Small-Scale Real Estate Innovation in São Paulo: Navigating Zoning Restrictions

In São Paulo city, extensive real estate developments face significant challenges due to stringent zoning laws and limitations on land expansion, restricting many areas from large-scale projects. However, a new wave of small-scale developers is seizing the opportunity by focusing on these underutilized spaces with innovative and alternative building solutions aimed at maximizing potential.

Tico, a burgeoning real estate company, was established by Rafael Fiorotto, who harnessed his vast expertise honed at prominent firms like Cyrela and Trisul. “I envisioned a development model that could transform well-located properties that were overlooked by larger developers,” he remarked. To date, Tico has successfully constructed three compact buildings across São Paulo, each comprising 12 to 30 apartments. The average size of these units is approximately 35 m², with the smallest lot used for development being merely 212 m², which was previously the site of a single-family home that now accommodates 12 distinct apartments.

The company’s forthcoming project, which is currently undergoing the approval process, stands on a more expansive 1,600 m² plot. However, it is subject to notable restrictions, as structures cannot rise beyond 10 meters in height or two stories, due to its designation as a Corridor Zone. “Even large lots can be constrained by height regulations that inhibit taller developments,” he added.

Such zoning restrictions effectively reduce the cost of land, as the market price is largely determined by the potential for construction. For instance, a lot situated in an Urban Structuring Axis Zone—characterized by no height restrictions and a utilization coefficient that permits at least four times the building area relative to the lot size—is priced considerably higher than a lot limited to only a 10-meter height and a coefficient of one.

Taking a unique approach, architect and photographer Inês Bonduki, alongside her family, initiated their venture, Só Predinhos, beginning with a 500 m² plot owned by her mother. Her father, Nabil Bonduki, an architect and esteemed professor at the University of São Paulo, serves as a city council member representing the Workers’ Party. Their objective is to construct a building that adheres strictly to their urban planning philosophies. “Architectural studies suggest that structures with six or seven stories maintain a human scale, allowing residents on the upper levels to still engage with the vibrant street life below,” she explained.

Their company plans to build six apartments on this premises, with sizes ranging from 120 to 206 m². Ms. Bonduki shared that half of the units have already been sold, with prices hovering around R$18,000 per square meter, aligning with the ongoing market trends in the area. Tico similarly operates within this pricing range, with Mr. Fiorotto indicating an average of approximately R$16,000 per square meter.

In addition to constructing smaller buildings, Cube, Inc. CEO Octávio Moreira identifies “jinxed” or rejected lots as prime opportunities for housing projects. His company has already developed 12 housing complexes within the city, including one on a modest 380 m² lot located in the upscale neighborhood of Higienópolis, featuring five residences. Mr. Moreira prefers the term “villages” for his projects, emphasizing their response to a significant housing demand, although he has opted for walled communities for enhanced security.

Cube’s housing developments start at a minimum of 120 m² but can extend beyond 250 m² depending on local zoning laws and market conditions. The most expansive homes offered by Cube commence at a price point of R$2 million. To meet legal requirements for new homes in upper-middle-class neighborhoods, Cube has introduced a “Cube XL” model accommodating larger residences, as regulations dictate a maximum of one home per 250 m² lot. Conversely, in more permissive zoning areas, smaller homes can be constructed on lots as small as 62.5 m².

Typically, the company’s four-story homes feature both a garden and an open terrace, promoting outdoor living space. A standout characteristic of these developments is that the top floor is excluded from the “computable area,” which allows it to circumvent limitations on height calculations. “We’re essentially marketing backyard and rooftop space; the appeal lies chiefly in the outdoor environments rather than the interior square footage,” explained Rodrigo Toninato, a partner and commercial director at Cube.

For buyers seeking a quieter lifestyle, smaller developments can serve as an attractive alternative in the competitive real estate market. “In the mid- to high-end segments, commodifying properties can lead to price competition; differentiation is crucial,” asserted Mr. Fiorotto.

Although zoning restrictions and the overarching Master Plan play vital roles in safeguarding the lots targeted by these innovative companies, recent revisions to these laws have sparked concerns. The three developers acknowledged that São Paulo still harbors numerous so-called problematic lots—sites deemed undesirable by conventional developers yet viewed as valuable opportunities by them—despite some regulatory changes that may not be advantageous.

Mr. Moreira highlighted a significant shift in urban operation zones, which are designed with specific land-use regulations to stimulate development. Initially, a minimum lot size of 1,000 m² was required for qualification for these advantageous benefits, leaving smaller desirable lots available for companies like his. Now, this threshold has been reduced to 500 m², further expanding the potential for smaller developers.

More regulatory changes loom on the horizon. Ms. Bonduki and Mr. Fiorotto expressed discontent over restrictions on single-family housing in certain affluent neighborhoods, which often results in majestic mansions remaining vacant instead of being repurposed for multi-family use. “Imagine retrofitting a grand mansion in Pacaembu into four chic apartments; that would be transformative,” Ms. Bonduki envisaged.

**Interview with Rafael Fiorotto, Founder of Tico ​Real Estate**

**Editor:** Thank you for joining us today, Rafael. With so many restrictions on large-scale real estate developments in São Paulo, how do you ⁣see your approach with Tico fitting into this ‌landscape?

**Rafael Fiorotto:** Thank you for having‍ me! We’re really excited about the opportunities in smaller-scale developments. The city’s zoning laws have indeed created challenges, but⁢ they also open up avenues that larger developers often overlook.​ Our focus is on transforming these underutilized spaces into compact, efficient living solutions that ‍meet a real need in the market.

**Editor:** You’ve already completed three buildings with a ⁢relatively small footprint. Can you tell us more⁤ about the types ‌of projects Tico specializes in?

**Rafael ‍Fiorotto:** Our projects focus on maximizing space; the average size of our apartments​ is around 35 m². We’ve managed to convert lots that were once⁢ single-family homes into multi-unit ⁢buildings. For instance, one such project turned a 212 m² lot into a building ⁤with 12 apartments. We believe that ‍even in smaller developments, we can ⁤create quality‍ living experiences.

**Editor:** I see⁢ you have a new project in the pipeline. ⁢How does the zoning designation of Corridor Zone impact your plans?

**Rafael Fiorotto:** The constraints are significant. ⁤The regulations limit us to two stories and a height of 10 meters, which makes it challenging in terms of design and ⁢market ⁤appeal. However, we’ve embraced⁤ these challenges as an opportunity to innovate and create designs that are functional and appealing within those parameters.

**Editor:** It ⁢seems there’s a financial advantage as well in these underutilized areas. How‍ does the cost of land play into your strategy?

**Rafael Fiorotto:** Absolutely. The market prices‍ are largely dictated by the potential for development, so lots in restricted⁢ zones often come at lower prices. We strategically target such properties, enabling ​us to reduce our overall costs‍ and offer competitive pricing for‍ our buyers.

**Editor:** With many developers pursuing different⁢ strategies, how does Tico differentiate itself in the competitive São Paulo market?

**Rafael Fiorotto:** Our‌ edge lies in our commitment to thoughtful urban design and sustainable living. We focus ⁤on compact living⁢ spaces that promote community and accessibility. When you look at our buildings, they are designed to foster a sense of place, even on a smaller scale.

**Editor:** Thank you for your insights, Rafael. It sounds like Tico is ‌making⁤ a significant impact in São Paulo’s real estate scene. We look forward to ⁤seeing how your future⁢ projects develop!

**Rafael Fiorotto:** Thank you! We are excited about the future and ‍committed to contributing⁢ positively to São‌ Paulo’s urban landscape.