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Good morning, one and all, and welcome to EZTEC's results presentation for the fourth quarter of 2020 as well as for the entire fiscal year of 2020. Please note that this call is being recorded [Operator Instructions] You may find that link and ID, as well as the slides for this presentation, at our website at the address, ir.eztech.com.br.
Before we start, we'd like to mention that any statements during this call pertain to EZTEC's business projections. Operational and financial targets are based on management's beliefs and premises as well as on currently available information. Future considerations do not constitute an assurance of performance. They involve risks, uncertainties and premises. Investors may take into account that general economic conditions, industry or operational circumstances may ultimately affect EZTEC's future performance that may cause the company's results to differ materially from those expressed in those forward statements.
Now I'll start the conversation. Here's Hugo Grassi speaking, EZTEC's IR Manager. I'll begin the conversation, alongside Emilio Fugazza, our Chief Financial Officer, as well as Investor Relations Manager.
Now, if you can just give me one second. There you go. Moving ahead to Slide #3. Very briefly, we -- 2020 was a year hit by pandemic, yet net sales -- both net sales and launches were curtailed due to the results, yet net sales outpaced launches. Land bank landed at BRL 11 billion, net -- gross profits at BRL 105 million, net income at BRL 140 million, net cash at BRL 1.072 billion and portfolio of receivables at BRL 504 million. Now more -- in a more detailed fashion, going ahead towards the operational session. We will add more detail and more new ones to the year's results.
Now looking at the land bank, I'd like to bring your attention to the first -- to the graph above when you look at the evolution from 2019 to 2020, which is basically the time where EZTEC fulfilled its mandate that it was given at the time of the follow-on in September 2019, where we injected as much as BRL 940 million in cash. And over the course of the year, up until right now, we had effectively fulfilled that mandate with acquisitions, which is why you see the volume of land bank reaching all the way up to BRL 11 billion by the 2020 carve-out.
But if you were to actually include acquisitions that happened by the first quarter and that by this point, our already definitive acquisition, here, I mentioned, for example, [indiscernible], where you actually already had the first installment already paid, which adds an additional BRL 1.6 billion to the 2020 carve-out. And on top of optioned acquisitions where we still have the capacity to move on with the acquisition or not, if we so choose, we planned at BRL 13 billion in -- BRL 13.3 billion in available land bank as we speak today.
Please note that if we were to exclude from this figure the BRL 3.4 billion in commercial land bank, basically, what we'll be saying is that we have enough land bank for as much as 4 years launching at a base level of BRL 2.5 billion per year, which constitutes a very, very robust, very comfortable operational base for us to think of this cycle going ahead.
Now moving to the bottom-left corner of that slide, you notice the composition from that land bank in a very well distributed, healthy diet between all types of segments. Basically, when you look at the mid and economic segments that there's even some room for maneuver here from projects that we may choose to adapt from one side to the other. And -- but by and large, it's not material for us to have a very strong start. Most -- you'll be noticing that the cash burns, we've invested over the past quarters have been basically on the back of these acquisitions. But as of now, we're still spending as much as a little bit over BRL 650 million in disbursement still to be made referring to these acquisitions, much of it still to happen in 2021 and 2022.
Now moving on to Slide #5, where we talk about the -- both sales as well as launches. You notice that we naturally were hampered by the pandemic in 2020, and we resulted with -- and you notice that the list of projects on the bottom left, you realize that much of the launches that took place in 2020 actually happened by the very end of the year, by December. That has to do with the pandemic shock naturally, but it also mounts with a bottleneck that we faced over the course of the year in admitting approvals for projects upon the Secretariat of Licensing from the municipality. It was an issue that we struggled with over the course of the third and fourth quarter, yet we will touch on how we're doing that thus far. And as a spoiler, that's as much as BRL 550 million in projects already approved.
Even so, that took a hit on the sales performance in the fourth quarter, which didn't really take the edge off of the overall year of surprisingly good performance. Here, I'd like to call your attention on the top-right graph to the fact that we had net sales of ready inventory, surprisingly, largely, is BRL 314 million of gross sales, basically in line with what we delivered in 2019, despite the fact that the underlying availability of the inventory is strengthened significantly. So very good news across the board.
And when you look at cancellations in the second -- on the mid right, you may notice that there was a perceptible spike in the third as well as in the fourth quarter. But here tried to -- on a more qualitative note, tried to mitigate any concern you may have on that subject because the third quarter, specifically, you naturally had some scare from the shock of the pandemic. Yet, as much as 50% of those cancellations on the third quarter were actually upgrades downgrades and transfers. In other words, there were cancellations that were registered but were immediately accompanied by a subsequent sale, so in any way reflects a proactive stance from the internal team.
When you look at the fourth quarter, you still have the lingering cancellation. But as much as 60% of the fourth quarter cancellations are actually on the high as well as smart living segments, which really reflect, in any way, a more malleable approach the cancellations in projects where you actually have significant increases in prices. And it really made sense for the company to take those units back and be able to resell them with no much added efforts and with increasing margins.
With that, I will move ahead. The Slide #6 will address inventory. I think that the result from these trends I just mentioned where we had limited launches in the face of a demand that -- in the face of sales that actually drew a V-shaped return as early as July, and that is actually working quite well up until now and naturally takes a hit because of the red phase of the pandemic. But it really led to a contraction of the available inventory to BRL 1.8 billion. And if you were to look up until today, you'd probably see something short of BRL 1.6 billion in available inventory because of what has been sold thus far.
Naturally, you've also notice on the bottom rack that it is a very young inventory. It's a very fresh inventory for projects that were recently launched, and they're currently in construction. There's not much more of that symptomatic ready inventory that's lingering in the balance sheet. The remainder of the ready inventory is mainly concentrated in Guarulhos, which, in its own turn, has been selling at a gross margin north of 50% consistently over the past quarters.
Overall, the fact that the inventory levels are very much contained, very much under control really gives an additional confidence in our capacity to fulfill the launch and guidance going ahead with the tranquility that you may have some additional gross inventory formation, but they're still very much under control given where the starting point will begin at.
Now moving ahead to Slide #7. I'll actually start introducing the launches that we made over the course of 2020 and a very strong start in the first quarter of 2020, especially marked by the Air Brooklin launch that was the centerpiece of that quarter. Naturally, prior to the pandemic, you saw sales really outperforming. And Air Brooklin, as of now, is already at 70% of the project sold but generally sales performance across the board.
Over the course of the second quarter, we were major with the pandemic. In the third quarter, we actually would have desired to launch more than we actually did. Here, the approval bottleneck kicked in. Yet, we managed to launch projects to the extent that we were getting those approvals submitted, where you see Gran Maia, especially Piazza, with an outstanding 59% sales performance. And especially in the fourth quarter, where, again, launch were concentrated in the very end of the year by the month of December, so no individual project had much more than a few weeks to be sold over the course of the fourth quarter before we had the holiday recess, both for the administrative staff as well as for the commercial staff.
But when you look at the current picture of where they're standing as of February 2021, the figures you're looking at, you realize that you have generally 2 positive trends. You have Fit Casa projects, the low-income projects, the Fit Casa Estação José Bonifácio and Meu Mundo Estação Mooca, delivering something like 20% of sales within the very first months. It is very compatible, very adequate for the profile of Fit Casa projects of low-income projects. If you look at the average of -- the first pre-launch we made in Fit Casa, thus far, they all have the same pattern where you sell something like 20%, 25% in the first quarter but you follow up with the full year, where you sell an additional 45% in average. So Fit Casa generally has that flatter -- a flatter sales curve, mostly due to the bureaucracies that's added to the process at the very early stage of sale when you have the arranged the financing for the client prior to the construction. That introduces a bottleneck, but that doesn't really hamper the fact that you have an underlying demand that's very deep for Fit Casa projects for low-income projects within the city of São Paulo, exactly where EZTEC's business model lays in.
Now when you look at the other 2 launches, Signature By Ott and Ereditá Parque da Mooca, you really have a much brighter note where you have a sales performance where, over the course of a little more than 2 months, we've had as much as 39% and 35% of the projects sold. In the year, we're talking about mid-, high-income projects, mostly, in regions like Aclimação and Mooca, which naturally very much consolidated neighborhoods, but they're really not on the very inner core of the prime regions of São Paulo that, up until now, had been the center of price gains in the city.
Now when you look at the performance for these projects as a -- it was, in a way, a first, that we actually managed to sell with very quick speed of sales, while at the same time, picking up in prices. So Signature By Ott, for example, is a project that its original feasibility analysis by April 2019 would take something like BRL 8,500 to BRL 9,000 per square meter, while we're actually selling it at an average of BRL 12,500 right now. And Ereditá Parque da Mooca, similar trend. Mooca is a place where we have a large land bank exposure, so this is a very promising sign. We managed to also sell the most recent units, adding price of BRL 10,000 per meter, very, very surprising figure.
And now moving ahead, it's also important to point to launches that we have scheduled for the following months. And here, I emphasize the fact that these projects on the screen right now are actually already approved by the city -- by the municipality by licensing officials. So basically, here is the first important sign of breaking through that bottleneck that we were facing in the past quarters. We -- so naturally, something that -- it's an awkward moment to make launches in the face of sales stands that are closed by the time by -- through the direct phase of the dynamic. So it's more likely that these projects may happen, in effect, subsequent to the red phase where we actually get to bring the client -- in a very organized and adhering to the sanitary protocols, bring that client to the sales stand accompanied by a broker, where you feel the enthusiasm of visiting the decorated stand and committing with a long-term purchase. Still, these projects are available, and the commercial team is lining up their commercial strategy so that we can execute a quick deployment as soon as possible.
On top of these projects, we're also having additional projects on track to be launched for as soon as those approvals are admitted. So you have Arkadio and Altta Vista Residence Resort are also lined up and inspire more confidence in our capacity to fulfill the guidance -- the 2-year term guidance that we've made 1 year ago, which basically implies that, going ahead, we still have something like BRL 2.8 billion to BRL 3.3 billion of additional launches to be made up until the end of the year. Here, we started with some views of how that should happen.
Now moving ahead, I'll the pass the word to Emilio, who'll start addressing the financial performance.
Many thanks, Hugo. Let's talk about Slide #12, financial performance. So let's start with net revenues and gross profit and gross margin. So both are subjects that we can see one complementing each other. It's important to mention that when you look deeply at the results of the fourth quarter 2020, you can understand what happened in Brazil in terms of the construction cost, in terms of the national inflation index for the construction cost. So first of all, it's important to understand that 2020 was a year that we saw INCC bringing something around 9% year-over-year. And 12 months by now, we have something around 12%. So inflation is in a clear order to ramp up, especially in the construction materials, materials that are tradable, materials are completely -- materials that are completely connected with the current price and the cost of the steel, for instance, the copper, plastic and all of the materials that are tradable and can be exported from Brazil to abroad.
So first of all, so the inflation was high, was something around 3.5% in the fourth quarter 2020. And by the methodology, we have been using to recognizing revenues, you have to recognize by the percentage of completion, PoC. So PoC is -- you have a base of cost. When you expand this base of cost by 3% to 4% in just one quarter, obviously you are getting down -- you are diminishing the total amount of -- the percentage of completion for that same site. So -- and that's why in order to see, for instance, one certain amount of construction recognized as revenues, recognized, you see -- you can see a little bit less than we thought before.
First of all -- second of all, let me remind you that by step methodology to recognize cost, so it's of paramount importance to recognize all the incremental costs by INCC or by the negotiations we have with our supply chain at once in the fourth quarter in 2020 to have a clear status of the current situation in the construction cost. And that, we have done. That's why you can see gross margin coming down from 44% in the third quarter 2020 to 40% in the fourth quarter in 2020. That's not proxy of you're going to see in the next few quarters because if you pay deeply attention at the backlog margin of our company, as we're going to see on the next slide, we're going to see something around 45% backlog. Less some taxes, we're going to see something around 43% of gross margin in the coming quarters.
Apart from that, it's important to mention, as part of our operation is to sell back to the market the units recovered from the prospect of providing financing to our clients. So some kind of units, instead of bringing the units to the banks in order to get mortgages and receiving the money at once, we can provide financing to them. As you know very well, EZTEC has been holding something around 1,600 units -- 1,600 clients, which we are providing financing to that. So from those clients, we have recovered some units because of delinquents. We're going to talk a little bit more forward. And obviously, we have to sell back to the market.
In the next -- in the last 4 quarters, all the units sold back to the market was something around BRL 13 million fully recognized in the results of 2020. But the margin, obviously, is not the same margin of units fresh provided by the company, so our units launched and sold by the company. It's a unit that the cost is the current debt of the unit provided by the client. So that's why the margin -- the gross margin, on average, got from those units, so that is something around 6% over the year, but 13%, especially beyond the fourth quarter 2020. That's important to mention.
Another fact that is important to keep in mind, it's about our Fit Casa segment, our Fit Casa company of launches in the Minha Casa Minha Vida, the low-income segment here in the city of São Paulo and metropolitan region of São Paulo. So those units, we bring the contract to Casa Alto do Ipiranga as soon as we start the construction, so -- which means that when you think about adjusting those contracts for INCC is not that true because the total amount of the value is going to be paid by cash by Casa Alto do Ipiranga without any kind of adjustment. That is the regular work from companies working with Minha Casa Minha Vida project like [indiscernible], among others. So in these segments, without watching the receivables adjusted by INCC and the costs adjusted by INCC in business different segments, obviously, there is much more pressure over gross margins, and this pressure can be seen exactly in the fourth quarter 2020.
So moving on to selling expenses. It's important to be reminded that was one of the better rates, talking about selling expenses over gross profit since ever for this company, simply because selling apartments online can be a little more profitable, a little more rational than the way we spend [ public ], specifically because we have the same amount of publicity. We have now the kind of sales stand. We have other kind of, I would say, choose to sell, which is -- which are less expensive than we used before. That's why when you look deeply at the fourth quarter 2020, we can see the ratio at a level of 3% since the third quarter 2020.
Talking about the G&A expenses. G&A expenses, specifically in the fourth quarter 2020, there was an adjust of over BRL 5 million in the fourth quarter specifically because of the IPO, expenses with lawyers and the auditing companies from the IPO of EZ Inc that we have canceled in the first quarter of 2021. So we book it -- we recognize as expenses in the fourth quarter 2020 without moving this expense to be recognized in 2021. Apart from that, you can see the volume of G&A expenses can be a little bit flat at a level of BRL 26 million over 2020.
Moving on to Slide #13, let's talk about on the bottom -- on the top left, financial result. Obviously, one of the main highlights from this fourth quarter 2020 which was something around BRL 76 million, mostly because of the adjustments in IGP. So IGP exclusively in the fourth quarter recognized this result was something around 11%. So all in all, IGP last year was something around 26%. But hopefully, in the fourth quarter 2020, something around 11%.
Apart from these receivables adjusted by IGP plus 10%, on average, we have to bear in mind the volume of cash equivalents we have voted in our company, which is something around BRL 1 billion with [ a net ] 2%, on average, in the first quarter -- in the fourth quarter 2020, getting up a little bit by the end of the first quarter 2021 because the SELIC rate was moved by Central Bank last year from Q2 to -- of 75%.
Talking about equity income. Let me remind you that equity income that we have other -- in a mix of control with our partners. And the most expressive project in the fourth quarter was [indiscernible] very well sold, a project of something around -- close to 40% gross margin. In the next coming quarters, you're going to see, as Hugo's information a little bit earlier, projects like Signature by Ott, Ereditá Parque da Mooca, all of them projects launched in the fourth quarter 2020 but without any revenue recognition from PoC because they have achieved 6 months or 30% total PoC. In the coming quarter, you're going to see improving -- those projects improving the equity income results in a very ratable way because all of them, we are talking projects that are having net gross margin better than 40%.
Talking about net income of this company, BRL 140 million in the fourth quarter 2020, the most expressive d -- the bigger result for one single quarter -- one single fourth quarter since 2015. And even talking about over the year BRL 105 million in a net margin of 43% is the biggest result since 2015, excluding the fact the sale of EZ Towers' tower A at the time. Exclusively, the fourth quarter 2020, the net margin reached something around 53%.
It's important to bear in mind that not only because of the operational results, not only because of financial results, but even because when you look deeply at the other revenues or the trends for the revenues, again in 2020 was positive. And positive because we sold a few -- we sold one project to [indiscernible], one project of Minha Casa Minha Vida in a branch, the level 2 branch. They are much more specialized on doing that. And the cost we could see from this sale was something around BRL 8 million. And in terms of -- we bought one very big project in the 2020 in the neighborhood of Mooca in the city of São Paulo. And even buying this project, so we have paid less than the worth value of the project, and that's why we have to reorganize because of [indiscernible] [ #18 ], we have to recognize again of something around BRL 8 million, too. That's important to bear in mind.
And finally, backlog margin. Backlog margin came flat, 45%. 45% in the coming quarters is going to turn into something around 43% because of the debt, but remaining step, which is very, very good compared to the current gross margin of 40% in a level of BRL 421 million results to be recognized. So, so far, no threats in terms of gross margins in the coming quarters.
Moving on to slide on Page 14. 14, it's our receivables -- portfolio of receivables that we have been providing financing to our clients. That is interesting because looking deeply at the chart below, you can see that, in 2018, we had something around 1,700 clients. 2019, we ended up the year with close to 1,900 clients. And 2020, we ended up this year at a level of 1,600 clients. So there was an acquittance, up 475, compared to the origination of 162 clients. The -- especially because, obviously, the inflation index we have been using, adjusting this portfolio is something around 26% over the year or which is the IGP.
But the good news coming from this slide is the foreclosure. The foreclosure is about 7 units only. Talking about the board of this portfolio ended up 2020 at BRL 509 million with only BRL 3 million of foreclosure. The highlight is a total amount of payments around BRL 198 million, so around BRL 200 million of cash received within 2020. That's important because you can see because of the chart below, you can see people pay in advance their obligations. So we can see reducing the number of the clients we are providing financing without experiencing a greater [ depo ] on this portfolio.
So the same units under the full situation at the beginning of this year are -- at the beginning of 2020 are the same at the end of 2020. So -- and obviously, because of it, we are going to see improving the numbers of foreclosure in the coming quarters but nothing that are, in my personal opinion, creating a track or a trend for this portfolio. And let me remind you that all the units under foreclosure, we can sell back providing a gross margin of an average 13%.
Moving on to the slide on Page #15, an important subject, which is Fit Casa. Fit Casa, as you can see on the left -- on the top left, you can see BRL 42 million of net income contribution to EZTEC in 2020. So all in all, 10% of the total amount of net income for EZTEC and gross margin of almost 44%. So what's important in that you can see on the right -- top-right side of this slide is the return on equity of 20%. So thinking that in the coming quarters, we are going to recognize under these numbers, Fit Casa [indiscernible] in a gross margin of 40% and Meu Mundo Estação Mooca in a gross margin of 50%, so there will be a possibility to see likely the return on equity at the same level for 2021 because of the projects coming to be recognized in the next coming quarters. So a very, I would say, profitable unit under EZTEC's management.
Slide #16. You can -- we can talk a little bit about EZ Inc. I think it's important to understand that the fourth quarter 2020 brought asset value at BRL 865 million and shareholders' equity around BRL 716 million. So the remaining BRL 148 million of liabilities are because mainly BRL 134 million from this number, mainly because one piece of land -- a piece of land [indiscernible] one tower we bought in the south of São Paulo, very close to [indiscernible] that we had to pay under installment each 6 months adjusted by SELIC plus 150 basis points. So the great news coming in the first quarter in 2021 over EZ Inc is the approval by the municipality of [indiscernible] Tower, [indiscernible] project, a [indiscernible] of around 8,000 square meters despite the fact that, nowadays, there was -- not the[ wave ], which means that we are not looking for capital increment. So this momentum for this company due to the status of the capital markets and our economy indeed.
So Slide #17, the value generation is a very common [indiscernible] which means that in 2020, the whole shareholders' equity in this company ended up this year of around BRL 4.1 billion, which means that the controlling shareholders' group, they have -- they've got something around BRL 4 billion in this amount. So these are the breakdown for this amount is in terms of assets, cash and equivalents can represent something around 25% of this equity. The receivables, coming from finished units. For the receivables, we are talking about 15% of equity, BRL 571 million. The cost of the ready inventory is something around 8% of our equity, so BRL 281 million. And more important than that, when we say, Hugo mentioned earlier, land they acquired of around BRL 10 billion, it means, in our accountancy, that -- this amount of land are booked by a cost of BRL 1.077 billion, which means -- lands at 11% ratio cost over PSV.
Let me remind you that when you see these figures in terms of land bank, including all the grants, all these effects, we have already booked to launch the right start the product like, for instance, an amazing project [indiscernible] is a project we can understand something around BRL 9 million of land and another BRL 9 million of [indiscernible]rents. So all of them booked inside BRL 1 billion land bank cost.
So in terms of liability, there is -- there are only few worth to mention. First of all, BRL 184 million of land to be paid in the next coming quarters, mostly because of BRL 184 million coming from the project of [indiscernible]. And finally, BRL 96 million of dividends to be paid, dividends that we are -- make the proposal -- the management proposal in the next coming days to the Annual Meeting of Shareholders to be held at the end of the next month.
So all in, that's our conference call for today. We are completely open to receive any further questions you may have. Thank you very much, guys.
Thank you, Emilio, and this is Hugo speaking. Only for logistical reasons, I'll invite the sell-side analysts on the room to raise their hands and maintain their hands raised while we give the responses, we can hand back and forth -- back and forth response.
Now I noticed that Nicole Inui from Bank of America has her hands up. So I invite her to speak. Please open her microphone.
Great. Can you hear me okay?
Perfect.
Well, great. Can you talk a little bit about the impact of these renewed lockdowns in São Paulo on your business. You mentioned perhaps some of the launches may be delayed until we get out of this red phase, but how do you see it impacting also sales and also your pace of construction and also approvals for additional projects, additional launches down the road?
Nicole, thank you so much for the questions. Obviously, it's a kind of subject that brings a lot of concerns to a company like EZTEC specifically because we have been working only in the city São Paulo and some projects in the metropolitan region of São Paulo. And the sector -- the whole sector, the real estate sector is still -- the government has a consideration to keep the site and the construction working so far.
So the news we have so far is about to bring earlier the holidays to São Paulo. In the next few weeks, we're going to see for 1 whole week the entire city close because of those holidays -- those are the state holidays.
So let's talk about some 2 kind of things, 2 kind of dividend impacts. So first of all, in terms of sites under construction. Sites under construction, so far, Nicole -- and let me remind you that since the June, July last year, we have been working with some impacts, supply chain, not because of the workers, not because of the workforce, but because of the supply chain. So it's hard to see the same amount of materials, the same amount of services provided by the -- to the constructions in the right time, and that's why we saw less advanced in the construction than we thought before.
In the first quarter 2021 is not different than that. We have some sites under construction bringing to an end with much more, I would say, safe than the sites under construction in the beginning of the construction. So simply because in the beginning of the construction, it will depend much more on the raw material than the finishing of the orders.
So on the mix. In the first quarter, you don't expect a much greater improvement in terms of revenue recognition because of it. And obviously, this impact, we're going to see also in the second quarter of 2021, too.
But in terms of sales, it's a little bit different. So, so far, we have achieved something around BRL 204 million of gross sales. So it's a very good number, especially because we haven't launched any project yet, and we were expecting to launch the very first much project at the end of March, at the end of this quarter, specifically because we got approvals of BRL 400 million in the east zone of São Paulo.
We don't know for sure because -- we don't know for sure what's going to happen with the same sales stand. Obviously, by March, we know that the sales stands are not going to be open, simply because of those new measures to be taken. So we expect this project, specifically in the [indiscernible] of São Paulo, we have a kind of world map in this project since January -- since last January. And we think that we can sell something because of this format, even online with the simple [indiscernible] in the Portuguese conference call, mentioned that the project ID by [ issue ] which is a very small project, BRL 26 million, our -- our stake in the potential sales value. He thinks that he can sell it only for current clients of EZTEC. So he thinks that we can -- we have to wait out, very interesting. But that it. It's not much more than it. So we are talking about BRL 200 million. So to launch another BRL 300 million of the group projects, we have to see sales stands open again.
In terms of taking a group of taking licenses, it's a little bit complicated because, obviously, we can see nowadays that we started, getting all the lease from those offices, releasing the approvals, working home office. And we know that the pace of releasing license are going to be slower than we saw in the last 4 to 6 months.
So all in all, we have about a mindset to launch something around BRL 1 billion in the next coming months, simply because a part of it we have already approved and part of it are in the point to get licenses -- someone to sign -- only someone to sign this approval. So BRL 1 billion, we're going to take, which means something around 1/3 of the whole guidance for this year. That's it. That's the whole perspective we can get you today, Nicole.
Thanks, Nicole. Now in the absence of any hands up, I will take the chance -- the opportunity here to make use of some questions that we've got from personal investors, from the noninstitutional investors over the Portuguese call. I'll do a quick translation and enjoy Emilio's presence here.
Now we have a question from [ Jean-Paul ] will ask for more details as far as what happened as far as construction inflation, how that affects the budget for the quarter. And I'll combine that with [ Rafael's ] question, and [indiscernible] who asked about what's the -- how are we dealing as far as prices? And if we're able to pass through the construction cost inflation to prices, and he's asking specifically about [indiscernible].
Hugo, thanks very much. Thanks to [ Jean-Paul ]for the question. It's important to understand that we have been dealing with cost of construction the same way we have been dealing for 15 years. So as we are trying to take advantage of a very good position of cash, a very safe position of cash, let me use as an example, lifts, elevators. So we have a major contract to buy lifts with Atlas Schindler, one of the biggest supplier for this chain in Brazil. So -- but this contract is adjusted by IGP and then the 12 months from now. And in now, IGP's very close to 30%. So we have some discussions with Atlas Schindler to pay in advance all the bills open for lifts that we have in all the construction sites under construction right now, which means that we can avoid something around 30% increment in the prices -- greater prices and delays in sites under construction. So it's a way to avoid.
In terms of steel, for instance, everyone knows that Brazil is one of the major producers of iron all over the world. But honestly, iron is ratable. And so a company selling steel for the unit -- the construction sites here in the city of São Paulo, they have to practice the common prices -- the common world prices of this.
We have a great push to buy iron from China, for instance, and there's a lack of -- in the supply chain because of a lot of countries, we can see closures in those factories, in those mining companies. So that's why at the beginning of January this year, there is still increased for us, something around 40%. And next April -- beginning of 1st of April, we will see another 30% incremental price of steel. So that's why last year, we bought 100% of the steel we need for that year. It was January. This year, unfortunately, the company are not allowing us to do the same, but at least we are buying 6 months in advance of steel, avoiding 30% incremental prices in April, which means that a lot of piece of land, piece of land that we are not increasing the construction or doing the construction right now, nowadays, shortage of this steel for construction coming in the next quarters. We are trying to make inventory of steel in order to avoid these -- those incremental prices.
But obviously, it's the kind of thing that we are doing for now, taking advantage of our cash equivalent position, but it's not sustainable for the longer -- in the longer -- in the long term.
Nowadays, we have been -- we can sell the units with a little gain or no gain but in the same pace of the INCC. And we know, for sure, that the INCC is not adjusting, for sure, the real prices we are facing in a city like São Paulo, so important to bear in mind. So thinking about a project that we have launched 2 years ago and trying to make the budget for now, so the adjustment is something around 150% of the INCC. So INCC in projects that we're going to see a time line of the construction, aiming 2 years from now, 3 years from now, there's no doubt that the INCC are going to get the point to show us all the incremental prices we are taking today. And the moment the INCC has done that, we are going to see an incremental gross margin, specifically because the price we sell the units all around, 40%, 45%, is the cost of the construction. So incremental price over 10% means that from the price, I have incrementally something around 10%, which means in the base 100, incrementally 10% -- incrementally 100 to 110, and it costs from 40% to -- from 40% to 44%, which means an incremental gap of gross margin of around 6% to 5%. So but now, currently, we can see some constraints to improve the margin so far. That's the explanation.
In terms of Fit Casa, it's important to bear in mind that the way we have to practice are not only bringing the contract to Fit Casa Alto do Ipiranga without any kind of adjustments of inflation. The other way to practice, to sell, is to sell as we have been selling all the units in this company without bringing the contracts to Fit Casa Alto do Ipiranga. So we made the contract -- the, I would say, the major contract with the bank, but we provide to the bank only half of those units we need to provide. 15% of those remaining units under the management of our company, adjusting those units to INCC, adjusted those units to the inflation costs. So which means that we are going to try to take an insurance of this incremental cost using a tool that we have the most, which is our position of cash.
And given the time, that concludes our conference call for the fourth quarter and for 2020. Thank you, Emilio. And thus far, the Investor Relations team will be available for whatever questions, whatever concerns. Feel free to get in touch.
Thank you very much. Have a wonderful day, and keep safe. Thank you.