Buyers snap up Rio’s hillside slum sites

Investors move in after drug trade forced out

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When Mr. Wielend bought his house, it had long been abandoned and lacked a bathroom, kitchen and even doors.

But it had a breathtaking view over Rio’s concrete jungle and the Atlantic Ocean. The German seller, who had snapped up dozens of properties in Vidigal, was asking for just $10,000.

Still, with a gang capo and his heavily armed minions for neighbors, Mr. Wielend thought hard before buying.

“It was a bit like signing up to living in ‘Robinson Crusoe,’ on a remote island where everything’s sort of makeshift,” said the 35-year-old telecommunications engineer, who first came to Brazil with Siemens, the German electronics giant. “I thought of the investment as a big gamble.”

Then came the big change. Hundreds of police stormed into Vidigal, pushing out the drug gang and establishing a permanent presence.

To date, 28 police pacification units have been established over dozens of favelas, with 12 more units expected this year.

Studies show homicides are down by double digits. A luxury boutique hotel with a rooftop pool is going up in Vidigal, and Italian tiremaker Pirelli shot part of its 2013 pinup calendar in Dona Marta, which in 2008 was the first favela to be pacified.

The Federal Reserve Bank of New York reckons that 15 percent of the 168 percent rise in Rio property prices between January 2008 and March 2012 was directly attributable to pacification and the resulting drop in crime.

Potential problems and payoffs

Mr. Ramos, the agent, said he recently closed a slew of $25,000 deals on small cinder-block homes that wouldn’t have fetched $5,000 a few years ago.

“People here have understood that favelas are a hot thing, and a lot of people are eager to cash in,” said Mr. Ramos. “And for a guy here, who for the price of his tiny studio apartment in Vidigal he can buy a big, three-bedroom house with a garage and a patio in another area of Rio, it’s like a dream come true.”

Not everyone sees the situation in such a rosy light. Many voice worries that the poor could be priced out of the slums as their cost of living rises and developers pressure them to sell.

SecoviRio’s Schneider acknowledged that the city’s demographics may change. About a quarter of Rio’s 6 million people live in the 1,071 favelas.

“In the coming 10-15 years, rich people are going to be buying houses and developers are going to be building condominiums in certain favelas that are well located, with views,” said Mr. Schneider.”Naturally, the poor people will move to another area and certain favelas, like Vidigal, are going to be transformed into luxury neighborhoods.”

Mr. Wielend, meanwhile, won a court ruling ordering his property returned to him.

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