On a regular basis, property owners make changes to the rent amount. To find out the updated value, use the FinanceOne rent adjustment calculator! If you are in doubt and want to understand how the adjustment works, check out the content we prepared for you below.
What is the index and how does the rent adjustment work?
The General Price Index – Market, also known as IGP-M , is a very important indicator which calculates the variation in pricesof goods and services, as well as raw materials used in agricultural, industrial and civil construction production. The index is calculated by the Brazilian Institute of Economics of the Getúlio Vargas Foundation (IBRE-FGV) and is widely used as a parameter to readjust items such as rent. So, if you are a tenant or own property for rent, it is important to keep an eye on the IGP-M when it comes time to renew the lease period in the property. Because of the pandemic, the IGP-M reached 23.14% in 2020. The value more than doubled, if compared to the accumulated IGP-M of 2019, which did not pass 7.3%. And, all indications are that the accumulated value of the index should follow the pace of growth of the previous year: until April 2021, the accumulation was 9.89%. To not be surprised with the value of the rent adjustment, the tip is simple. Just use the FinanceOne rent adjustment calculator. For free, you have access to the adjusted rental value, without any kind of bureaucracy. You just need to inform:
- Adjustment index;
- Rent at the beginning of the contract;
- Date of commencement of contract;
- Adjustment frequency.
IGP-M or IPCA in the rent adjustment?
Now that you know the IGP-M, you also need to know the IPCA, which is an index used to readjust commercial properties and public service concessionaires.
The IPCA is a fundamental index for the Brazilian economy. After all, it is the official inflation index in Brazil. The calculation is made between the first and the last day of the month and determines the prices passed on to the consumer for cash payments. Normally, the IGP-M is usually a little higher than the IPCA. So, the value did not bother and even did not make much difference compared to the IPCA. However, the sudden increase in the IGP-M because of the pandemic made many people migrate to the IPCA, which follows the country’s inflation. In other words, the IGP-M increase was due to a few reasons. But the main villains were commodities and the dollar during the pandemic. Because it takes into consideration the dollar, many specialists consider the index an outdated tool, since the Brazilian salary does not follow this increase, much less the dollar. Therefore, consider in this time of tightening migrate your rent contract to the Broad Consumer Price Index, the IPCA. It will provide you with a more accessible value and will be more equivalent to your reality as a Brazilian.
Can there be rent adjustment in pandemic?
There is a bill in progress in the House of Representatives that prevents the readjustment of rents until December 2022, but it has not yet been approved. During the beginning of the pandemic, there were laws preventing the eviction of tenants who could not pay or renew their rent contracts. However, these have been suspended.
How to negotiate the rent?
If you are nearing the time of contract renewal and can not afford the value of readjustment, try to renegotiate the value of your rent.
- Present all your bills and your current salary and show how an increase in your rent is incompatible with your current income.
- Try changing the adjustment indexer to the IPCA, which is more accessible.
- Explain to the landlord the advantages of having you as a tenant (for example, you have never had any problems with neighbours and/or the landlord; you have always paid your bills on time).
- Show the landlord the options that are available on the market to rent.
- Also consider showing properties that can be compared to the one you currently reside in and have a more affordable value.
If, after these conversations, the landlord is unyielding, choose to move. You will have less stress and probably a friendlier dialogue with the next tenant. Finally, value your money. If the landlord won’t give in, prepare the move and move to a more affordable property. Many have been empty for quite some time, so there are plenty of good places available and affordable to pay. Check out other content about real estate that can help you:
- Renting property: see the advantages and disadvantages.
- How to assess whether the rent is fair?
- What is better: to buy property or to rent and invest the value?
