Brazil real estate market faces rising contract cancellations and INCC legal disputes

The Brazilian real estate market is facing significant shifts due to rising property contract cancellations (distratos) and potential legal claims regarding construction cost adjustments. Data from the first half of 2026 indicates that ten publicly traded developers recorded R$ 2.167 billion in cancellations, a 27.7% increase compared to the same period in 2025. Key drivers include high household debt, difficult access to credit, and high interest rates, with the Selic rate at 14% per year.

Additionally, buyers of off-plan properties may be entitled to recover funds if the National Construction Cost Index (INCC) was applied incorrectly. Under Law 10.931/2004, monthly INCC adjustments are only authorized for contracts with a minimum commercialization period of 36 months. Legal experts note that even after a property is paid off, buyers can contest irregular adjustments. The São Paulo Court of Justice (TJSP) has previously ruled against monthly corrections when the actual economic structure of the contract is less than three years, ordering the restitution of values.

These trends impact new condominiums, as returned units increase developer inventory and can affect the financial management of residential complexes due to fluctuations in expected occupancy and revenue.