfers ownership. The buyer pays the balance of the price, and the purchase taxes are paid before it is signed. For a new building, buyers and their banks normally wait for the use permit first.
Sinal(deposit): The money a buyer pays at the promissory contract. If the buyer walks away, the seller keeps it. If the seller walks away, the buyer is owed twice the amount.
Caderneta predial(property tax record): The tax authority's record of a property: its location, its areas, its use and its taxable value (VPT). It is one of the first documents to ask for when you study a building.
VPT(valor patrimonial tributário, taxable value): The value the tax authority gives a property. IMI is charged on it. IMT and stamp duty are charged on the purchase price or on this value, whichever is higher.

Taxes

IMT(property transfer tax): The tax a buyer pays when a property changes hands, due before the deed. The rate depends on the type of property and on its price. Some purchases for resale or for rehabilitation can be exempt when the legal conditions are met.
Imposto do Selo(stamp duty): A tax of 0.8% of the price on a property purchase, paid with IMT. Stamp duty is also charged on loans and on some bank fees.
IMI(annual property tax): The yearly municipal tax on property, charged on its taxable value. A developer pays it on the land and the building while the project runs.
AIMI(additional IMI): An additional yearly tax on the total taxable value of the residential property and building land one owner holds. Individuals have an allowance; companies generally do not.
ARU(área de reabilitação urbana, urban rehabilitation area): An area a municipality sets aside for urban rehabilitation. Rehabilitation works there can qualify for a reduced VAT rate of 6% and for other tax benefits, when the legal conditions are met. Whether a deal qualifies changes its cost a great deal.
IRC and derrama(corporate tax and municipal surcharge): IRC is the corporate income tax a development company pays on its profit. The derrama municipal is a surcharge set by the municipality, and a state surcharge (derrama estadual) applies to large profits.

Licensing and building

PIP(pedido de informação prévia, prior information request): A request to the municipality to say, before a full project is submitted, what may be built on a site. A favourable answer binds the municipality for a period, which lowers the risk of buying.
Licenciamento(licensing, alvará): The municipality's approval of the architecture project and of the works. In the large cities it can take a year or more, and it is the main risk to the schedule of a development.
Licença de utilização(use permit, autorização de utilização): The municipality's confirmation that the finished building may be used for its purpose. Buyers and their banks normally wait for it before the deed, so it decides when the sales money arrives.
Fiscalização(works inspection): The independent supervision of the works on the owner's behalf: quality, cost and schedule. It is a cost line of its own in a Portuguese feasibility study, set as a monthly fee or as a percentage of the works.
Empreitada(construction contract): The contract with the builder. It sets the price, the schedule and how the builder is paid, usually against monthly statements of the work done, with a retention released at the end.
TRIU(infrastructure charge): A municipal charge for the urban infrastructure a new building uses, paid when the licence is issued. Each municipality has its own formula and its own name for it.

Returns and financing

Estudo de viabilidade(feasibility study): The calculation that says whether a development is worth doing at a given purchase price: revenue, all costs and taxes, financing, the monthly cash flow and the return.
TIR(IRR, internal rate of return): The yearly return of the money invested, taking into account when each euro goes in and comes back. It is the number most developers and investors compare deals on.
MOIC(equity multiple): The money returned divided by the money invested. A multiple of 1.5 means every euro came back as one euro and fifty cents. It says how much, where the IRR says how fast.
LTV and LTC(loan to value, loan to cost): How much a bank lends, as a share of the value of the finished building (LTV) or of the cost of the project (LTC). The rest is the equity the developer and the investors must bring.
EURIBOR and spread: EURIBOR is the reference interest rate for loans in euros, published for terms such as 3, 6 and 12 months. A bank charges EURIBOR plus its own margin, the spread.
Preferred return, catch-up and carried interest(LP/GP waterfall): The rules for sharing profit between investors and the developer who runs the deal. Investors first receive their money and a preferred return. The developer may then catch up, and takes a share of what is left: the carried interest.

These definitions are general explanations to help you read a deal. Tax rates and rules change: confirm the current rule with your accountant or lawyer before you rely on it.

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