The decline in savings deposits—Brazil’s main source of housing finance—has pushed banks to prioritize these funds for individual borrowers, while financing property developers with loans tied to market interest rates. This trend, which began gradually a few years ago, has accelerated in recent months.

Construction loans accounted for only 11% of the R$51 billion in mortgage credit operations using savings deposits between January and April of this year—the lowest share in the data series that began in 2002, according to a Valor analysis of figures from the Brazilian Association of Real Estate Credit and Savings Entities (ABECIP). Since 2016, this share had fluctuated between 20% and 27%. At its peak in 2005, it reached 59%.

“This shift is set to accelerate, and developers who still rely on savings-based financing are likely to see that dry up,” said Sandro Gamba, president of ABECIP. “In the past, savings funded everything, but as the resource has become scarcer, the market has had to make choices and find new structures.”

The R$51 billion in financing booked between January and April marked a 4.7% increase from the same period last year. However, loans to individuals rose 20.4% to R$45.25 billion, while financing for construction plunged 48.6% to R$5.7 billion.

Construction funding naturally varies depending on which projects banks approve, but the current shift is broader: most banks are reducing or eliminating resources earmarked for developers under the so-called Plano Empresário.

At state-owned Caixa Econômica Federal, the largest player in the sector, just 5.3% of mortgage loans funded by savings between January and April went to construction. The rest supported home purchases by individuals. The share was 8.8% at Itaú Unibanco and 11.9% at Bradesco. Santander stopped using savings deposits for construction loans some time ago.

This shift raises costs for developers. Since savings are earmarked for real estate credit, loans through the Brazilian Savings and Loan System (SBPE) generally carry lower interest rates than market-based loans. Besides turning to banks, companies are increasingly relying on capital markets through real estate funds and instruments such as real estate receivables certificates (CRI).

SBPE’s share in housing finance has dropped in line with savings withdrawals, driven by high interest rates that make other investments more appealing. In the first four months of the year alone, savings accounts posted R$38.9 billion in net outflows. While nearly 40% of housing finance was funded by savings in 2022, that share fell to 32% in 2024.

“For long-cycle financing like that of individuals, savings have become less prominent but still play an important role. For short-cycle funding for developers, capital markets and other structures have grown more relevant,” Mr. Gamba said.

In banking credit, one structure gaining traction is real estate financing tied to the CDI (Interbank Deposit Certificate) rate. These loans are costlier and more volatile than those based on savings but offer developers more flexibility. They can be used not only for construction but also for the broader development business, such as land acquisition and marketing. “Developers will be able to seek out the structure that best suits their needs,” Mr. Gamba said.

Santander was one of the first banks to reserve savings deposits for individual borrowers. Since 2020, its developer loans have been funded solely with non-earmarked credit. “There was some resistance to this model, but over time, companies realized the scarcity of funding. Our model ended up working, and we even increased market share in 2024,” said Paulo Duailibi, head of real estate business at the bank.

While companies are finding alternatives, individuals don’t have the same options, Mr. Duailibi added. “If individuals had to pay more, developers wouldn’t be able to sell. So this shift also benefits developers. The market must prioritize individual borrowers because that’s essential to making projects viable,” he said.

Caixa, Brazil’s leader in housing credit, has followed a similar path. For its production-support line aimed at companies, the bank decided last year to mostly rely on sources other than savings deposits.

“This year, we’re doing just that and applying the same logic to FGTS [workers’ severance Fund] resources,” said Inês Magalhães, Caixa’s vice president of housing. “We must direct the cheapest resources to individuals, especially since the production cycle is shorter. If we were raising rates for individuals, we’d be increasing their cost over 30 years.”

Marcos Brasiliano, Caixa’s vice president of finance, said that if rate increases only affected individuals, the housing market would suffer more. “It’s in corporate loans that we see the potential for scale gains to offset higher rates. Individuals don’t have that.”

Some banks, like Itaú Unibanco, still see value in using savings-based funding for both developers and homebuyers. “We see the housing cycle as a single journey. This integrated view is a competitive advantage,” said Bruno Bianchi, commercial director for real estate at Itaú BBA.

The current environment is one of higher costs, Mr. Bianchi said, whether for production financing or for individual buyers. That’s due to rising interest rates, ongoing savings withdrawals, and strong demand.

Bradesco, when contacted, said it continues to offer the Plano Empresário with pricing based on the TR (Reference Rate) benchmark plus interest—similar to individual credit lines. However, like others in the market, the bank is prioritizing SBPE funding for home purchases, a source familiar with the matter said.