UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549










FORM 20-F



(Mark One)



| | ☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------------



OR



| | ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
| | - | --------------------------------------------------------------------------------------------------------------------------------



OR



| | ☐ | TRANSITION
                                         REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                                         For the transition period from  to .
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



OR



| | ☐ | SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
| | - | -------------------------------------------------------------------------------------------



Date of event requiring this shell company report



For the transition
period from  to .



Commission file number: 001-33356







GAFISA
S.A.(Exact name of Registrant as specified in its charter)



GAFISA S.A.(Translation of Registrant’s name into English)



The Federative
Republic of Brazil(Jurisdiction of incorporation or organization)



Av. Pres. Juscelino Kubitschek, No. 1830,
Block 2, 3rd Floor
04543-900 – São Paulo, SP – Brazil
phone: + 55 (11) 3025-9000
fax: + 55 (11) 3025-9348
e mail: ri@gafisa.com
Attn: Ian Andrade – Chief Financial Officer and Investor Relations Officer
(Address of principal executive offices)



Securities registered or to be registered
pursuant to Section 12(b) of the Act:



None



Securities registered or to be registered
pursuant to Section 12(g) of the Act:



None













Securities for which there is a reporting
obligation pursuant to Section 15(d) of the Act:



|Title
of each class               | Name
of each exchange on which registered
|--------------------------------- | -----------------------------------------
|Common Shares, without par value* | N/A                                      



* Traded only in the form of American
Depositary Shares (as evidenced by American Depositary Receipts), each representing two common shares which are registered under
the Securities Act of 1933.



Indicate the number of outstanding shares
of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.



The number of outstanding shares as of
December 31, 2019 was:



|Title
of Class | Number
of Shares Outstanding
|-------------- | ----------------------------
|Common Stock   | 120,000,000*                



*Includes 2,981,052 common shares
that are held in treasury.



Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.



Yes ☐	No ☒



If this report is an annual or transition
report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.



Yes ☐	No ☒



Note – Checking the box above
will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
from their obligations under those Sections.



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.



Yes ☐	No ☒



Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).



Yes ☐	No ☐



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large
accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange
Act.



Large Accelerated
Filer ☐   Accelerated Filer ☒
  Non-accelerated Filer ☐ Emerging growth company ☐



If an emerging
growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new or revised financial accounting standards†
provided pursuant to Section 13(a) of the Exchange Act.☐



† The term “new
or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its
Accounting Standards Codification after April 5, 2012.



Indicate by check mark whether an internal
control over financial reporting auditor attestation is included in the filing:



Yes ☒	No
☐



Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this annual report:



| | ☐ | U.S. GAAP
| | - | ---------



| | ☐ | International Financial Reporting Standards as issued by the International Accounting Standards Board
| | - | -----------------------------------------------------------------------------------------------------



| | ☒ | Other
| | - | -----









If “Other” has been checked
in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.



☐ Item 17   	☒ Item 18



If this is an annual report, indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



Yes ☐	   No ☒



(APPLICABLE ONLY TO ISSUERS
INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)



Indicate by check mark whether the registrant
has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent
to the distribution of securities under a plan confirmed by a court.



Yes ☐   No
☐









Table of Contents


TABLE OF CONTENTS



|
|



Page



|INTRODUCTION                                                                          | 1  
|------------------------------------------------------------------------------------- | ---
|PRESENTATION OF FINANCIAL AND OTHER INFORMATION                                       | 1  
|CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS                             | 3  
|PART I                                                                                | 4  
|ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                         | 4  
|ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                       | 4  
|ITEM 3. KEY INFORMATION                                                               | 4  
|ITEM 4. INFORMATION ON THE COMPANY                                                    | 22 
|ITEM 4A. UNRESOLVED STAFF COMMENTS                                                    | 54 
|ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                  | 54 
|ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    | 80 
|ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                             | 91 
|ITEM 8. FINANCIAL INFORMATION                                                         | 92 
|ITEM 9. THE OFFER AND LISTING                                                         | 99 
|ITEM 10. ADDITIONAL INFORMATION                                                       | 103
|ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   | 126
|ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 127
|PART II                                                                               | 129
|ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                              | 129
|ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 129
|ITEM 15. CONTROLS AND PROCEDURES                                                      | 129
|ITEM 16. RESERVED                                                                     | 131
|ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT                                            | 131
|ITEM 16B. CODE OF BUSINESS CONDUCT AND ETHICS                                         | 132
|ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                      | 132
|ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                  | 133
|ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS      | 133
|ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT                                | 133
|ITEM 16G. CORPORATE GOVERNANCE                                                        | 133
|ITEM 16H. MINE SAFETY DISCLOSURE                                                      | 133
|PART III                                                                              | 133
|ITEM 17. FINANCIAL STATEMENTS                                                         | 133
|ITEM 18. FINANCIAL STATEMENTS                                                         | 133
|ITEM 19. EXHIBITS                                                                     | 133

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INTRODUCTION



In this annual report,
references to “Gafisa,” “we,” “our,” “us,” “our company” and “the
Company” are to Gafisa S.A. and its consolidated subsidiaries (unless the context otherwise requires). In addition, the term
“Brazil” refers to the Federative Republic of Brazil, and the phrase “Brazilian government” refers to the
federal government of Brazil. All references to “real,” “reais” or “R$” are to
the Brazilian real, the official currency of Brazil, and all references to “U.S. dollar,” “U.S. dollars”
or “US$” are to U.S. dollars, the official currency of the United States. References to “Brazilian GAAP”
or “BR GAAP” are to accounting practices adopted in Brazil and references to “U.S. GAAP” are to generally
accepted accounting principles in the United States. Any reference to “financial statement” is related to our consolidated
financial statements.



PRESENTATION OF FINANCIAL AND OTHER INFORMATION



Financial Information



We maintain our books
and records in reais. Our audited financial statements were prepared in accordance with Brazilian GAAP and are presented
in thousands of reais, which are based on:



| | · | Brazilian Law No. 6,404/76, as amended by Brazilian Law No. 9,457/97, Brazilian Law No. 10,303/01,
Brazilian Law No. 11,638/07, Brazilian Law No. 12,431/11 and Brazilian Law No. 12,973/14, which we refer to hereinafter as “Brazilian
corporate law;”
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the rules and regulations of the Brazilian Securities Commission (Comissão de Valores
Mobiliários), or the “CVM;” and
| | - | ---------------------------------------------------------------------------------------------------------------------



| | · | the accounting standards issued by the Brazilian Federal Accounting Council (Conselho Federal
de Contabilidade), or the “CFC”, and the Accounting Standards Committee (Comitê de Pronunciamentos Contábeis),
or the “CPC.”
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Brazilian corporate
law was amended by Law No. 11,638, dated December 28, 2007, in order to facilitate the convergence of Brazilian GAAP with International
Financial Reporting Standards, or “IFRS,” and thereafter, the CPC issued new accounting standards that generally converged
Brazilian GAAP with IFRS, except for revenue recognition related to real estate transactions.



In preparing our financial
statements, we have applied: (1) Circular Letter/CVM/SNC/SEP 02/2018 regarding the application of Technical Pronouncement CPC 47
– Revenue from contracts with customers (IFRS 15), and (2) CPC 37 (R1), which requires that an entity develops accounting
policies based on the standards and interpretations of the CPC. We have adopted all pronouncements, guidelines and interpretations
of the CPC issued through December 31, 2018. As a result, our financial statements are prepared in accordance with Brazilian GAAP,
which allows revenue recognition on a percentage of completion basis for construction companies (i.e., revenue is recorded in accordance
with the percentage of financial evolution of the construction project), and are therefore not compliant with IFRS as issued by
the International Accounting Standards Board (“IASB”), which require revenue recognition on transferring control.



Brazilian GAAP differs
in significant respects from U.S. GAAP. The notes to our financial statements included elsewhere in this annual report contain
a reconciliation of equity and net income (loss) from Brazilian GAAP to U.S. GAAP. Unless otherwise indicated, all financial information
of our company included in this annual report is derived from our Brazilian GAAP financial statements.



Our consolidated financial
statements reflect statement of operations and balance sheet information for all of our subsidiaries, and also separately disclose
the interest of non-controlling shareholders.



As explained in Note
8.2 to our consolidated financial statements for the year ended December 31, 2019, the results of operations of Construtora Tenda
S.A., or “Tenda,” have been presented as discontinued operations under Brazilian GAAP in the Company’s 2018,
2017, 2016 and 2015 consolidated statements of operations. Under Brazilian GAAP, previous period balance sheet information is not
retrospectively adjusted. Additionally, earnings per share amounts have been adjusted retroactively to reflect the reverse split
of our common shares at the ratio of 13.483023074 to 1, which was consummated on March 23, 2017.






Table of Contents


Additionally, as of
December 31, 2018, for comparability purposes, our statement of profit or loss for the year ended December 31, 2017 and 2016 has
been adjusted to consider changes in accounting practice derived from the adoption of CPC 48 – Financial Instruments (IFRS
9) and CPC 47 – Revenue from Contracts with Customers (IFRS 15). As required by CPC 23 – Accounting Policies, Changes
in Accounting Estimates and Errors, the retrospective effects of the adoption of CPCs 47 and 48 are demonstrated as follows:



|                                          | For
the Year ended December 31,               | For
the Year ended December 31,    
|----------------------------------------- | --------------------------------------------- | -----------------------------------
|                                          | 2017                                          | 2016                               
|                                          | Balances
originally reported as of 12/31/2017 | Impact
from applying CPCs 47 and 48
|Statement of profit or loss               |                                               |                                    
|Net operating revenue                     | 608,823                                       | 177,351                            
|Operating costs                           | (818,751)                                     | (87,735)                           
|Operating (expenses) income               | (654,216)                                     | —                                  
|Financial income (expenses)               | (107,268)                                     | —                                  
|Income tax and social contribution        | 23,100                                        | —                                  
|Non-controlling interests                 | (281)                                         | —                                  
|Profit or loss of discontinued operations | 98,175                                        | —                                  
|Net income (loss) for the year            | (849,856)                                     | 89,616                             



Market Information



Certain industry,
demographic, market and competitive data, including market forecasts, used in this annual report were obtained from internal surveys,
market research, publicly available information and industry publications. We have made these statements on the basis of information
from third-party sources that we believe are reliable, such as the Brazilian Property Studies Company (Empresa Brasileira de
Estudos de Patrimônio), or “EMBRAESP,” the Association of Managers of Real Estate Companies (Associação
de Dirigentes de Empresas do Mercado Imobiliário), or “ADEMI,” the Getulio Vargas Foundation (Fundaçao
Getulio Vargas), or “FGV,” the National Bank of Economic and Social Development (Banco Nacional de Desenvolvimento
Econômico e Social), or “BNDES,” the Real Estate Companies’ Union (Sindicato das Empresas de Compra,
Venda, Locação e Administração de Imóveis Residenciais e Comerciais), or “SECOVI,”
the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística), or “IBGE,”
and the Brazilian Central Bank (Banco Central do Brasil), or the “Central Bank,” among others. Industry and
government publications, including those referenced here, generally state that the information presented therein has been obtained
from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Although we
have no reason to believe that any of this information or these reports are inaccurate in any material respect, such information
has not been independently verified by us. Accordingly, we do not make any representation as to the accuracy of such information.



Rounding and Other Information



Some percentages and
certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals
in certain tables in this annual report may not be an arithmetic aggregation of the figures that precede them.



In this annual report,
all references to “contracted sales” are to the aggregate amount of sales resulting from all agreements for the sale
of units (including residential communities and land subdivisions) entered into during a certain period, including new units and
units in inventory. Further, in this annual report we use the term “value of launches” as a measure of our performance.
Value of launches is not a GAAP measurement. Value of launches, as used in this annual report, is calculated by multiplying the
total numbers of units in a real estate development by the average unit sales price.



All references to
“potential sales value” are to our estimates of the total amount obtained or that can be obtained from the sale of
all launched units of a certain real estate development, calculated by multiplying the number of units in a development by the
sale price of the unit. Investors should be aware that our potential sales value may not be realized or may significantly differ
from the amount of contracted sales, since the total number of units actually sold may be lower than the number of units launched
and/or the contracted sales price of each unit may be lower than the launching price.



2


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In addition, we present
information in square meters in this annual report. One square meter is equal to approximately 10.76 square feet.



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS



The statements contained
in this annual report in relation to our plans, forecasts, expectations regarding future events, strategies, and projections, are
forward-looking statements which involve risks and uncertainties and which are therefore not guarantees of future results, including
as a result of any impact from the COVID-19 pandemic. Our estimates and forward-looking statements are mainly based on our current
expectations and estimates on projections of future events and trends, which affect or may affect our businesses and results of
operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they
are subject to several uncertainties and are made in light of information currently available to us. Our estimates and forward-looking
statements may be influenced by the following factors, among others:



| | · | changes in overall economic conditions, including employment levels, population growth and consumer
confidence;
| | - | ---------------------------------------------------------------------------------------------------------------



| | · | changes in real estate market prices and demand, estimated budgeted costs and the preferences and
financial condition of our customers;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



| | · | demographic factors and available income;
| | - | -----------------------------------------



| | · | any impacts from
the COVID-19 pandemic;
| | - | ---------------------------------------



| | · | our ability to repay our indebtedness and comply with our financial obligations;
| | - | --------------------------------------------------------------------------------



| | · | our ability to arrange financing and implement our expansion plan;
| | - | ------------------------------------------------------------------



| | · | our ability to compete and conduct our businesses in the future;
| | - | ----------------------------------------------------------------



| | · | changes in our business;
| | - | ------------------------



| | · | inflation and interest rate fluctuations;
| | - | -----------------------------------------



| | · | changes in the laws and regulations applicable to the real estate market;
| | - | -------------------------------------------------------------------------



| | · | government interventions, resulting in changes in the economy, taxes, rates or regulatory environment;
| | - | ------------------------------------------------------------------------------------------------------



| | · | other factors that may affect our business, market share, financial condition, liquidity and results
of our operations; and
| | - | ---------------------------------------------------------------------------------------------------------------------------



| | · | other risk factors discussed under “Item 3. Key Information—D. Risk Factors.”
| | - | -----------------------------------------------------------------------------



The words “believe,”
“may,” “will,” “estimate,” “continue,” “anticipate,” “intend,”
“expect” and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking
statements speak only as of the date they were made, and we undertake no obligation to update or to review any estimate and/or
forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements
involve risks and uncertainties and are not guarantees of future performance. Our future results may differ materially from those
expressed in these estimates and forward-looking statements. In light of the risks and uncertainties described above, the estimates
and forward-looking statements discussed in this annual report might not occur and our future results and our performance may differ
materially from those expressed in these forward-looking statements due to, inclusive of, but not limited to, the factors mentioned
above.



PART I



ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS



Not applicable.



3


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ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE



Not applicable.



ITEM 3. KEY INFORMATION



A. Selected Financial Data



The following selected
financial data for 2019, 2018, 2017, 2016 and 2015 has been derived from our audited consolidated financial statements presented
herein. The consolidated financial statements presented herein for the years ended 2017 and 2016 have been retrospectively adjusted
to reflect the adoption of the new accounting pronouncements CPCs 47 (IFRS 15), CPC 48 (IFRS 9) and ASC 606, as explained in Notes
3 and 33 to our consolidated financial statements for the year ended December 31, 2018. The aforementioned retrospective adjustments
(2017 and 2016) were audited by BDO and, therefore, KPMG audit report makes reference to the consolidated financial statements
before those adjustments. The following selected financial data for 2019, 2018, 2017, 2016 and 2015 are derived from these audited
consolidated financial statements presented herein.



Our financial statements
are prepared in accordance with Brazilian GAAP, which differs in significant respects from U.S. GAAP. For a discussion of the significant
differences relating to these consolidated financial statements and a reconciliation of net income (loss) and equity from Brazilian
GAAP to U.S. GAAP, see the notes to our consolidated financial statements included elsewhere in this annual report. See also “Presentation
of Financial and Other Information.”



This financial information
should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual
report.



As explained in Note
8.2 to our consolidated financial statements for the years ended December 31, 2019 and December 31, 2018, Notes 1 and 8.2 to our
consolidated financial statements for the year ended December 31, 2017 and Notes 2.3 and 8.2 to our consolidated financial statements
for the year ended December 31, 2016, the results of operations of Tenda have been presented as discontinued operations under Brazilian
GAAP in the Company’s 2017, 2016 and 2015 consolidated statements of operations. Additionally, earnings per share amounts
have been adjusted retroactively to reflect the reverse split of our common shares at the ratio of 13.483023074 to 1, which was
consummated on March 23, 2017.



The following table
sets forth financial information as of and for the years ended December 31, 2019, 2018, 2017, 2016 and 2015, which has been prepared
in accordance with Brazilian GAAP in effect as of December 31, 2019. Certain information below is presented in accordance with
U.S. GAAP.



|                                                                        |  | As of and for the year ended December 31,                                                           
|----------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------
|                                                                        |  | 2019(4)(5)                                                                                          
|                                                                        |  | (in thousands of reais, except per share, per American Depositary Shares (“ADS”) and operating data)
|Consolidated Statement of Operations Data:                              |  |                                                                                                     
|Brazilian GAAP:                                                         |  |                                                                                                     
|Net operating revenue                                                   |  |                                                                                                     
|Operating costs                                                         |  |                                                                                                     
|Gross profit (loss)                                                     |  |                                                                                                     
|Operating expenses, net                                                 |  |                                                                                                     
|Financial expenses, net                                                 |  |                                                                                                     
|Income (loss) before income tax and social contribution                 |  |                                                                                                     
|Income tax and social contribution                                      |  |                                                                                                     
|Net income (loss) from continuing operations                            |  |                                                                                                     
|Net income (loss) from discontinued operations	.                        |  |                                                                                                     
|Net income (loss) for the year attributable to non-controlling interest |  |                                                                                                     
|Net income (loss) for the year attributable to owners of Gafisa         |  | R$                                                                                                  
|Share and ADS data(1):                                                  |  |                                                                                                     

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|                                                                                                  |  | As of and for the year ended December 31,                                                           
|------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------
|                                                                                                  |  | 2019(4)(5)                                                                                          
|                                                                                                  |  | (in thousands of reais, except per share, per American Depositary Shares (“ADS”) and operating data)
|Per common share data—R$ per share:                                                               |  |                                                                                                     
|Earnings (loss) per weighted average number of shares—Basic                                       |  |                                                                                                     
|From continuing operations                                                                        |  |                                                                                                     
|From discontinued operations	.                                                                    |  |                                                                                                     
|Earnings (loss) per weighted average number of shares —Diluted                                    |  |                                                                                                     
|From continuing operations                                                                        |  |                                                                                                     
|From discontinued operations                                                                      |  |                                                                                                     
|Weighted average number of shares outstanding—in thousands                                        |  |                                                                                                     
|Dividends and interest on shareholders’ equity declared—in thousands of reais                     |  |                                                                                                     
|Earnings (loss) per share—R$ per share                                                            |  |                                                                                                     
|Number of common shares outstanding as at end of period—in thousands*                             |  |                                                                                                     
|Earnings (loss) per ADS—R$ per ADS(1)                                                             |  |                                                                                                     
|U.S. GAAP:                                                                                        |  |                                                                                                     
|Net operating revenue                                                                             |  |                                                                                                     
|Operating costs                                                                                   |  |                                                                                                     
|Gross profit (loss)                                                                               |  |                                                                                                     
|Operating expenses, net                                                                           |  |                                                                                                     
|Financial expenses, net                                                                           |  |                                                                                                     
|Income from disposal on controlling interests                                                     |  |                                                                                                     
|Income (loss) before income tax and social contribution and income from equity method investments |  |                                                                                                     
|Income tax and social contribution                                                                |  |                                                                                                     
|Equity pick-up                                                                                    |  |                                                                                                     
|Net income (loss) from continuing operations                                                      |  |                                                                                                     
|Net income (loss) from discontinued operations                                                    |  |                                                                                                     
|Net income (loss) for the year                                                                    |  |                                                                                                     
|Net income (loss) attributable to non-controlling interests                                       |  |                                                                                                     
|Net income (loss) attributable to owners of Gafisa                                                |  |                                                                                                     
|Per share and ADS data(1):                                                                        |  |                                                                                                     
|Per common share data—R$ per weighted average number of shares:                                   |  |                                                                                                     
|Earnings (loss) per weighted average number of shares—Basic                                       |  |                                                                                                     
|Earnings (loss) per weighted average number of shares—Diluted                                     |  |                                                                                                     
|Weighted average number of shares outstanding — in thousands                                      |  |                                                                                                     
|Dividends declared and interest on equity                                                         |  |                                                                                                     
|Per ADS data—R$ per ADS(1):                                                                       |  |                                                                                                     
|Profit (loss) per ADS —Basic(1)                                                                   |  |                                                                                                     
|Profit (loss) per ADS —Diluted(1)                                                                 |  |                                                                                                     
|Weighted average number of ADSs outstanding—in thousands                                          |  |                                                                                                     
|Dividends and interest on equity declared                                                         |  |                                                                                                     
|Consolidated Balance Sheet Data:                                                                  |  |                                                                                                     
|Brazilian GAAP:                                                                                   |  |                                                                                                     

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|                                                                                        |  | As of and for the year ended December 31,                                                           
|--------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------
|                                                                                        |  | 2019(4)(5)                                                                                          
|                                                                                        |  | (in thousands of reais, except per share, per American Depositary Shares (“ADS”) and operating data)
|Cash, cash equivalents and short-term investments                                       |  |                                                                                                     
|Current and non-current properties for sale                                             |  |                                                                                                     
|Working capital(2)                                                                      |  |                                                                                                     
|Total assets                                                                            |  |                                                                                                     
|Total debt(3)                                                                           |  |                                                                                                     
|Total Gafisa equity                                                                     |  |                                                                                                     
|Equity of non-controlling interests                                                     |  |                                                                                                     
|Total equity                                                                            |  |                                                                                                     
|U.S. GAAP:                                                                              |  |                                                                                                     
|Cash and cash equivalents, short-term investments and restricted short-term investments |  |                                                                                                     
|Current and non-current properties for sale                                             |  |                                                                                                     
|Working capital(2)                                                                      |  |                                                                                                     
|Total assets                                                                            |  |                                                                                                     
|Total debt(3)                                                                           |  |                                                                                                     
|Total Gafisa equity                                                                     |  |                                                                                                     
|Equity of non-controlling interests                                                     |  |                                                                                                     
|Total equity                                                                            |  |                                                                                                     
|Consolidated cash flow provided by (used in):                                           |  |                                                                                                     
|Brazilian GAAP                                                                          |  |                                                                                                     
|Operating activities                                                                    |  |                                                                                                     
|Investing activities                                                                    |  |                                                                                                     
|Financing activities                                                                    |  |                                                                                                     





_________________

* Common shares held in Treasury
are not included.



| | (1) | Earnings (loss) per ADS is calculated based on each ADS representing two common shares. On March 23, 2017, we consummated a
reverse split of our common shares at the ratio of 13.483023074 to 1, decreasing the number of our total common shares from 378,066,162
common shares to 28,040,162 common shares. All Brazilian GAAP and U.S. GAAP information relating to the number of shares and ADSs
has been adjusted retroactively for the periods ended December 31, 2016 and 2015 to reflect the reverse split of our common shares.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Working capital equals current assets less current liabilities.
| | --- | ---------------------------------------------------------------



| | (3) | Total debt comprises current and non-current portion of loans and financings and debentures.
| | --- | --------------------------------------------------------------------------------------------



| | (4) | As explained in Note 8.2 to our consolidated financial statements for the years ended December 31, 2019 and December 31, 2018,
Notes 1 and 8.2 to our consolidated financial statements for the year ended December 31, 2017 and Notes 2.3 and 8.2 to our consolidated
financial statements for the year ended December 31, 2016, the results of operations of Tenda have been presented as discontinued
operations under Brazilian GAAP and U.S. GAAP in the consolidated statements of operations. Under Brazilian GAAP, previous period
balance sheet information is not retrospectively reclassified.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | As explained in Note 3 to our consolidated financial statements for the year ended December 31, 2018, under Brazilian GAAP,
we have adopted CPC 48 – Financial Instruments (IFRS 9) and CPC 47 – Revenue from Contracts with Customers (IFRS 15)
retrospectively from January 1, 2016. Under U.S. GAAP, we have adopted ASUs Topic 606 – Revenue from Contracts with Customers
retrospectively from January 1, 2016. The consolidated financial information as of and for the years ended December 31, 2015 has
been derived from our historical financial statements but was not restated for the retrospective application of IFRS 9 and
IFRS 15, for Brazilian GAAP purposes, and Topic 606 for U.S. GAAP purposes, due to unreasonable effort or expense.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Exchange Rates



All transactions involving
foreign currency in the Brazilian market, whether carried out by investors resident or domiciled in Brazil or investors resident
or domiciled abroad, must now be conducted on the consolidated exchange market through institutions authorized by the Central Bank
and subject to the rules of the Central Bank.



The Central Bank has
allowed the real to float freely against the U.S. dollar since January 15, 1999. Since the beginning of 2001, the Brazilian
exchange market has been increasingly volatile, and, until early 2003, the value of the real declined relative to the U.S.
dollar, primarily due to financial and political instability in Brazil and Argentina. According to the Central Bank, in 2005, 2006
and 2007, however, the period-end value of the real appreciated in relation to the U.S. dollar 13.4%, 9.5% and 20.7%, respectively.
In 2008, the period-end value of the real depreciated in relation to the U.S. dollar by 24.2%. In 2009 and 2010, the period-end
value of the real appreciated in relation to the U.S. dollar by 34.2% and 4.3%. In 2011, the real depreciated against
the U.S. dollar by 11.2%. In 2014, the period-end value of the real depreciated in relation to the U.S. dollar by 13.4%.
On December 31, 2014, the period-end



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real/U.S. dollar exchange rate was R$2.6562 per U.S.$1.00.
In 2015, the period-end value of the real depreciated in relation to the U.S. dollar by 47.0%. On December 31, 2015, the
period-end real/U.S. dollar exchange rate was R$3.9048 per U.S.$1.00. On December 31, 2016, the period-end real/U.S.
dollar exchange rate was R$3.2591 per U.S.$1.00. On December 31, 2017, the period-end real/U.S. dollar exchange rate was
R$3.308 per U.S.$1.00. On December 31, 2018, the period-end real/U.S. dollar exchange rate was R$3.875 per U.S.$1.00. On
December 31, 2019, the period-end real/U.S. dollar exchange rate was R$4.031 per U.S.$1.00. Although the Central Bank has
intervened occasionally to control unstable movements in the foreign exchange rates, the exchange market may continue to be volatile
as a result of this instability or other factors, and, therefore, the real may substantially decline or appreciate in value
in relation to the U.S. dollar in the future.



The following table
shows the selling rate, expressed in reais per U.S. dollar (R$/US$), for the periods and dates indicated.



|Year | Period-end | Average(1) | Low   | High 
|---- | ---------- | ---------- | ----- | -----
|2015 | 3.905      | 3.339      | 2.575 | 4.195
|2016 | 3.259      | 3.483      | 3.119 | 4.156
|2017 | 3.308      | 3.193      | 3.051 | 3.381
|2018 | 3.875      | 3.656      | 3.139 | 4.188
|2019 | 4.031      | 3.946      | 3.652 | 4.260



|Month                             | Period-end | Average(2) | Low   | High 
|--------------------------------- | ---------- | ---------- | ----- | -----
|December 2019                     | 4.031      | 4.110      | 4.031 | 4.226
|January 2020                      | 4.270      | 4.149      | 4.021 | 4.270
|February 2020                     | 4.499      | 4.341      | 4.238 | 4.499
|March 2020                        | 5.199      | 4.884      | 4.488 | 5.199
|April 2020                        | 5.427      | 5.326      | 5.078 | 5.651
|May 2020                          | 5.426      | 5.643      | 5.299 | 5.937
|June 2020 (through June 19, 2020) | 5.347      | 5.127      | 4.889 | 5.364



_________________



Source:
Central Bank.



| | (1) | Represents the average of the exchange rates on the closing of each day during the year.
| | --- | ----------------------------------------------------------------------------------------



| | (2) | Represents the average of the exchange rates on the closing of each day during the month.
| | --- | -----------------------------------------------------------------------------------------



On June 19, 2020,
the selling rate was R$5.347 to US$1.00. The real/dollar exchange rate fluctuates and, therefore, the selling rate at June
19, 2020, may not be indicative of future exchange rates.



Brazilian law provides
that, whenever there is a serious imbalance in Brazil’s balance of payments or serious reasons to foresee such imbalance,
temporary restrictions may be imposed on remittances of foreign capital abroad. For approximately six months in 1989, and early
1990, for example, the Federal Government froze all dividend and capital repatriations that were owed to foreign equity investors.
These amounts were subsequently released in accordance with Federal Government directives. There can be no assurance that similar
measures will not be taken by the Federal Government in the future.



B. Capitalization and Indebtedness



Not applicable.



C. Reasons for the Offer and Use of Proceeds



Not applicable.



D. Risk Factors



This section is
intended to be a summary of the more detailed discussion included elsewhere in this annual report. Our business, results of operations,
financial condition or prospects could be adversely affected if any of these risks occurs, and as a result, the trading price of
our common shares and ADSs could decline. The risks described below are those known to us and those that we currently believe may
materially affect us.



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Risks Relating to Our Business and to the Brazilian Real
Estate Industry



Our business, results of operations,
financial condition and the market price of our common shares or the ADSs may be adversely affected by weaknesses in general economic,
real estate and other conditions.



The residential homebuilding
and land development industry is cyclical and is significantly affected by changes in general and local economic conditions, such
as:



| | · | employment levels;
| | - | ------------------



| | · | population growth;
| | - | ------------------



| | · | consumer demand, confidence, stability of income levels and interest rates;
| | - | ---------------------------------------------------------------------------



| | · | availability of financing for land home site acquisitions and the availability of construction
and permanent mortgages;
| | - | -----------------------------------------------------------------------------------------------------------------------



| | · | inventory levels of both new and existing homes;
| | - | ------------------------------------------------



| | · | supply of rental properties; and
| | - | --------------------------------



| | · | conditions in the housing resale market.
| | - | ----------------------------------------



Furthermore, the market
value of undeveloped land, buildable lots and housing inventories held by us can fluctuate significantly as a result of changing
economic and real estate market conditions. If there are significant adverse changes in economic or real estate market conditions,
we will have to sell homes at a loss or hold land in inventory longer than planned.



For example, in 2008,
the global financial crisis adversely impacted Brazil’s gross domestic product, or “GDP,” resulting in a decrease
in both the number of developments launched and the rate of sales of our units. Since 2014, weakening economic conditions and political
instability in Brazil, leading to fluctuations in interest rates and inflation and an increase in levels of unemployment, among
other factors, had an adverse impact on the real estate market, including a decrease in the volume of Gafisa launches and a sharp
decrease in the overall volume of real estate launches in Brazil. Worldwide financial market volatility may also adversely impact
government plans for the Brazilian real estate industry, which may have a material adverse effect on our business, our financial
condition and results of operations.



Our business may be adversely affected
by the recent coronavirus outbreak.



In December 2019,
a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China. In January 2020, COVID-19 spread to other
countries, including Brazil, and on March 11, 2020, the World Health Organization declared that the spread of COVID-19 had become
a global pandemic. The spread of COVID-19 has resulted in a global and regional economic slowdown, and efforts to contain the spread
of COVID-19 have intensified, including shutdowns mandated by governmental authorities. The outbreak and the preventative and protective
actions that governments have taken in respect of COVID-19 has resulted in a period of business disruption and reduced operations,
including in the real estate sector. In addition, the pandemic has caused levels of equity and other financial markets to decline
sharply and to become volatile, including the price of our common shares.



In response to the
pandemic, we created a crisis management committee which meets daily to discuss developments and disease prevention measures. In
addition, we have preventatively determined that back-office personnel work remotely, providing all employees with the required
tools and infrastructure to enable them to work from home. We have also implemented a series of educative and preventative measures
targeted at our construction site employees, and have reduced staff considered to be in the risk group. Moreover, our sales teams
have focused on online interactions with prospective customers.



The COVID-19 pandemic
may continue to affect our industry and cause temporary suspension of projects and shortage of labour and raw materials, which
would severely disrupt our operations and have a material adverse effect on our business, financial condition and results of operations.



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Our operations could
also be disrupted if any of our employees or the employees of our subcontractors contracted or are thought to have contracted COVID-19
or another disease that could cause an epidemic, since this could require us and our subcontractors to quarantine some or all of
these employees and temporarily close our work sites and other facilities used for our operations. In addition, our revenue and
profitability could also be reduced to the extent COVID-19 or any other epidemic harms the overall economy in Brazil. These adverse
impacts, particularly if they materialize and persist for a substantial period, may significantly and adversely affect our business
operation and financial performance. Additionally, the city of São Paulo where we develop our main projects is highly affected
by COVID-19. A recurrence of this epidemic or any epidemic in the city of São Paulo could result in material disruptions
to our property developments, which in turn could materially and adversely affect our financial condition and results of operations.



The impact from the
outbreak of COVID-19 on our operations will depend on future developments, which are highly uncertain and cannot be predicted,
including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its
impact, among others. While it is too early for us to predict the impacts on our business or our financial targets that the expanding
pandemic, and the governmental responses to it, may have, we would be materially adversely affected by a protracted downturn in
local, regional or global economic conditions.



We operate in a highly competitive industry
and our failure to compete effectively could adversely affect our business.



The Brazilian real
estate industry is highly competitive and fragmented. We compete with several developers on the basis of land availability and
location, price, funding, design, quality, and reputation as well as for partnerships with other developers. Because our industry
does not have high barriers to entry, new competitors, including international companies working in partnership with Brazilian
developers, may enter into the industry, further intensifying this competition. Some of our current potential competitors may have
greater financial and other resources than we do. Furthermore, a significant portion of our real estate development and construction
activity is conducted in the state of São Paulo, an area where the real estate market is highly competitive due to a scarcity
of properties in desirable locations and the relatively large number of local competitors. If we are not able to compete effectively,
our business, our financial condition and the results of our operations could be adversely affected.



Problems with the construction and timely
completion of our real estate projects, as well as third party projects for which we have been hired as a contractor, may damage
our reputation, expose us to civil liability and decrease our profitability.



The quality of work
in the construction of our real estate projects and the timely completion of these projects are major factors that affect our reputation,
and therefore our sales and growth. We may experience delays in the construction of our projects or there may be defects in materials
and/or workmanship. Any defects could delay the completion of our real estate projects, or, if such defects are discovered after
completion, expose us to civil lawsuits by purchasers or tenants. These factors may also adversely affect our reputation as a contractor
for third party projects, since we are responsible for our construction services and the building itself for five years. Construction
projects often involve delays in obtaining, or the inability to obtain, permits or approvals from the relevant authorities. In
addition, construction projects may also encounter delays due to adverse weather conditions, natural disasters, fires, delays in
the provision of materials or labor, accidents, labor disputes, unforeseen engineering, environmental or geological problems, disputes
with contractors and subcontractors, unforeseen conditions at construction sites, disputes with surrounding landowners, or other
events. In addition, we may encounter previously unknown conditions at or near our construction sites that may delay or prevent
construction of a particular project. If we encounter a previously unknown condition at or near a site, we may be required to correct
the condition prior to continuing construction and there may be a delay in the construction of a particular project. The occurrence
of any one or more of these problems in our real estate projects could adversely affect our reputation and our future sales.



We may incur construction
and other development costs for a project that exceeds our original estimates due to increases over time in interest rates, real
estate taxes or costs associated with materials and labor, among others. We may not be able to pass these increased costs on to
purchasers. Construction delays, scarcity of skilled workers, default and or bankruptcy of third party contractors, cost overruns
and adverse conditions may also increase project development costs. In addition, delays in the completion of a project may result
in a delay in the commencement of cash flow, which would increase our capital needs.



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Our inability to acquire adequate capital
to finance our projects could delay the launch of new projects and adversely affect our business.



We expect that the
continued expansion and development of our business will require significant capital, including working capital, which we may be
unable to obtain on acceptable terms, or at all, to fund our capital expenditures and operating expenses, including working capital
needs. We may fail to generate sufficient cash flow from our operations to meet our cash requirements. Furthermore, our capital
requirements may vary materially from those currently planned if, for example, our revenues do not reach expected levels or we
have to incur unforeseen capital expenditures and make investments to maintain our competitive position. If this is the case, we
may require additional financing sooner than anticipated, or we may have to delay some of our new development and expansion plans
or otherwise forgo market opportunities. Future borrowing instruments such as credit facilities are likely to contain restrictive
covenants, particularly in light of the recent economic downturn and unavailability of credit, and/or may require us to pledge
assets as security for borrowings under those facilities. Our inability to obtain additional capital on satisfactory terms may
delay or prevent the expansion of our business, which would have an adverse effect on our business. As of December 31, 2019, our
net debt (indebtedness from debentures, loans and financing, and project financing balance, net of our cash and short term investments
position) was R$316.4 million, our cash and cash equivalents and short-term investments were R$414.3 million and our total debt
was R$730.7 million.



Changing market conditions may adversely
affect our ability to sell our property inventories at expected prices, which could reduce our margins and adversely affect the
market price of our common shares or the ADSs.



We must constantly
locate and acquire new tracts of land for development and development home sites to support our homebuilding operations. There
is a lag between the time we acquire land for development or development home sites and the time that we can bring the properties
to market and sell homes. As a result, we face the risk that demand for housing may decline, costs of labor or materials may increase,
interest rates may increase, currencies may fluctuate and political uncertainties may occur during this period and that we will
not be able to dispose of developed properties at expected prices or profit margins or within anticipated time frames or at all.
Significant expenditures associated with investments in real estate, such as maintenance costs, construction costs and debt payments,
cannot generally be reduced if changes in the economy cause a decrease in revenues from our properties. The market value of property
inventories, undeveloped tracts of land and desirable locations can fluctuate significantly because of changing market conditions.
In addition, inventory carrying costs (including interest on funds unused to acquire land or build homes) can be significant and
can adversely affect our performance. Because of these factors, we may be forced to sell homes and other real properties at a loss
or for prices that generate lower profit margins than we anticipate. We may also be required to make material write-downs of the
book value of our real estate assets in accordance with Brazilian and U.S. GAAP if values decline. The occurrence of any of these
factors may adversely affect our business and results of operations.



We are subject to risks normally associated
with permitting our purchasers to make payments in installments; if there are higher than anticipated defaults or if our costs
of providing such financing increase, then our profitability could be adversely affected.



As is common in our
industry, we and the special purpose entities (sociedade de propósito específico), or “SPEs,”
in which we participate permit some purchasers of the units in our projects to make payments in installments. As a result, we are
subject to the risks associated with this financing, including the risk of default in the payment of principal or interest on the
loans we make as well as the risk of increased costs for the funds raised by us. In addition, our term sales agreements usually
bear interest and provide for an inflation adjustment. If the rate of inflation increases, the loan payments under these term sales
agreements may increase, which may lead to a higher rate of payment default. If the default rate among our purchasers increases,
our cash generation and, therefore, our profitability could be adversely affected.



In the case of a payment
default after the delivery of financed units, Brazilian law provides for the filing of a collection claim to recover the amount
owed or to repossess the unit following specified procedures. The collection of overdue amounts or the repossession of the property
is a lengthy process and involves additional costs. It is uncertain that we can recover the full amount owed to us or that if we
repossess a unit, we can re-sell the unit at favorable terms or at all.



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If we or the SPEs in which we participate
fail to comply with or become subject to more onerous government regulations, our business could be adversely affected.



We and the SPEs in
which we participate are subject to various federal, state and municipal laws and regulations, including those relating to construction,
zoning, soil use, urban regulations, environmental protection, historical sites, consumer protection and antitrust. We are required
to obtain, maintain and renew on a regular basis permits, licenses and authorizations from various governmental authorities in
order to carry out our projects. We strive to maintain compliance with these laws and regulations, as well as with conditions of
permits, licenses and authorizations. If we are unable to achieve or maintain compliance with these laws, regulations and conditions,
we could be subject to fines, project shutdowns, cancellation of licenses and revocation of authorizations or other restrictions
on our ability to develop our projects, which could have an adverse impact on our business, financial condition and results of
operations. In addition, our contractors and subcontractors are required to comply with various labor and environmental regulations
and tax and other regulatory obligations. Because we are secondary obligors to these contractors and subcontractors, if they fail
to comply with these regulations or obligations, we may be subject to penalties by the relevant regulatory bodies, and to indemnification
claims from affected third parties.



Regulations governing
the Brazilian real estate industry as well as environmental laws have tended to become more restrictive over time. We cannot assure
that new and stricter standards will not be passed or become applicable to us, or that stricter interpretations of existing laws
and regulations will not be adopted. Furthermore, we cannot assure that any such more onerous regulations would not cause delays
in our projects or that we would be able to secure the relevant permits and licenses. Any such event may require us to spend additional
funds to achieve compliance with such new rules and therefore make the development of our projects more costly, which could adversely
affect our business and the market price of our common shares or the ADSs.



Scarcity of financing and/or increased
interest rates could cause a decrease in the demand for real estate properties, which could negatively affect our results of operations,
financial condition and the market price of our common shares or the ADSs.



The scarcity of financing
and/or an increase in interest rates or in other indirect financing costs may adversely affect the ability or willingness of prospective
buyers to purchase our products and services, especially prospective low income buyers. A majority of the bank financing obtained
by prospective buyers comes from the Housing Financial System (Sistema Financeiro de Habitação), or the “SFH,”
which is financed by funds raised from savings account deposits. The Brazilian Monetary Council (Conselho Monetário Nacional),
or the “CMN,” often changes the amount of such funds that banks are required to make available for real estate financing.
If the CMN restricts the amount of available funds that can be used to finance the purchase of real estate properties, or if there
is an increase in interest rates, there may be a decrease in the demand for our residential and commercial properties and for the
development of lots of land, which may adversely affect our business, financial condition and results of operations.



We and other companies
in the real estate industry frequently extend credit to our clients. As a result, we are subject to risks associated with providing
financing, including the risk of default on amounts owed to us, as well as the risk of increased costs of funding our operations.
An increase in inflation would raise the nominal amounts due from our clients, pursuant to their sales agreements, which may increase
their rates of default. If this were to occur, our cash generation and, therefore, our operating results may be adversely affected.
In addition, we obtain financings from financial institutions at different rates and subject to different indexes and may be unable
to match our debt service requirements with the terms of the financings we grant to our clients. The mismatch of rates and terms
between the funds we obtain and the financings we grant may adversely affect us.



We may sell portions of our landbank
located in nonstrategic regions, which is in line with our future strategies. As a result, we will prepare an annual analysis for
impairment of our landbank.



As part of our strategy
to focus our future operations on regions where our developments have historically been successful, and where we believe there
is homebuilding potential based on market opportunities, we may sell portions of our landbank located outside of these regions.
As a result, we prepare an annual impairment analysis of our landbank based on the acquisition cost of the land in our portfolio.
In 2011, we made a decision to sell a portion of our landbank given our narrowed geographic focus and, since then, we have been
recording provisions for impairment on landbank and properties for sale. As of December 31, 2015, we had R$50.3 million recorded
as a provision for impairment on landbank and properties for sale. Since 2016, our impairment analysis has been negatively impacted
by the challenging macroeconomics conditions in the real estate sector and in Brazil as a whole, which has led to a decrease in
sales



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prices for our commercial and residential units. As of December
31, 2016, 2017 and 2018, we had R$174.4 million, R$310.6 million and R$235.9 million recorded as a provision for impairment on
landbank and properties for sale, respectively. As of December 31, 2019, we had R$198.5 million recorded as a provision for impairment
on landbank and properties for sale.



The real estate industry is dependent
on the availability of credit, especially in the entry-level segment.



One of our main strategies
is to expand our operations to the entry-level segment in which clients are strongly dependent on bank financing to purchase homes.
This financing may not be available on favorable terms to our clients, or at all. Changes in the Real Estate Financing System (Sistema
de Financiamento Imobiliário), or the “SFI,” and in the SFH rules, the scarcity of available resources or
an increase in interest rates may affect the ability or desire of such clients to purchase homes, consequently affecting the demand
for homes. These factors would have a material adverse effect on our business, financial condition and results of operations.



Because we recognize sales revenue from
our real estate properties under the percentage of completion method of accounting under Brazilian GAAP as generally adopted by
construction companies and under U.S. GAAP, by transferring control, an adjustment in the cost of a development project may reduce
or eliminate previously reported revenue and income.



We recognize revenue
from the sale of units in our properties based on the percentage of completion method of accounting, which requires us to recognize
revenue as we incur the cost of construction. Total cost estimates are revised on a regular basis as the work progresses, and adjustments
based upon such revisions are reflected in our results of operations in accordance with the method of accounting used. To the extent
that these adjustments result in an increase, a reduction or an elimination of previously reported income, we will recognize a
credit to or a charge against income, which could have an adverse effect on our previously reported revenue and income.



Our participation in SPEs creates additional
risks, including potential problems in our financial and business relationships with our partners.



We invest in SPEs
with or without other real estate developers and construction companies in Brazil. The risks involved with SPEs include the potential
bankruptcy of our SPE partners and the possibility of diverging or inconsistent economic or business interests between us and our
partners. If an SPE partner fails to perform or is financially unable to bear its portion of the required capital contributions,
we could be required to make additional investments and provide additional services in order to make up for our partner’s
shortfall. In addition, under Brazilian law, the partners of an SPE may be liable for certain obligations of an SPE, including
with respect to tax, labor, environmental and consumer protection laws and regulations. These risks could adversely affect us.



We may experience difficulties in finding
desirable land tracts, and increases in the price of land may increase our cost of sales and decrease our earnings.



Our continued growth
depends in large part on our ability to continue to acquire land and to do so at a reasonable cost. As more developers enter or
expand their operations in the Brazilian home building industry, land prices could rise significantly and suitable land could become
scarce due to increased demand, decreased supply or both. A resulting rise in land prices may increase our cost of sales and decrease
our earnings on future developments. We may not be able to continue to acquire suitable land at reasonable prices in the future,
which could adversely affect our business.



The market value of our inventory of
undeveloped land may decrease, thus adversely affecting our results of operations.



We own tracts of undeveloped
land that are part of our inventory for future developments. We also intend to increase our inventory and acquire larger tracts
of land. The market value of these properties may significantly decrease from the acquisition date to the development of the project
as a result of economic downturns or market conditions, which would have an adverse effect on our results of operations.



Increases in the price of raw materials
and fixtures may increase our cost of sales and reduce our earnings.



The basic raw materials
and fixtures used in the construction of our homes include concrete, concrete block, steel, aluminum, bricks, windows, doors, roof
tiles and plumbing fixtures. Increases in the price of these and other raw



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materials, including increases that may occur as a result of
shortages, duties, restrictions, or fluctuations in exchange rates, could increase our cost of sales. Any such cost increases could
reduce our earnings and adversely affect our business.



If we are not able to implement our growth
strategy as planned, or at all, our business, financial condition and results of operations could be adversely affected.



We plan to grow our
business by selectively expanding to meet the growth potential of the Brazilian residential market. We believe that there is increasing
competition for suitable real estate development sites. We may not find suitable additional sites for development of new projects
or other suitable expansion opportunities. We anticipate that we will need additional financing to implement our expansion strategy
and we may not have access to the funding required for the expansion of our business or such funding may not be available to us
on acceptable terms. We may finance the expansion of our business with additional indebtedness or by issuing additional debt or
equity securities.



We could face financial
risks, covenant restrictions and restrictions on our ability to employ assets associated with incurring additional indebtedness,
such as reducing our liquidity and access to financial markets and increasing the amount of cash flow required to service such
indebtedness, or associated with issuing additional stock, such as dilution of ownership and earnings.



There are risks for which we do not have
insurance coverage or the insurance coverage we have in place may not be sufficient to cover damages that we may suffer.



We maintain insurance
policies with coverage for certain risks, including damages arising from engineering defects, fire, landslides, storms, gas explosions
and civil liabilities stemming from construction errors. We believe that the level of insurance we have contracted for accidents
is consistent with market practice. However, there can be no assurance that such policies will always be available or provide sufficient
coverage for certain damages. In addition, there are certain risks that may not be covered by such policies, such as damages resulting
from war, force majeure or the interruption of certain activities and, therefore any requirement to pay amounts not covered by
our insurance may have a negative impact on our business and our results of operations. Furthermore, we are required to pay penalties
and other fines whenever there is delay in the delivery of our units, and such penalties and fines are not covered by our insurance
policies.



Moreover, we cannot
guarantee that we will be able to renew our current insurance policies under favorable terms, or at all. As a result, insufficient
insurance coverage or our inability to renew existing insurance policies could have an adverse effect on our financial condition
and results of operations.



Our level of indebtedness could have
an adverse effect on our financial health, diminish our ability to raise additional capital to fund our operations and limit our
ability to react to changes in the economy or the real estate industry.



As of December 31,
2019, our total debt (loans, financing and debentures) was approximately R$730.7 million and our short-term debt was R$584.3 million.
In addition, as of December 31, 2019 our cash and cash equivalents and short-term investments available was R$414.3 million and
our net debt represented 35.3% of our shareholders’ equity including the non-controlling interest. Our indebtedness has variable
interest rates. Our level of indebtedness could have important negative consequences for us. For example, it could:



| | · | require us to dedicate a large portion of our cash flow from operations to fund payments on our
debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate
purposes;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | increase our vulnerability to adverse general economic or industry conditions;
| | - | ------------------------------------------------------------------------------



| | · | limit our flexibility in planning for, or reacting to, changes in our business or the industry
in which we operate;
| | - | -------------------------------------------------------------------------------------------------------------------



| | · | limit our ability to raise additional debt or equity capital in the future or increase the cost
of such funding;
| | - | ----------------------------------------------------------------------------------------------------------------



| | · | restrict us from making strategic acquisitions or exploring business opportunities; and
| | - | ---------------------------------------------------------------------------------------



| | · | place us at a competitive disadvantage compared to our competitors that have less debt.
| | - | ---------------------------------------------------------------------------------------



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Certain of our debt agreements contain
financial and other covenants and any default under such debt agreements may have a material adverse effect on our financial condition
and cash flows.



Certain of our existing
debt agreements contain restrictions and covenants and require the maintenance or satisfaction of specified financial ratios, ratings
and tests, cash generation, capitalization, debt coverage, maintenance of shareholding position, and others. Our ability to meet
these financial ratios, ratings and tests can be affected by events beyond our control and we cannot assure that we will meet those
tests, especially given the lower yield environment in which the industry currently operates. Failure to meet or satisfy any of
these covenants, financial ratios or financial tests could result in an event of default under these and other agreements, as a
result of cross-default provisions. If we are unable to comply with our debt covenants, we could be forced to seek waivers.



If we are unable to
obtain waivers, a large portion of our debt could be subject to acceleration. We do not believe such occurrence to be likely; however,
if it were to happen, we could be required to renegotiate, restructure or refinance our indebtedness, seek additional equity capital
or sell assets, which could materially and adversely affect us.



We cannot guarantee
that we will be successful in obtaining any waivers. As of December 31, 2019, the Company and its subsidiaries were in compliance
with the contractual covenants provided for in our debentures and our credit instruments.



Failures or delays by our third party
contractors may adversely affect our reputation and business and exposes us to civil liability.



We engage third party
contractors to provide services for our projects. Therefore, the quality of work in the construction of our real estate projects
and the timely completion of these projects may depend on factors that are beyond our control, including the quality and timely
delivery of building materials and the technical skills of the outsourced professionals. Such outsourcing may delay the identification
of construction problems and, as a result, the correction of such problems. Any failures, delays or defects in the services provided
by our third party contractors may adversely affect our reputation and relationship with our clients, which would adversely affect
our business and results of operations.



Unfavorable judicial, administrative
or arbitration decisions may adversely affect us.



We currently are,
and may be in the future, defendants in several judicial, administrative proceedings related to civil, labor and tax matters. We
cannot assure you that we will obtain favorable decisions in such proceedings, that such proceedings will be dismissed, or that
our provisions for such proceedings are sufficient in the event of an unfavorable decision. Unfavorable decisions that impede our
operations, as initially planned, or that result in a claim amount that is not adequately covered by provisions in our balance
sheet, may adversely affect our business and financial condition.



We may be held responsible for labor
liabilities of our third party contractors.



We may be held responsible
for the labor liabilities of our third party contractors and obligated to pay for fines imposed by the relevant authorities in
the event that our third party contractors do not comply with applicable legislation. As of December 31, 2019, R$16.9 million of
our R$34.7 million of total labor liabilities and provisions were for such liabilities. Approximately 90% of the labor claims were
commenced by employees of our third party contractors. An adverse result in such claims would cause an adverse effect on our business.



Failure to keep members of our senior
management and/or our ability to recruit and retain qualified professionals may have a material adverse effect on our business,
financial condition and results of operations.



Our future success
depends on the continued service and performance of our senior management and our ability to recruit and retain qualified professionals.
None of the members of our senior management are bound to long-term labor contracts or non-compete agreements and there can be
no assurance that we will successfully recruit and retain qualified professionals to our management as our business grows. The
loss of any key professionals or our inability to recruit or retain qualified professionals may have an adverse effect on our business,
financial condition and results of operations.



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Risks Relating to Brazil



Brazilian economic, political and other
conditions, and Brazilian government policies or actions in response to these conditions, may negatively affect our business and
results of operations and the market price of our common shares or the ADSs.



The Brazilian economy
has been characterized by unstable economic cycles and frequent and occasionally extensive intervention by the Brazilian government.
The Brazilian government has often changed monetary, fiscal, credit, tariff and other policies to influence the course of the Brazilian
economy. For example, the government’s actions to control inflation have at times involved setting wage and price controls,
blocking access to bank accounts, imposing exchange controls and limiting imports into Brazil. We have no control over, and cannot
predict, what policies or actions the Brazilian government may take in the future.



Our business, results
of operations, financial condition and prospects, as well as the market prices of our common shares or the ADSs, may be adversely
affected by, among others, the following factors:



| | · | exchange rate movements;
| | - | ------------------------



| | · | exchange control policies;
| | - | --------------------------



| | · | expansion or contraction of the Brazilian economy, as measured by rates of GDP;
| | - | -------------------------------------------------------------------------------



| | · | inflation;
| | - | ----------



| | · | tax policies;
| | - | -------------



| | · | other economic, political, diplomatic and social developments in or affecting Brazil;
| | - | -------------------------------------------------------------------------------------



| | · | interest rates;
| | - | ---------------



| | · | energy shortages;
| | - | -----------------



| | · | liquidity of domestic capital and lending markets; and
| | - | ------------------------------------------------------



| | · | social and political instability.
| | - | ---------------------------------



Uncertainty over whether
the Brazilian federal government will implement reforms or changes in policy or regulation affecting these or other factors in
the future may affect economic performance and contribute to economic uncertainty in Brazil, which may have an adverse effect on
our activities and consequently our operating results, and may also adversely affect the trading price of our common shares and
the ADSs.



Inflation, and government measures to
curb inflation, may adversely affect the Brazilian economy, the Brazilian securities market, our business and operations and the
market prices of our common shares or the ADSs.



At times in the past,
Brazil has experienced high rates of inflation. According to the General Market Price Index (Índice Geral de Preços—Mercado),
or “IGP-M”, inflation rates in Brazil were 2017, 7.5% in 2018 and 7.3% in 2019. In addition, according to the Expanded
Consumer Price Index (Índice de Preços ao Consumidor Ampliado), or “IPCA,” Brazilian consumer
price inflation rates were 2017, 3.7% in 2018 and 4.3% in 2019. Our term sales agreements usually provide for an inflation adjustment
linked to the National Construction Cost Index (Índice Nacional de Custo de Construção), or “INCC”.
The INCC rates were 2017, 3.8% in 2018 and 4.1% in 2019. The Brazilian government’s measures to control inflation have often
included maintaining a tight monetary policy with high interest rates, thereby restricting availability of credit and reducing
economic growth. Inflation, actions to combat inflation and public speculation about possible additional actions have also contributed
materially to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets.



Brazil may experience
high levels of inflation in future periods. Periods of higher inflation may slow the rate of growth of the Brazilian economy, which
could lead to reduced demand for our products in Brazil and decreased net sales. Inflation is also likely to increase some of our
costs and expenses, which we may not be able to pass on to our



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customers and, as a result, may reduce our profit margins and
net income. In addition, high inflation generally leads to higher domestic interest rates, and, as a result, the costs of servicing
our reais-denominated debt may increase, resulting in lower net income. Inflation and its effect on domestic interest rates
can, in addition, lead to reduced liquidity in the domestic capital and lending markets, which could affect our ability to refinance
our indebtedness in those markets. In addition, increases in inflation rates would increase the outstanding debt of our customers,
which could increase default levels and affect our cash flows. Any decline in our net operating revenue or net income and any deterioration
in our financial condition would also likely lead to a decline in the market price of our common shares and the ADSs.



Developments and the perceptions of risks
in other countries, including other emerging markets, the United States and Europe, may harm the Brazilian economy and the price
of our common shares and the ADSs.



The market for securities
offered by companies with significant operations in Brazil is influenced by economic and market conditions in Brazil and, to varying
degrees, market conditions in other Latin American and emerging markets, as well as the United States, Europe and other countries.
To the extent the conditions of the global markets or economy deteriorate, the business of companies with significant operations
in Brazil may be harmed. The weakness in the global economy has been marked by, among other adverse factors, lower levels of consumer
and corporate confidence, decreased business investment and consumer spending, increased unemployment, reduced income and asset
values in many areas, reduction of China’s growth rate, currency volatility and limited availability of credit and access
to capital. Developments or economic conditions in other emerging market countries have at times significantly affected the availability
of credit to companies with significant operations in Brazil and resulted in considerable outflows of funds from Brazil, decreasing
the amount of foreign investments in Brazil.



Crises and political
instability in other emerging market countries, the United States, Europe or other countries could decrease investor demand for
securities offered by companies with significant operations in Brazil, such as our common shares or the ADSs. In June 2016, the
United Kingdom had a referendum in which the majority voted to leave the European Union (so-called “Brexit”).
The announcement of Brexit caused significant volatility in global stock markets and currency exchange rate fluctuations. The United
Kingdom formally ceased to be a member state of the European Union on January 31, 2020, at which point a transition period began.
The United Kingdom is expected to continue to follow certain European Union rules during the transition period which will end on
December 31, 2020; however, the ongoing process of negotiations between the United Kingdom and the European Union will determine
the future terms of the United Kingdom’s relationship with the European Union, including access to European Union markets,
either during the transitional period or more permanently. We have no control over and cannot predict the effect of the United
Kingdom’s exit from the European Union nor over whether and to which effect any other member state will decide to exit the
European Union in the future. These developments, as well as potential crises and forms of political instability arising therefrom
or any other as of yet unforeseen development, may harm our business and the price of our common shares and the ADSs.



Political instability and economic uncertainty
in Brazil, including in relation to country-wide corruption probes, may adversely affect the price of our ADSs and our business,
operations and financial condition.



Brazil’s political
environment has historically influenced, and continues to influence, the performance of the country’s economy. Political
crises have affected and continue to affect the confidence of investors and the general public, which have historically resulted
in economic deceleration and heightened volatility in the securities offered by companies with significant operations in Brazil.



The recent economic
instability in Brazil has contributed to a decline in market confidence in the Brazilian economy as well as to a deteriorating
political environment. In addition, various ongoing investigations into allegations of money laundering and corruption being conducted
by the Office of the Brazilian Federal Prosecutor, including the largest such investigation, known as “Operação
Lava Jato,” have negatively impacted the Brazilian economy and political environment. The potential outcome of these
investigations is uncertain, but they have already had an adverse impact on the image and reputation of the implicated companies,
and on the general market perception of the Brazilian economy. We cannot predict whether the ongoing investigations will result
in further political and economic instability, or if new allegations against government officials and/or executives of private
companies will arise in the future.



A failure by the Brazilian
government to implement necessary reforms may result in diminished confidence in the Brazilian government’s budgetary condition
and fiscal stance, which could result in downgrades of Brazil’s



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sovereign foreign credit rating by credit rating agencies, negatively
impact Brazil’s economy, and lead to further depreciation of the real and an increase in inflation and interest rates,
which could adversely affect our business, operations and financial condition.



Any of the above factors
may create additional political uncertainty, which could harm the Brazilian economy and, consequently, our business, and could
adversely affect our business, operations, financial condition and the price of our common shares and the ADSs.



Fluctuations in interest rates may have
an adverse effect on our business and the market prices of our common shares and the ADSs.



The Central Bank,
through the Monetary Policy Committee (Comitê de Política Monetária), or the “COPOM,” establishes
the Special Clearance and Escrow System rate (Sistema Especial de Liquidação e Custodia), or the “SELIC
rate,” which is the basic interest rate for the Brazilian financial system by reference to the level of economic growth of
the Brazilian economy, the level of inflation and other economic indicators. The SELIC rate is also an important policy instrument
used by the Brazilian government to achieve inflation targets it established on June 21, 1999 (Decree No. 3,088).



As of December 31,
2015, the SELIC rate was 14.25%. As of December 31, 2016, the Central Bank reduced the SELIC rate to 13.75%. As of December 31,
2017, the Central Bank had significantly reduced the SELIC to 7.0% and, as of December 31, 2018, the SELIC rate was 6.5%. As of
December 31, 2019, the Central Bank had further decreased the SELIC rate to 4.50%. As of the date of this annual report, the SELIC
rate is 3.75%. Debts of companies in the real estate industry, including ours, are subject to the fluctuation of the SELIC rate.
Should the SELIC rate increase, the costs relating to the service of our debt obligations may also increase.



As of December 31,
2019, our indebtedness was denominated in reais and subject to Brazilian floating interest rates, such as the Reference
Interest Rate (Taxa Referencial), or “TR,” and the Interbank Deposit Certificate Rate (Certificado de Depósito
Interbancário), or “CDI rate.” Any increase in the TR rate or the CDI rate may have an adverse impact on
our financial expenses, our results of operations and on the market price of our common shares or the ADSs. We are not a party
to any hedging instruments with respect to our indebtedness.



Restrictions on the movement of capital
out of Brazil may adversely affect your ability to receive dividends and distributions on the ADSs and on our common shares, or
the proceeds of any sale of our common shares.



Brazilian law permits
the Brazilian government to impose temporary restrictions on conversions of Brazilian currency into foreign currencies and on remittances
to foreign investors of proceeds from their investments in Brazil whenever there is a serious imbalance in Brazil’s balance
of payments or there are reasons to expect a pending serious imbalance. The Brazilian government last imposed remittance restrictions
for approximately six months in 1989 and early 1990. The Brazilian government may take similar measures in the future. Any imposition
of restrictions on conversions and remittances could hinder or prevent holders of our common shares or the ADSs from converting
into U.S. dollars or other foreign currencies and remitting abroad dividends, distributions or the proceeds from any sale in Brazil
of our common shares. Exchange controls could also prevent us from making payments on our U.S. dollar-denominated debt obligations
and hinder our ability to access the international capital markets. As a result, exchange controls restrictions could reduce the
market prices of our common shares and the ADSs.



Changes in tax laws may increase our
tax burden and, as a result, adversely affect our profitability.



The Brazilian government
regularly implements changes to tax regimes that may increase our and our customers’ tax burdens. These changes include modifications
in the rate of assessments and, on occasion, enactment of temporary taxes, the proceeds of which are earmarked for designated governmental
purposes. Since April 2003, the Brazilian government has presented several tax reform proposals, which were mainly designed to
simplify tax assessments, to avoid internal disputes within and between the Brazilian states and municipalities, and to redistribute
tax revenues. The tax reform proposals provided for changes in the rules governing the federal Social Integration Program (Programa
de Integração Social), or “PIS,” the federal Contribution for Social Security Financing (Contribuição
para Financiamento da Seguridade Social), or “COFINS,” the state Tax on the Circulation of Merchandise and Services
(Imposto Sobre a Circulação de Mercadorias e Serviços), or “ICMS,” and other taxes. The
effects of these proposed tax reform measures and any other changes that result from enactment of additional tax reforms have not
been, and



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cannot be, quantified. However, some of these measures, if enacted,
may result in increases in our overall tax burden, which could negatively affect our overall financial performance.



Risks Relating to Our Common Shares and the ADSs



International economic and market conditions,
especially in the United States, may adversely affect the market price of the ADSs.



The market for securities
issued by Brazilian companies is influenced, to a varying degree, by international economic and market conditions generally. As
our ADSs are traded Over the Counter, or the “OTC”, adverse market conditions and economic and/or political crises,
especially in the United States, such as the subprime mortgage lending crisis in 2007 and 2008 and the financial and credit crises
in 2008, have at times resulted in significant negative impacts on the market price of our ADSs. Despite the fact that our clients,
whether financed by us or by Brazilian banks through resources obtained in the local market, were not directly exposed to the mortgage
lending crisis in the United States, there were still uncertainties as to whether such crisis may indirectly affect homebuilders
worldwide. The uncertainties generated by such a crisis may affect the market prices of our ADSs in future and could also make
it more difficult for us to access the capital markets and finance our operations in the future on acceptable terms or at all.



Developments and the perception of risks
in other countries, especially emerging market countries, may adversely affect the market prices of our common shares and the ADSs.



The market for securities
issued by Brazilian companies is influenced, to varying degrees, by economic and market conditions in other emerging market countries,
especially other Latin American countries. Although economic conditions are different in each country, the reaction of investors
to developments in one country may cause the capital markets in other countries to fluctuate. Developments or adverse economic
conditions in other emerging market countries have at times resulted in significant outflows of funds from, and declines in the
amount of foreign currency invested in, Brazil. For example, in 2001, after a prolonged recession, followed by political instability,
Argentina announced that it would no longer continue to service its public debt. The economic crisis in Argentina negatively affected
investors’ perceptions of Brazilian securities for several years. Economic or political crises in Latin America or other
emerging markets may significantly affect perceptions of the risk inherent in investing in the region, including Brazil.



The Brazilian economy
is also affected by international economic and general market conditions, especially economic and market conditions in the United
States. Share prices on the B3, for example, have historically been sensitive to fluctuations in U.S. interest rates as well as
movements of the major U.S. stock indexes, particularly in the current worldwide economic downturn. Developments in other countries
and securities markets could adversely affect the market prices of our common shares and the ADSs and could also make it more difficult
for us to access the capital markets and finance our operations in the future on acceptable terms or at all.



The relative volatility and the lack
of liquidity of the Brazilian securities market may adversely affect you.



The Brazilian securities
market is substantially smaller, less liquid, more concentrated and more volatile than major securities markets in the United States.
This may limit your ability to sell our common shares and the common shares underlying your ADSs at the price and time at which
you wish to do so. As of December 31, 2019, the average daily trading for all companies listed on the B3, the only Brazilian stock
exchange, was approximately R$4.3 billion, according to B3 data.



Shares eligible for future sale may adversely
affect the market value of our common shares and the ADSs.



Certain of our shareholders
have the ability, subject to applicable Brazilian laws and regulations and applicable securities laws in the relevant jurisdictions,
to sell our shares and the ADSs. We cannot predict what effect future sales of our shares or ADSs may have on the market price
of our shares or the ADSs. Future sales of substantial amounts of such shares or the ADSs, or the perception that such sales could
occur, could adversely affect the market prices of our shares or the ADSs.



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The economic value of your investment
in our company may be diluted.



We may need additional
funds in the future, in order to expand more rapidly, develop new markets, respond to competitive pressures or make acquisitions.
Any necessary additional financing may not be available on terms favorable to us. If adequate funds are not available on acceptable
terms, we may be unable to meet our business or strategic objectives or compete effectively. If additional funds are raised by
our issuing new equity securities existing shareholders may be diluted. See “Item 4. Information on the Company—A.
History and Development of the Company.”



We may be subject to takeover by other
companies or investors.



Since we do not have
a controlling shareholder, we may be subject to takeover by other companies or investors. Pursuant to article 46 of the Company’s
Bylaws, any shareholder that holds a participation equal to or greater than 50% of the Company’s share capital is required
to make a tender offer for the remaining shares, for consideration equal to at least the fair value as determined by an appraisal
report and subject to the regulation provided for in Law No. 6,404/76 of the Brazilian corporate law and applicable CVM regulations
on takeovers. In addition, in accordance with Brazilian corporate law, a shareholder that holds a participation equal to or greater
than 10% of the Company’s share capital may convene a shareholder meeting to dismiss the management of the Company, and to
the extent the other shareholders at such meeting do not vote against a proposal to dismiss or approve such proposal, our management
would be dismissed, which would disrupt the day to day operations of the Company and would have an adverse impact on our business
and result of operations.



Holders of our common shares or the ADSs
may not receive any dividends or interest on shareholders’ equity.



According to our bylaws,
we must generally pay our shareholders at least 25% of our annual net profit as dividends or interest on shareholders’ equity,
as calculated and adjusted under Brazilian corporate law method. This adjusted net profit may be used to absorb losses or for the
payment of statutory participation on profits to debenture holders, employees or members of our management, which would ultimately
reduce the amount available to be paid as dividends or interest on shareholders’ equity. Additionally, Brazilian corporate
law allows a publicly traded company like us to suspend the mandatory distribution of dividends in any particular year if our board
of directors informs our shareholders that such distributions would be inadvisable in view of our financial condition or cash availability.
Based on the negative results of the fiscal year 2014, on April 16, 2015, our shareholders did not approve any distribution of
dividends. On April 25, 2016, our shareholders approved a distribution of dividends in the amount of R$17.7 million, representing
R$0.0481 per share. Based on the negative results of the fiscal year 2016, at our annual shareholders’ meeting held on April
28, 2017, our shareholders did not approve any distribution of dividends. Based on the negative results of the fiscal year 2017,
our shareholders did not approve any distribution of dividends at our annual shareholders’ meeting held on April 27, 2018.
Based on the negative results of the fiscal year 2018, our shareholders did not approve any distribution of dividends at our annual
shareholders’ meeting held on April 24, 2019. Based on the negative results of the fiscal year 2019, at our annual shareholders’
meeting held on April 30, 2020, our shareholders did not approve any distribution of dividends.



For further information,
see “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.”



Holders of ADSs may find it difficult
to exercise voting rights at our shareholders’ meetings.



Holders of ADSs may
exercise voting rights with respect to our common shares represented by ADSs only in accordance with the terms of the deposit agreement
governing the ADSs. Holders of ADSs will face practical limitations in exercising their voting rights because of the additional
steps involved in our communications with ADS holders. For example, we are required to publish a notice of our shareholders’
meetings in specified newspapers in Brazil. Holders of our common shares will be able to exercise their voting rights by attending
a shareholders’ meeting in person or voting by proxy. By contrast, holders of ADSs will receive notice of a shareholders’
meeting from the ADR depositary following our notice to the depositary requesting the depositary to do so. To exercise their voting
rights, holders of ADSs must instruct the ADR depositary on a timely basis. This voting process necessarily will take longer for
holders of ADSs than for holders of our common shares. Common shares represented by ADSs for which no timely voting instructions
are received by the ADR depositary from the holders of ADSs shall not be voted.



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Holders of ADSs also
may not receive the voting materials in time to instruct the depositary to vote the common shares underlying their ADSs. In addition,
the depositary and its agents are not responsible for failing to carry out voting instructions of the holders of ADSs or for the
manner of carrying out those voting instructions. Accordingly, holders of ADSs may not be able to exercise voting rights, and they
will have little, if any, recourse if the common shares underlying their ADSs are not voted as requested.



No single shareholder or group of shareholders
holds more than 50% of our capital stock, which may increase the opportunity for alliances between shareholders as well as conflicts
between them.



No single shareholder
or group of shareholders holds more than 50% of our capital stock. There is no guidance in Brazilian corporate law for publicly-held
companies without an identified controlling shareholder. Due to the absence of a controlling shareholder, we may be subject to
future alliances or agreements between our shareholders, which may result in the exercise of a controlling power over our company
by them. In the event a controlling group is formed and decides to exercise its controlling power over our company, we may be subject
to unexpected changes in our corporate governance and strategies, including the replacement of key executive officers. Additionally,
we may be more vulnerable to a hostile takeover bid. The absence of a controlling group may also jeopardize our decision-making
process as the minimum quorum required by law for certain decisions by shareholders may not be reached and, as a result, we cannot
guarantee that our business plan will be affected. Any unexpected change in our management team, business policy or strategy, any
dispute between our shareholders, or any attempt to acquire control of our company may have an adverse impact on our business and
result of operations.



Holders of ADSs will not be able to enforce
the rights of shareholders under our bylaws and Brazilian corporate law and may face difficulties in protecting their interests
because we are subject to different corporate rules and regulations as a Brazilian company.



Holders of ADSs are
not direct shareholders of our company and are unable to enforce the rights of shareholders under our bylaws and Brazilian corporate
law.



Our corporate affairs
are governed by our bylaws and Brazilian corporate law, which differ from the legal principles that would apply if we were incorporated
in a jurisdiction in the United States, such as the State of Delaware or New York, or elsewhere outside Brazil. Although insider
trading and price manipulation are crimes under Brazilian law, the Brazilian securities markets are not as highly regulated and
supervised as the U.S. securities markets or the markets in some other jurisdictions. In addition, rules and policies against self-dealing
or for preserving shareholder interests may be less well-defined and enforced in Brazil than in the United States and certain other
countries, which may put holders of the ADSs at a potential disadvantage. Corporate disclosures also may be less complete or informative
than for a public company in the United States or in certain other countries.



Holders of ADSs may face difficulties
in serving process on or enforcing judgments against us and other persons.



We are a corporation
organized under the laws of Brazil, and all of our directors and executive officers and our independent public accountants reside
or are based in Brazil. Most of the assets of our company and of these other persons are located in Brazil. As a result, it may
not be possible for holders of ADSs to effect service of process upon us or these other persons within the United States or other
jurisdictions outside Brazil or to enforce against us or these other persons judgments obtained in the United States or other jurisdictions
outside Brazil. Because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may be enforced
in Brazil only if certain conditions are met, holders may face greater difficulties in protecting their interests in the case of
actions by us or our directors or executive officers than would shareholders of a U.S. corporation.



Changes in Brazilian tax laws may have
an adverse impact on the taxes applicable to a disposition of the ADSs.



According to Law No.
10,833 of December 29, 2003, the disposition of assets located in Brazil by a non-resident to either a Brazilian resident or a
non-resident is subject to taxation in Brazil, regardless of whether the disposition occurs outside or within Brazil. Thus, gains
arising from a disposition of our common shares by a non-resident of Brazil to another non-resident of Brazil are subject to income
tax.



Although the matter
is not entirely clear, we believe it is reasonable to take the position that ADSs do not constitute assets located in Brazil for
the purposes of Law No. 10,833/03. Accordingly, the disposition of our ADSs by a non-resident to either a Brazilian resident or
a non-resident should not be subject to taxation in Brazil. We cannot assure



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you, however, that the Brazilian tax authorities or the Brazilian
courts will agree with this interpretation. In the event that a disposition of our ADSs is considered a disposition of assets located
in Brazil, gains on a disposition of ADSs by a non-resident of Brazil may be subject to income tax in Brazil. See “Item 10.
Additional Information—E. Taxation—Brazilian Tax Considerations—Gains.”



Any gain or loss recognized
by a U.S. Holder (as defined in “Item 10. Additional Information—E. Taxation—U.S. Federal Income Tax Considerations”)
would generally be treated as U.S. source gain or loss for all foreign tax credit purposes. Consequently, U.S. Holders will not
be able to credit any Brazilian income tax imposed on such gains against their U.S. federal income tax liability unless they have
other creditable taxable income from foreign sources in the appropriate foreign tax credit basket. U.S. Holders should consult
their tax advisers as to whether the Brazilian tax on gain would be creditable against such holder’s U.S. federal income
tax on foreign-source income from other sources.



There can be no assurance that we will
not be a passive foreign investment company, or “PFIC,” for any taxable year, which could result in adverse U.S. federal
income tax consequences to U.S. holders of our common shares or ADSs.



In general, a non-U.S.
corporation is a PFIC for any taxable year if: (1) 75% or more of its gross income consists of passive income (the “income
test”) or (2) 50% or more of the average value of its assets (generally determined on a quarterly basis) consists of assets
that produce, or are held for the production of, passive income (including cash and cash equivalents). Generally, “passive
income” includes interest, dividends, rents, royalties and certain gains. For purposes of the above calculations, a non-U.S.
corporation that directly or indirectly owns at least 25% by value of the shares of another corporation is treated as if it held
its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the
other corporation. The Company believes that it was not a “passive foreign investment company,” or “PFIC,”
for U.S. federal income tax purposes for its 2019 taxable year. However, because the Company’s PFIC status is an annual determination
that can be made only after the end of each taxable year and will depend on the composition of its income and assets and the value
of its assets for each such year, there can be no assurance that the Company will not be a PFIC for the current or any other taxable
year.



If the Company were
a PFIC for any taxable year during which a U.S. holder owned its common shares or ADSs, certain adverse U.S. federal income tax
consequences could apply to such U.S. holder. See “Item 10. Additional Information—E. Taxation——Certain
U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Rules.”



Judgments of Brazilian courts with respect
to our common shares will be payable only in reais.



If proceedings are
brought in the courts of Brazil seeking to enforce our obligations in respect of the common shares, we will not be required to
discharge our obligations in a currency other than reais. Under Brazilian exchange control limitations, an obligation in
Brazil to pay amounts denominated in a currency other than reais may be satisfied in Brazilian currency only at the exchange
rate, as determined by the Central Bank, in effect on the date of payment. The exchange rate may not afford non-Brazilian investors
with full compensation for any claim arising out of or related to our obligations under our common shares or the ADSs.



Holders of ADSs may be unable to exercise
preemptive rights with respect to our common shares underlying the ADSs.



Holders of ADSs will
be unable to exercise the preemptive rights relating to our common shares underlying ADSs unless a registration statement under
the U.S. Securities Act of 1933, as amended, or the “Securities Act,” is effective with respect to those rights or
an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration
statement with respect to the shares relating to these preemptive rights or to take any other action to make preemptive rights
available to holders of ADSs. We may decide, in our discretion, not to file any such registration statement. If we do not file
a registration statement or if we, after consultation with the ADR depositary, decide not to make preemptive rights available to
holders of ADSs, those holders may receive only the net proceeds from the sale of their preemptive rights by the depositary, or
if they are not sold, their preemptive rights will be allowed to lapse.



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An exchange of ADSs for common shares
risks loss of certain foreign currency remittance and Brazilian tax advantages.



The ADSs benefit from
the certificate of foreign capital registration, which permits Citibank N.A., as depositary, to convert dividends and other distributions
with respect to our common shares into foreign currency, and to remit the proceeds abroad. Holders of ADSs who exchange their ADSs
for common shares will then be entitled to rely on the depositary’s certificate of foreign capital registration for five
business days from the date of exchange. Thereafter, they will not be able to remit the proceeds abroad unless they obtain their
own certificate of foreign capital registration under the terms of Law No. 4,131/62, or unless they qualify under Resolution CMN
4,373, which superseded Resolution CMN No. 2,689, which entitles certain investors to buy and sell shares on Brazilian stock exchanges
or organized over-the-counter market and benefit from the certificate of foreign capital registration managed by their authorized
representatives in Brazil. See “Item 9. The Offering and Listing—C. Markets—Investment in Our Common Shares by
Non-Residents of Brazil.”



If holders of ADSs
do not qualify under Resolution CMN 4,373, they will generally be subject to less favorable tax treatment on distributions with
respect to our common shares. There can be no assurance that the depositary’s certificate of registration or any certificate
of foreign capital registration obtained by holders of ADSs will not be affected by future legislative or regulatory changes, or
that additional Brazilian law restrictions applicable to their investment in the ADSs may not be imposed in the future.



A portion of the compensation of our
officers and members of the senior management is paid in the form of stock options, which could tie their interest to the market
price of our shares and ADSs.



We have established
stock option plans for our officers and members of our senior management. Potential benefits under the stock option plans are tied
to the appreciation of the market price of our shares and ADSs.



As a result, our compensation
policy may influence our officers and members of the senior management and their interest to the market price of our shares and
ADSs, which may conflict with the interests of our shareholders. Our officers and members of the senior management may be influenced
to focus on short-term rather than long-term results because a significant portion of their compensation is tied to our results
and the market price of our shares and ADSs. See “Item 6. Directors, Senior Management and Employees—E. Share Ownership—Stock
Option Plans” in this annual report.



ITEM 4. INFORMATION ON THE COMPANY



A. History and Development of the Company



General



Gafisa S.A. is a corporation
organized under the laws of Brazil. We were incorporated on November 12, 1996 for an indefinite term. Our registered and principal
executive offices are located at Av. Pres. Juscelino Kubitschek, No. 1830, Block 2, 3rd Floor, 04543-900, São Paulo, SP,
Brazil, and our general telephone and fax numbers are + 55 (11) 3025-9000 and + 55 (11) 3025-9242, respectively.



We are a leading diversified
national homebuilder serving all demographic segments of the Brazilian market. Established over 60 years ago, we have completed
and sold more than 1,100 developments and constructed over 16 million square meters of housing under the Gafisa brand, which we
believe is more than any other homebuilder in Brazil. Recognized as one of the foremost professionally-managed homebuilders, we
are also one of the best-known brands in the real estate development market, enjoying a reputation among potential homebuyers,
brokers, lenders, landowners, and competitors for quality, consistency and professionalism, offering a variety of residential options
to the mid to higher income segments.



Our core business
is the development of high-quality residential units in attractive locations. The year ended December 31, 2019 was a milestone
year for Gafisa, as we underwent a comprehensive restructuring process. As a result and to focus on our restructuring, we decided
not to launch new projects. We currently operate mainly in São Paulo, but we still have a small portion of our inventory
in Rio de Janeiro and other cities.



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In 2006 Gafisa acquired
Alphaville Urbanismo S.A., or “Alphaville,” leading residential community development company in Brazil. In 2008 Gafisa
acquired Tenda, focusing on the low income segment. In 2013 Gafisa sold a 70% interest in Alphaville, and sold our remaining stake
in 2019.



On August 16, 2016,
we announced to the market that the spin-off studies were ongoing and that we were evaluating other potential capital structure
options and separation alternatives for the Gafisa and Tenda business units, including a potential offer of securities and/or a
sale of equity interests, in addition to the spin-off itself.



In December 2016,
following the conclusion of our analysis of certain strategic options, our management at the time decided to sell 50% of Tenda’s
total capital stock, and transfer the remaining 50% of Tenda’s total capital stock to our shareholders in connection with
a reduction in our total capital stock. Accordingly, on December 14, 2016, we entered into the SPA with Jaguar pursuant to which
we would sell Tenda shares representing up to 30% of the total capital stock of Tenda, at a price equal to R$8.13 per share.



During 2017, we did
not issue a launch guidance for Gafisa as a result of the continuing weakening economic conditions and political instability in
Brazil. Accordingly, we adopted a conservative approach to launches, focusing on the sale of inventory.



The spin-off of the
Tenda business unit was consummated on May 4, 2017, following: (i) a reduction of the capital stock of Tenda (without the cancellation
of shares), pursuant to which Gafisa, as sole shareholder at that time, received R$100 million (adjusted by the SELIC); (ii) a
reduction of the capital stock of Gafisa, resulting in the distribution to Gafisa shareholders of shares corresponding to 50% of
the capital stock of Tenda; (iii) the conclusion of the preemptive rights exercise pursuant to which Gafisa shareholders acquired
up to 50% of the total share capital of Tenda, at the price per share set forth in the SPA with Jaguar and for a total amount of
R$219.5 million, with no shares being acquired by Jaguar; and (iv) the satisfaction of other conditions precedent for the consummation
of the spin-off. In addition, on May 4, 2017, the Tenda shares were listed on the B3 and began to publicly trade.



During 2018, we did
not issue a launch guidance for Gafisa as a result of the economic conditions and political instability in Brazil.



On September 25, 2018,
at an extraordinary shareholders’ meeting held at the request of GWI Asset Management S.A., the shareholders resolved to
(i) remove by majority vote all of the members of the Board of Directors and (ii) elect new Board members by means of a multiple-vote
process. Accordingly, at a Board of Directors’ meeting on September 28, 2018, the following resolutions were passed as part
of the turnaround process and the optimization of the Company’s structure: (i) the withdrawals of chief executive officer,
chief financial and investor relations officer and chief operating officer and the election of new statutory officers; (ii) the
adoption of measures to approve the Company’s headquarters relocation; (iii) the closure of our branch located in the city
of Rio de Janeiro and (iv) the approval of the Company’s share buyback program.



An auction of 14,600,000
shares held by the Company’s shareholder, GWI Asset Management S.A. took place on February 14, 2019, corresponding to an
interest of 33.67% in the Company’s ownership structure. As a result of this auction, Planner Corretora de Valores S.A.,
through investment funds managed by it, acquired 8,000,000 common shares corresponding to 18.45% of the total common shares issued
by the Company. Mr. Mu Hak You and Mr. Thiago Hi Joon You resigned from the board of directors on February 17, 2019.



Our common shares
are listed on the B3 under the symbol “GFSA3” and the ADSs are traded OTC in the United States under the symbol “GFASY”.



Our agent for service
of process in the United States is National Corporate Research, Ltd. located at 10 East 40th Street, 10th floor, New York, NY 10016.



Historical Background and Recent Developments



Gomes de Almeida Fernandes
Ltda., or “GAF,” was established in 1954 in the city of Rio de Janeiro with operations in the real estate markets in
the cities of Rio de Janeiro and São Paulo. In December 1997, GP Investimentos S.A. and its affiliates, or “GP,”
entered into a partnership with the shareholders of GAF to create Gafisa S.A. In 2004, as a result of a corporate restructuring,
GP assumed a controlling position in our company. In 2005, an affiliate of Equity International Management, LLC, or “Equity
International,” acquired approximately 32% of our company



23


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through a capital contribution. In February 2006, we concluded
our initial public offering in Brazil, resulting in a public float of approximately 47% of our total share capital at the conclusion
of the offering.



In September 2006,
we created Gafisa Vendas Intermediação Imobiliária Ltda., or “Gafisa Vendas,” to function as our
internal sales division in the state of São Paulo and in February 2007, we created a branch of Gafisa Vendas in Rio de Janeiro,
or “Gafisa Vendas Rio,” to function as our internal sales division in the metropolitan region of Rio de Janeiro.



In October 2006, we
entered into an agreement with Alphaville Participações S.A. to acquire 100% of Alphaville, one of the largest residential
community development companies in Brazil in terms of units and square meters, focused on the identification, development and sale
of high quality residential communities in the metropolitan regions throughout Brazil targeted at upper and upper-middle income
families.



On March 17, 2007,
we concluded our initial public offering of common shares in the United States, resulting in a public float of 78.6% of our total
share capital at the conclusion of the offering. Upon completion of the offering, entities related to Equity International and
GP controlled 14.2% and 7.3% of our total capital stock, respectively. In June 2007, Brazil Development Equity Investments, LLC,
a company affiliated with GP, sold its remaining interest in our company (7.1% of our capital stock at the time).



On March 15, 2007,
we created a new wholly-owned subsidiary, Fit Residencial Empreendimentos Imobiliários Ltda., or “FIT,” for
the development, construction and management of lower and lower-middle income residential projects. On October 21, 2008, Gafisa
and Tenda concluded a business combination in which FIT was merged into Tenda. The purpose of the merger was to consolidate the
activities of FIT and Tenda in the lower-income segment in Brazil focused on developing real estate units with an average price
of less than R$200.0 thousand. As a result of the business combination, Gafisa became the owner of 60.0% of the total and voting
capital stock of Tenda. On December 30, 2009, the shareholders of Gafisa and Tenda approved a corporate restructuring to consolidate
Gafisa’s non-controlling share ownership in Tenda. The restructuring was accomplished by exchanging all of the remaining
Tenda shares not held by Gafisa into Gafisa shares. As a result of the restructuring, Tenda became a wholly-owned subsidiary of
Gafisa. On October 26, 2007, Gafisa acquired 70% of Cipesa Empreendimentos Imobiliários S.A., a leading homebuilder in the
State of Alagoas at the time.



On October 1, 2010,
Equity International sold its remaining interest in our company.



On December 9, 2013,
Gafisa announced the completion of the agreement to sell a 70% interest in Alphaville to private equity firms Blackstone and Pátria.
Gafisa retained a 30% interest. The sale valued Alphaville at R$2.0 billion. The proceeds from the transaction totaled R$1.54 billion,
of which R$1.25 billion was received through the sale of shares, and R$290 million was received as a dividend distributed by Alphaville.



On February 2, 2014,
Gafisa’s board of directors authorized management to initiate studies for a potential spin-off of Gafisa and Tenda business
units into two independent publicly traded companies. Our management initiated the studies in the first quarter of 2014.



During 2015 and 2016,
we implemented several initiatives in connection with the potential spin-off. During 2016, our management decided to sell 50% of
Tenda’s total capital stock, and transfer the remaining 50% of Tenda’s total capital stock to our shareholders in connection
with a reduction in our total capital stock, and implement the spin-off. The spin-off of the Tenda business unit was consummated
on May 4, 2017. See “—A. History and Development of the Company—General” for further information.



On March 23, 2017,
the Company conducted a reverse split of common shares issued by the Company, at the ratio of 13.483023074 to 1, and proportional
adjustment to the limit of authorized capital. As of the date of this annual report, the share capital is comprised of 28,040,162
common, registered and non-par value shares.



On December 20, 2017,
the Company’s shareholders approved at an extraordinary shareholders’ meeting a capital increase of up to R$300.0 million,
with the option to approve a partial capital increase of up to R$200.0 million to be subscribed for through the issuance of a minimum
of 13,333,333 new common shares and a maximum of 20,000,000 new common shares in the Company, all in registered, book-entry form,
and with no par value, at a price per share equal to R$15.00, of which R$0.01 per share would be allocated to capital, and R$14.99
per share would be allocated to capital reserves. This capital increase is part of the Company’s strategy to reinforce its
liquidity, strengthen its capital structure and solidify the Company’s strategic and operational positioning for a new cycle
of the real estate



24


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market. Following the preemptive rights exercise period, which
expired on January 19, 2018, and the subsequent subscription periods that expired on February 2, 2018 and February 21, 2018, respectively,
we issued and sold 16,717,752 new common shares of the Company for a total amount of R$250.8 million, all in registered, book-entry
form, and with no par value, at a price per share equal to R$15.00, of which R$0.01 per share was allocated to capital, and R$14.99
per share was allocated to capital reserves. Accordingly, on February 28, 2018, our board of directors approved a capital and capital
reserve increase in the amount of R$250.8 million.



At the end of 2017
and in the beginning of 2018, GWI Group, a private property investment company and asset management fund founded by South Korean
national Mu Hak You, began to acquire a large number of shares in the Company. On January 31, 2018, following several purchases
of Company shares, the GWI Group had a 30.45% interest in the Company’s share capital.



On September 21, 2018,
GWI Group acquired an additional number of shares, increasing its interest to 37.32% in the Company’s share capital. GWI
informed us that this share acquisition was made for investment purposes and in order to restructure part of the Company’s
Board. On September 25, 2018, GWI convened an Extraordinary Shareholders’ Meeting for the purpose of dismissing members of
the Board of Directors and electing new members through a multiple-vote process. GWI approved the dismissal of the entire Board
of Directors and elected directors for five of the seven vacant seats. See “Item 6. Directors, Senior Management and Employees—C.
Board Practices”, for further information about our Board of Directors. Within three days of the dismissal and election of
the new Board of Directors, the Company’s executive board was removed from office.



On November 26, 2018,
our Board of Directors approved the voluntary delisting of our ADSs from the New York Stock Exchange (the “NYSE”) and
a proposal to maintain our ADR facility as a Level 1 ADR program to enable investors to retain their ADSs. On December 7, 2018,
we filed a Form 25 with the SEC to effect the delisting of the ADSs, and sent a copy to the NYSE on the same day. The last day
of trading on NYSE for our ADSs was December 14, 2018, and our ADSs were delisted from the NYSE on December 17, 2018. Our ADSs
remain eligible for trading in the over-the-counter markets in the United States, and our common shares will continue to be listed
and admitted to trading in the Novo Mercado segment of the B3. In addition to the information we are required to report under applicable
Brazilian regulations, we intend to continue publishing English translations of our annual report, interim results and communications
on our investor relations website at (www.ri.gafisa.com.br), in accordance with Rule 12g3-2(b) under the Exchange Act. In the Extraordinary
shareholders meeting held in April 2019, the measures taken for the voluntary delisting of Gafisa’s shares from the New York
Stock Exchange (NYSE) and the change of the American Depositary Shares program from a Level 3 to a Level 1 program were not ratified.



On December 19, 2018,
the Board of Directors approved the cancellation of 1,030,325 of the Company’s common shares, without reduction in our capital
stock.



On January 22, 2019,
the Board of Directors approved the cancellation of 370,000 of the Company’s common shares, without reduction in our capital
stock. The Company also disclosed to the market a Material Fact stating that the GWI Group had acquired Company shares representing
more than 50% in the Company’s share capital. Pursuant to article 46 of the Company’s Bylaws, any shareholder that
holds a participation equal to or greater than 50% of the Company’s share capital is required to make a Tender Offer for
the remaining shares. Accordingly, shortly thereafter, GWI Group, without making a Tender Offer, sold a small portion of its shares
in order to maintain a participation of less than 50% in the Company’s share capital. Following queries for clarification
by the Company, CVM and B3 about these transactions involving the Company’s share capital, GWI Group confirmed that the GWI
acquisition of more than 50% of the Company’s share capital was not intentional and, therefore, did not trigger the Tender
Offer requirement provided for in the Company Bylaws.



By February 14, 2019,
GWI Group had sold, through auction in the capital markets, a 33.67% interest it held in the Company’s share capital. As
a result, GWI Group ceased to control the Company and reduced its interest in the Company’s share capital to 7.70%. Furthermore,
Planner Corretora de Valores S.A. in the same date, through investment funds managed by it, purchased shares corresponding to 18.45%
of the total share capital of the Company.



The GWI Group traded
in our shares in early 2019, giving rise to several requests for information by CVM and B3 with respect to compliance with the
Tender Offer requirement provided for in the Company’s Bylaws. The Company responded to such requests on March 21, 2019 and,
as of the date of this annual report, has no knowledge of any further action to be taken by CVM regarding this issue. The Company
understands that, as the GWI Group is no longer a relevant shareholder and their representatives are no longer part of the Company’s
management, the



25


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Company should not be subject to any further sanctions and will
keep its shareholders and the market informed of any developments in that regard.



During February, March
and April 2019, the members of the Company’s Board of Directors elected in late 2018 resigned, with the exception of Pedro
Carvalho de Mello, and new members were elected to replace them. As of the date of this annual report, following the Annual General
Meetings held on April 15, 2019 and April 30, 2020, Gafisa’s Board of Directors is composed of the following members: (i)
Leo Julian Simpson (nominated as chairman of the Board of Directors on April 15, 2019), (ii) Antonio Carlos Romanoski, (iii) Denise
dos Passos Ramos, (iv) Eduardo Larangeira Jácome, (v) Nelson Sequeiros Rodriguez Tanure, (vi) João Antônio
Lopes Filho, (vii) Thomas Cornelius Azevedo Reichenheim, and (viii) Gilberto Benevides.



On April 15, 2019,
at the Annual General Meeting, the shareholders resolved to suspend the shareholder rights of GWI Asset Management S.A. and the
other members of the GWI Group due to GWI Group’s non-compliance with the Company’s Bylaws as they relate to the Tender
Offer request. In addition, it was resolved to increase the limit of authorized capital of the Company from 71,031,876 ordinary
shares to 120,000,000 ordinary shares. This increase in the Company’s authorized capital enables us to issue new shares in
a sufficient amount to accommodate the financial restructuring of the Company.



On April 15, 2019,
following the General Meeting, in order to raise funds for investments, the newly appointed Board of Directors approved a capital
increase of 26,273,962 new common shares. These newly issued common shares were offered privately to the Company’s shareholders
at the B3, and were issued at the reference price of R$6.02 per common share (which was determined following an audit conducted
by a specialized firm). The Board of Directors also appointed Roberto Luz Portella as Chief Executive Officer, Chief Financial
Officer and Investor Relations Officer and Eduardo Larangeira Jácome as Operational Executive Officer. Following the preemptive
rights exercise period, and the subsequent subscription periods, we issued and sold 12,170,035 and 14,103,927 new common shares
of the Company for a total amount of R$62.3 million and R$70.0 million, respectively, all in registered, book-entry form, and with
no par value, at a price per share equal to R$5.12 and R$4.96, respectively. Accordingly, on June 24, 2019, our board of directors
approved a capital increase in the amount of R$132.3 million.



In June 2019, we concluded
a capital increase of 26,273,962 shares, raising approximately R$132 million.



On August 15, 2019,
the Board of Directors approved a capital increase of 48,968,124 new common shares. These newly issued common shares were offered
privately to the Company’s shareholders at the B3, and were issued at the reference price of R$6.57 per common share (which
was determined following an audit conducted by a specialized firm). Following the preemptive rights exercise period and subsequent
subscriptions periods, we issued and sold 45.554.148 and 3,413,976 new common shares of the Company for a total amount of R$254.2
million and R$18.5 million, respectively, all in registered, book-entry form, and with no par value, at a price per share equal
to R$5.58 and R$5.42, respectively. Accordingly, on October 23, 2019, our board of directors approved a capital increase in the
amount of R$272.7 million. As of the date of this annual report, the share capital of the Company totaled R$2,926.3 million, represented
by 120,000,000 common shares, all in registered, book-entry form, and with no par value.



On August 29, 2019
the Board of Directors appointed André Luis Ackermann as Chief Financial Officer, and Eduardo Larangeira Jácome tendered
his resignation as Management Officer, effective as of September 30, 2019. Eduardo Larangeira Jácome will remain as a member
of the Restructuring Committee until December 31, 2019 and a member of the Company’s Board of Directors.



In addition, on September
20, 2019, Roberto Luz Portella resigned from his position as Chief Executive Officer and Investor Relations Officer. Following
his resignation, on September 23, 2019, the Board of Directors appointed André Luis Ackermann as Investor Relations Officer.



In October 2019, we
concluded a capital increase of 48,986,124 shares and raised approximately R$272 million.



On October 21, 2019,
we informed our shareholders and the market that we entered into a Purchase and Sale, Stock Redemption, Corporate Restructuring
Agreement with Alphaville Urbanismo S.A., Private Equity AE Investimentos e Participações S.A. and affiliates of
PEAE, setting forth the terms and conditions for the divestment of our shares in Alphaville. On December 27, 2019, we concluded
the divestment sale of our remaining 21.20% stake in Alphaville for R$100 million, which was settled by offsetting certain credits
and the receipt of the investee shares



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against assets, measured at fair value. This transaction is
in line with the Company’s strategy to optimize and improve the Company’s portfolio and capital allocation, aiming
at creating value for our shareholders.



On December 16, 2019,
we announced that we had entered into a non-binding letter of intent with UPCON Incorporadora S.A. (“UPCON”), pursuant
to which we indicated our intent to acquire the entire share capital of UPCON. On March 2, 2020, the Administrative Council for
Economic Defense (CADE) approved, without restriction, the merger of UPCON into the Company. Once all required approvals are obtained,
UPCON will become a wholly-owned subsidiary of Gafisa.



On December 16, 2019,
we entered into an Additional Investment Agreement with UPCON, which was discussed at an Extraordinary Shareholders’ Meeting
on April 30, 2020. Accordingly and with the aim to strengthen our executive team, our Board of Directors approved a new organizational
structure and elected the following three new Executive Officers: (i) Guilherme Augusto Soares Benevides as Chief Operations Officer
and Vice-president of Operations; (ii) Fábio Freitas Romano as Assistant Vice-president of Operations; and (iii) Ian Masini
Monteiro de Andrade as Chief Financial Officer and Investor Relations Officer and Vice-president of Management and Finance.



On April 30, 2020,
at our Annual and Extraordinary Shareholders’ Meeting, the following matters were approved in relation to the purchase and
sale of UPCON Incorporadora S.A.’s shares: (i) the acquisition by Gafisa of the entire share capital of UPCON; (ii) an increase
in the Company’s share capital of R$310.0 million; (iii) the issuance of two series of debentures convertible into common
shares to cover the transaction with UPCON, in the total amount of R$150.0 million; (iv) changes in the composition of the Board
of Directors, which will have seven to nine members; (v) the election of members to the Board of Directors; and (vi) approval of
a plan to repurchase the Company’s shares, up to a limit of 10,327,558 shares to be acquired by the Company.



On January 28, 2020,
the Board of Directors elected new statutory officers: (i) Cauê Castello Cardoso, (ii) Guilherme Luis Pesenti, and (iii)
Luiz Fernando Ortiz.



At a Board of Directors
meeting held on February 7, 2020, Mr. Roberto Luz Portella tendered his resignation as a member of the Company’s Board of
Directors. At the same meeting, Mr. João Antônio Lopes Filho was elected as the new member of the Company’s
Board of Directors.



On March 27, 2020,
our Board of Directors approved the establishment of the Company’s share buyback program with the objective of generating
value for the Company’s shareholders, that was confirmed by the General Shareholders Meeting held on April 30, 2020. Shares
purchased by the Company as part of the buyback program will be held in treasury, and may subsequently be canceled, sold and/or
used in connection with the exercise of stock options granted by the Company. The maximum number of shares the Company may acquire
under this program is 10,327,558 common shares, pursuant to Article 8 of CVM Instruction No. 567/15. This buyback program ends
on May 4, 2021. Under our current shares repurchase program, any acquisition by us of our own shares must be made on a stock exchange
and cannot be made by means of a private transaction. See “Item 10. Additional Information—B. Memorandum and Bylaws—Purchases
by us of our own Shares,” for further information.



On March 2, 2020,
the Administrative Council for Economic Defense (CADE) approved, without restriction, the merger of UPCON into the Company. On
April 30, 2020 all required approvals were obtained, and UPCON became a wholly-owned subsidiary of Gafisa.



Capital Expenditures



In 2019, under the
Gafisa brand, we invested R$3.6 million in machinery and equipment, information technology equipment, software, project planning
and information technology projects. Our main investments during the period were related to sales stands, which amounted to approximately
R$1 million.



In 2018, under the
Gafisa brand, we invested R$12.5 million in machinery and equipment, information technology equipment, software, project planning
and information technology projects. Our main investments during the period were related to sales stands, which amounted to R$9.7
million.



In 2017, under the
Gafisa brand, we invested R$20.5 million in machinery and equipment, information technology equipment, software, project planning
and information technology projects. Our main investments during the period were related to sales stands and software acquisitions,
which amounted to R$7.3 million and R$6.4 million, respectively.



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Our capital expenditures
are all made in Brazil and are usually funded by financings through local debt capital markets. We currently do not have any significant
capital expenditures in progress.



B. Business Overview



General Overview



We believe we are
one of Brazil’s leading homebuilders. For over more than 60 years, Gafisa has been recognized as one of the foremost professionally-managed
homebuilders, having completed and sold more than 1,100 developments and constructed over 16 million square meters of housing,
which we believe is more than any other residential development company in Brazil. We believe our brand “Gafisa” is
a well-known brand in the Brazilian real estate development market, enjoying a reputation among potential homebuyers, brokers,
lenders, landowners and competitors for quality, consistency and professionalism.



Our core business
is the development of high-quality residential units in attractive locations. For the year ended December 31, 2019, we did not
launch new projects as we focused on our corporate restructuring. In addition, we also provide construction services to third parties
on certain developments where we retain an equity interest. We are currently operating mainly in São Paulo and its metropolitan
area. The city of São Paulo represented approximately 6% of the national population and over 10% of the gross domestic product
as of December 31, 2017 (latest available information).



Our Markets



We have developed
real estate projects in 40 municipalities throughout Brazil, including Barueri, Belém, Campinas, Cuiabá, Curitiba,
Goiânia, Gramado, Guarujá, Guarulhos, Itu, Jundiaí, Macaé, Maceió, Manaus, Niterói, Nova
Iguaçu, Osasco, Porto Alegre, Porto Velho, Rio de Janeiro, Salvador, Santo André, Santos, São Bernardo do
Campo, São Caetano do Sul, São Gonçalo, São Jose dos Campos, São Luís, São Paulo
and Volta Redonda.



Our Real Estate Activities



Our real estate business
includes the following activities:



| | · | developments for sale of:
| | - | -------------------------



| | · | residential units;
| | - | ------------------



| | · | commercial buildings;
| | - | ---------------------



| | · | construction services to third parties on certain developments in the Gafisa segment where we retain
an equity interest; and
| | - | ----------------------------------------------------------------------------------------------------------------------------



| | · | sale of units through our brokerage subsidiaries, Gafisa Vendas and Gafisa Vendas Rio, jointly
referred to as “Gafisa Vendas.”
| | - | ------------------------------------------------------------------------------------------------------------------------------



The table below sets
forth our potential sales value, generated from new developments for each of our real estate activities and as a percentage of
total real estate amount generated during the periods presented:



|                      |  | For the year ended December 31,
|--------------------- |  | -------------------------------
|                      |  | 2019                           
|                      |  | (in
thousands of reais)        
|                      |  |                                
|Residential buildings |  |                                
|Commercial            |  |                                
|Potential sales (1)   |  |                                



_________________

| | (1) | The spin-off of the Tenda business unit was concluded on May 4, 2017.
| | --- | ---------------------------------------------------------------------





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The table below sets forth our sales value
from new developments generated for each of our real estate activities and as a percentage of total real estate amount generated
during the periods presented:



29


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|                      |  | For the year ended December 31,
|--------------------- |  | -------------------------------
|                      |  | 2019                           
|                      |  | (in thousands of reais)        
|                      |  |                                
|Residential buildings |  |                                
|Commercial            |  |                                
|Sales (1)             |  |                                



_________________

| | (1) | The spin-off of the Tenda business unit was concluded on May 4, 2017.
| | --- | ---------------------------------------------------------------------



Developments for Sale



The table below provides
information on our developments for sale activities during the periods presented:



|                                           |  | As of and for the year ended December 31,       
|------------------------------------------ |  | ------------------------------------------------
|                                           |  | 2019                                            
|                                           |  | (in thousands of reais, unless otherwise stated)
|São Paulo                                  |  |                                                 
|Potential sales value of units launched(1) |  |                                                 
|Developments launched(2)                   |  |                                                 
|Usable area (m2)(3)                        |  |                                                 
|Units launched(4)                          |  |                                                 
|Average sales price (R$/m2)(3) (5)         |  |                                                 
|Rio de Janeiro                             |  |                                                 
|Potential sales value of units launched(1) |  |                                                 
|Developments launched(2)                   |  |                                                 
|Usable area (m2)(3)                        |  |                                                 
|Units launched(4)                          |  |                                                 
|Average sales price (R$/m2)(3)(5)          |  |                                                 
|Other Markets                              |  |                                                 
|Potential sales value of units launched(1) |  |                                                 
|Developments launched(2)                   |  |                                                 
|Usable area (m2)(3)                        |  |                                                 
|Units launched(4)                          |  |                                                 
|Average sales price (R$/m2)(3)(5)          |  |                                                 
|Total Gafisa                               |  |                                                 
|Potential sales value of units launched(1) |  |                                                 
|Developments launched(2)                   |  |                                                 
|Usable area (m2)(3)                        |  |                                                 
|Units launched(4)                          |  |                                                 
|Average sales price (R$/m2)(3)(5)          |  |                                                 



_________________





| | (1) | Potential sales value is calculated by multiplying the number of units in a development by the
expected sales price of the unit.
| | --- | --------------------------------------------------------------------------------------------------------------------------------



| | (2) | Does not consider acquisitions of additional ownership interests in projects or cancelled projects.
| | --- | ---------------------------------------------------------------------------------------------------



| | (3) | One square meter is equal to approximately 10.76 square feet. The unit’s usable area in exchange
for land pursuant to barter transactions is not included.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | The units delivered in exchange for land pursuant to barter transactions are not included.
| | --- | ------------------------------------------------------------------------------------------



| | (5) | Average sales price per square meter was R$6,400, R$8,661 and R$6,679 in 2019, 2018 and 2017, respectively,
for Gafisa’s ventures only.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------



Our developments for
sale are divided into two broad categories: (1) residential buildings and (2) commercial buildings.



30


Table of Contents


Overview of Residential Buildings



In the residential
buildings category, we develop three main types of products: (1) luxury buildings targeted at higher-income customers and buildings
targeted at middle-income customers; and (2) entry level buildings targeted at middle-low income customers. Quality residential
buildings for middle- and upper-income customers are our core products and we have developed them since our inception. A significant
portion of our residential developments is located in São Paulo and Rio de Janeiro. In 2006, we began our national expansion
to pursue opportunities in residential buildings outside these cities. However in 2012, as a result of the difficulties to manage
these projects and to achieve reasonable profits, we shifted our focus back to São Paulo and Rio de Janeiro.



Luxury and Middle-Income Buildings



Luxury buildings are
a high margin niche. Units usually have over 150 square meters of private area, at least four bedrooms and more than three parking
spaces. Typically, this product is fitted with modern, top-quality materials designed by brand-name manufacturers. The development
usually includes swimming pools, gyms, visitor parking, and other amenities. Average price per square meter generally is higher
than approximately R$15,000. Luxury building developments are targeted to families with monthly household incomes in excess of
approximately R$40,000.



Buildings targeted
at middle-income customers have accounted for the majority of our sales since our inception. Units usually have between 60 and
150 square meters of private area, between one and three bedrooms and up to three parking spaces. Buildings are usually developed
in large tracts of land as part of multi-building developments and, to a lesser extent, in smaller lots in attractive neighborhoods.
Average price per square meter ranges from approximately R$9,000 to R$15,000. Middle-income building developments are tailored
to customers with monthly household incomes between approximately R$15,000 and R$40,000.



The table below sets
forth our luxury and middle-income building developments launched between January 1, 2017 and December 31, 2019:



|Project
Description | Year
Launched | Gafisa
Participation (%) | Usable
Area (m2) (1) (2) | Completion
Year | Number
of Units (2) | Units
Sold (%) (As of December 31, 2019)
|------------------- | ------------- | ------------------------ | ------------------------ | --------------- | ------------------- | ----------------------------------------
|Upside Pinheiros    | 2018          | 100%                     | 11,261                   | 2021            | 76                  | 99%                                     
|Upside Paraíso      | 2018          | 100%                     | 10,881                   | 2021            | 109                 | 79%                                     
|J330 Jardins        | 2017          | 100%                     | 3,896                    | 2021            | 28                  | 46%                                     
|Parque Ecoville     | 2017          | 100%                     | 10,534                   | 2020            | 134                 | 78%                                     




_________________

| | (1) | One square meter is equal to approximately 10.76 square feet.
| | --- | -------------------------------------------------------------



| | (2) | Values for 100% of the building development, except on projects with partial interest.
| | --- | --------------------------------------------------------------------------------------



Entry Level Developments



Entry level housing
consists of building and house units. Units usually have between 40 to 60 square meters of private area, one to three bedrooms,
and are typically located outside the vehicle restriction area of São Paulo and near public transportation points. The average
price per square meter ranges from R$6,000 to R$9,000. Entry level housing developments are tailored to customers with monthly
household incomes between approximately R$7,000 and R$10,000.



The table below sets
forth our entry level developments launched between January 1, 2017 and December 31, 2019:



|Project
Description        | Year
Launched | Gafisa
Participation (%) | Usable
Area (m2) (1) (2) | Completion
Year | Number
of Units (2) | Units
Sold (%) (As of December 31, 2019)
|-------------------------- | ------------- | ------------------------ | ------------------------ | --------------- | ------------------- | ----------------------------------------
|Belvedere Lorian Boulevard | 2018          | 100%                     | 24,975                   | 2022            | 223                 | 37%                                     
|Moov Belém                 | 2018          | 100%                     | 14,512                   | 2021            | 392                 | 94%                                     
|Scena Tatuapé              | 2018          | 100%                     | 16,028                   | 2021            | 147                 | 24%                                     
|Moov Estação Brás          | 2017          | 100%                     | 12,866                   | 2021            | 543                 | 50%                                     

31


Table of Contents




|Project
Description  | Year
Launched | Gafisa
Participation (%) | Usable
Area (m2) (1) (2) | Completion
Year | Number
of Units (2) | Units
Sold (%) (As of December 31, 2019)
|-------------------- | ------------- | ------------------------ | ------------------------ | --------------- | ------------------- | ----------------------------------------
|Moov Espaco Cerâmica | 2017          | 100%                     | 24,396                   | 2021            | 396                 | 99%                                     
|Moov Parque Maia     | 2017          | 100%                     | 31,248                   | 2021            | 500                 | 59%                                     



_________________





| | (1) | One square meter is equal to approximately 10.76 square feet.
| | --- | -------------------------------------------------------------



| | (2) | Values for 100% of the building development, except on projects with partial interest.
| | --- | --------------------------------------------------------------------------------------



Completed developments with percentage of
units sold less than 90%



The table below sets
forth our completed developments as of December 31, 2019, with percentage of units sold less than 90%:



|                            | As
of December 31, 2019
|--------------------------- | -----------------------
|Project
Description         | Units Sold (%)         
|Smart Vila Madalena (1)     | 89.81%                 
|Varandas Grand Park F2 (2)  | 88.80%                 
|Smart Santa Cecília (3)     | 88.49%                 
|Varandas Grand Park F4 (4)  | 88.03%                 
|Mood Lapa (5)               | 85.90%                 
|Varandas Grand Park F3 (6)  | 80.57%                 
|Sao Way (7)                 | 79.73%                 
|Today Modern Residences (8) | 78.79%                 
|Bambu (9)                   | 78.70%                 
|Varandas Grand Park F6 (10) | 78.02%                 
|067 Hermann Junior (11)     | 77.40%                 
|Laguna Mall (12)            | 76.77%                 
|Barra Vista (13)            | 76.17%                 
|Alphamall (14)              | 70.61%                 
|Varandas Grand Park F5 (15) | 68.12%                 
|Americas Avenue (16)        | 64.70%                 
|Target Offices & Mall (17)  | 63.87%                 
|Sao Gate (18)               | 51.02%                 




| | (1) | Smart Vila Madalena. This development was 100% completed at December 31, 2019 at which time 89.81%
of the units had been sold. According to the Company’s business plan, this development’s selling forecast indicates
the remaining units will be sold within the next 12 months.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Varandas Grand Park F2. This development was 100% complete at December 31, 2019 at which time 88.80%
of the units had been sold. According to the Company’s business plan, this development’s selling forecast indicates
the remaining units will be sold within the next 12-24 months.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Smart Santa Cecília. This development was 100% completed at December 31, 2019 at which time
88.49% of the units had been sold. According to the Company’s business plan, this development’s selling forecast indicates
the remaining units will be sold within the next 24–36 months.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Varandas Grand Park F4. This development was 100% completed at December 31, 2019 at which time
88.03% of the units had been sold. According to the Company’s business plan, this development’s selling forecast indicates
the remaining units will be sold within the next 12-24 months.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | Mood Lapa. This development was 100% completed at December 31, 2019 at which time 85.90% of the
units had been sold. According to the Company’s business plan, this development’s selling forecast indicates the remaining
units will be sold within the next 12 months.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) | Varandas Grand Park F3. This development was 100% completed at December 31, 2019 at which time
80.57% of the units had been sold. According to the Company’s business plan, this development’s selling forecast indicates
the remaining units will be sold within the next 24-36 months.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Table of Contents


| | (7) | Sao Way. This development was 100% completed at December 31, 2019 at which time 79.73% of the units
had been sold. According to the Company’s business plan, this development’s selling forecast indicates the remaining
units will be sold within the next 24-36 months.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (8) | Today Modern Residence. This development was 100% completed at December 31, 2019 at which time
78.79% of the units had been sold. According to the Company’s business plan, this development’s selling forecast indicates
the remaining units will be sold within the next 12-24 months
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (9) | Bambu. This development was 100% completed at December 31, 2019 at which time 78.70% of the units
had been sold. According to the Company’s business plan, this development’s selling forecast indicates the remaining
units will be sold within the next 12-24 months .
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (10) | Varandas Grand Park F6. This development was 100% completed at December 31, 2019 at which time
78.02% of the units had been sold. According to the Company’s business plan, this development’s selling forecast indicates
the remaining units will be sold within the next 24-36 months.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (11) | 067 Hermann Júnior. This development was 100% completed at December 31, 2019 at which time
77.40% of the units had been sold. According to the Company’s business plan, this development’s selling forecast indicates
the remaining units will be sold within the next 12 months.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (12) | Laguna Mall. This development was 100% completed at December 31, 2019 at which time 76.77% of the
units had been sold. According to the Company’s business plan, this development’s selling forecast indicates the remaining
units will be sold within the next 24-36 months.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (13) | Barra Vista. This development was 100% completed at December 31, 2019 at which time 76.17% of the
units had been sold. According to the Company’s business plan, this development’s selling forecast indicates the remaining
units will be sold within the next 12 months.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (14) | Alphamall. This development was 100% completed at December 31, 2019 at which time 70.61% of the
units had been sold. According to the Company’s business plan, this development’s selling forecast indicates the remaining
units will be sold within the next 36-48 months.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (15) | Varandas Grand Park F5. This development was 100% completed at December 31, 2019 at which time
68.12% of the units had been sold. According to the Company’s business plan, this development’s selling forecast indicates
the remaining units will be sold within the next 24-36 months.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(16)Americas
Avenue. This development was 100% completed at December 31, 2019 at which time 64.70% of the units had been sold. According to
the Company’s business plan, this development’s selling forecast indicates the remaining units will be sold within
the next 48-60 months. The relatively low speed at which the units of this development have been sold is mainly due to the challenging
macroeconomic conditions in the city of Rio de Janeiro and its negative impact on the real estate market.



| | (17) | Target Offices e Mall. This development was 100% completed at December 31, 2019 at which time 63.87%
of the units had been sold. According to the Company’s business plan, this development’s selling forecast indicates
the remaining units will be sold over a long time horizon. The relatively low speed at which the units of this development have
been sold is mainly due to the challenging macroeconomic conditions in the city of Rio de Janeiro and its negative impact on the
real estate market.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (18) | Sao Gate. This development was 100% completed at December 31, 2018 at which time 51.02% of the
units had been sold. According to the Company’s business plan, this development’s selling forecast indicates the remaining
units will be sold over a long time horizon.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We have evaluated
all of our developments and we have recorded reduction to net realizable value and write-offs to net realizable value for the following
projects: Alpha Green, Alpha Land, Alphamall, Americas Avenue, Espaço Alpha, Global Offices, Golden Office, Icon Business
& Mall, Laguna Mall, Sao Gate, Sao Way, Scena Alto da Lapa, Target Offices & Mall, Today Modern Residences, Smart Vila
Madalena, Smart Santa Cecília, Moov Parque Maia, Moov Belém, Vision Capote Valente, single units of Olavo Bilac and
single units of Reserva das Ruínas.



Commercial Buildings



In 2017, 2018 and
2019, we did not launch any commercial buildings.



33


Table of Contents


Construction Services



We provide construction
services to third parties on certain developments where we retain an equity interest. This practice allows us to benchmark our
construction costs, facilitates our access to new constructions materials, techniques and service providers such as architects
and sub-contractors, and provides larger economies of scale.



The table below sets
forth the real estate developments for third parties currently under construction, in which we also have an equity interest, between
January 1, 2017 and December 31, 2019:



|Project       | First
Year of Construction | Gafisa
Participation
(%) | Partner               | Type
of Project
|------------- | -------------------------- | ------------------------ | --------------------- | ---------------
|Marques 2900  | 2016                       | 50%                      | Bueno Netto           | Residential    
|044 Vila Rica | 2017                       | 50%                      | Atins Empreendimentos | Residential    



Sale of Units Through Our Brokerage Subsidiaries



In September 2006,
we created a new subsidiary, Gafisa Vendas, to function as our internal sales division in the state of São Paulo. This subsidiary
company is responsible for efforts in connection with: (1) launches — our internal sales force focuses on promoting launches
of our developments; however, we also use outside brokers (mainly in Rio de Janeiro), thus creating what we believe to be a healthy
competition between our sales force and outside brokers; (2) inventory — we have a team focused on selling units launched
in prior years; and (3) web sales — we have a sales team dedicated to internet sales as an alternative source of revenues
with lower costs.



Our Clients



Our clients mainly
consist of development clients. Development clients are clients who purchase units in our developments. As of December 31, 2019,
our development-client database was comprised of more than 60,000 individuals. We currently have approximately 18,000 active clients.



We also provide construction
services to certain construction-services clients in connection with developments in which we retain an equity interest. As of
December 31, 2019, our main construction services client was Atins Empreendimentos, with whom we retain an equity interest in the
044 Vila Rica development.



No individual client
represents more than 5% of our revenues from residential developments or construction services.



Our Operations



The stages of our
development process are summarized in the diagrams below:







34


Table of Contents


Land Acquisition



We use results from
our extensive market research to guide our land reserves strategy and process. Our marketing and development teams monitor market
fundamentals and trends. We have developed a sophisticated database to support our search for and analysis of new investment opportunities.
Key decision factors used by our management for land acquisition and new developments include location, type of product to be developed,
expected demand for the new developments, current inventory of units in the region and acquisition cost of the land.



Whenever we identify
an attractive tract of land, we first conduct a study of the project to define the most appropriate use of the space. Afterwards,
the basic design of the project enters the economic feasibility study stage, where we consider preliminary revenues and expenses
associated with the project. This study will determine project profitability. We collect and analyze information on demand, competition,
construction budget, sales policy and funding structure to ensure economic viability of the new development. We then initiate a
legal due diligence of the property to identify liens, encumbrances and restrictions, potential solutions to such issues and the
relevant costs. Before acquiring the land, we conduct a thorough due diligence process including an environmental review. Each
decision to acquire land is analyzed and approved by our investment committee. See “Item 6. Directors, Senior Management
and Employees—C. Board Practices” elsewhere in this annual report for further information on the activities of our
committees and boards.



We seek to finance
land acquisition through barter transactions, in which we grant the seller a certain number of units to be built on the land or
a percentage of the proceeds from the sale of units in such development. As a result, we reduce our cash requirements and increase
our returns. In the event we cannot do so or in order to obtain better terms or prices, we acquire land for cash, alone or in partnership
with other developers. We purchase land both for immediate development and for inventory.



As a strategy defined
by the end of 2011, the Company is selling landbank located in cities and places where there is no intention to run operations
with new developments.



As of December 31,
2019, we had an inventory of 32 land parcels under Gafisa, in which we estimate we could develop a total of 7,315 units (residential
and commercial) with a sales value of R$ 4.0 billion, of which 8.1% represents land acquired through barter transactions. The table
below sets forth the breakdown of our land holdings by location and by segment:



35


Table of Contents


|               |  | Gafisa                     
|-------------- |  | ---------------------------
|               |  | Future Sales (% Gafisa) (1)
|               |  | (in millions of reais)     
|São Paulo      |  |                            
|Rio de Janeiro |  |                            
|Other states   |  |                            
|Total          |  |                            



_________________

| | (1) | Information reflects our interest.
| | --- | ----------------------------------



Project Design



In order to meet evolving
preferences of our customers, we invest considerable resources in creating an appropriate design and marketing strategy for each
new development, which includes determining the size, style and price range of units. Our staff, including engineers and marketing
and sales professionals, works with recognized independent architects on the planning and design of our developments. Their activities
include designing the interior and exterior, drafting plans for the execution of the project, and choosing the finishing construction
materials. A team responsible for preparing the business plan and budget and assessing the financial viability for each of our
projects is also involved. Simultaneously with the planning and design of our developments, we seek to obtain all the necessary
licenses and regulatory approvals from local authorities, which usually take three to twelve months in the case of our residential
buildings and three years in the case of our residential communities.



Marketing and Sales



Our marketing efforts
are coordinated by our internal staff. Our specialized team generally coordinates with several outsourced brokerage companies,
monitoring such sales representatives in order to promote loyalty and ensure performance. Our marketing intelligence team is also
responsible for gathering information on the needs and preferences of potential customers to provide guidance on our land acquisition
and project design activities.



Gafisa Vendas was
created as our internal sales division and it currently consists of approximately 130 independent Gafisa Vendas brokers, 4 sales
coordinators and 3 sales managers.



The creation of Gafisa
Vendas was intended to establish a strategic channel for us to access our clients and to reduce our dependence on outside brokers
for marketing. Because the sales force at Gafisa Vendas is trained to sell our products exclusively, we believe that it is able
to focus on the sale of our developments, articulate the unique features of our development, manage our current customers and capture
new customers more effectively. Gafisa Vendas was initially established in São Paulo in 2006 and opened a branch in Rio
de Janeiro in 2007.



In 2019, 2018, 2017,
2016 and 2015, Gafisa Vendas was responsible for approximately (i) 74%, 73.7%, 68.0%, 61.1% and 60.9%, respectively, of our sales
in the state of São Paulo, and (ii) 60%, 64.9%, 63%, 48.8% and 60.6%, respectively, of our sales in the state of Rio de
Janeiro.



We will continue to
utilize independent real estate brokerage firms as we believe this provides a healthy competition between our internal sales force
and outside brokers. Independent brokers provide us with a broad reach, access to a specialized and rich database of prospective
customers, and flexibility to accommodate the needs of our diverse offering and clientele. In line with our results-oriented culture,
we compensate brokers based on their profit contribution rather than on sales. Brokers are required to attend periodic specialized
training sessions where they are updated on customer service and marketing techniques, competing developments, construction schedules,
and marketing and advertising plans. We emphasize a highly transparent sales approach, as opposed to the traditional high-pressure
techniques, in order to build customer loyalty and to develop a sense of trust between customers and us. At our showrooms, brokers
explain the project and financing plans, answer questions and encourage customers to purchase or sign on to receive a visit or
additional information.



Under our Gafisa brand,
we typically initiate our marketing efforts 60 days before the launch of a development. We typically have a showroom on or near
the construction site, which includes a model unit furnished with appliances and furniture. We leverage our reputation for quality,
consistency, on-time delivery and professionalism to increase sales velocity. We have been successful with this strategy, usually
selling approximately 30% of the units before construction starts.



36


Table of Contents


We market our developments
through online platforms, newspapers, radio, television, direct mail advertising and by distributing leaflets in neighboring areas,
as well as through telemarketing and websites.



Under Brazilian law,
we may establish a term within and the conditions under which we are entitled to cancel the development. According to our regular
purchase contracts, if we are not able to sell at least 60% of the units within 180 days of launching, we can cancel the development.
Under those circumstances, we usually consider changing the project or selling the land, but, in any of those cases, we have to
return the cash payment made by our customers adjusted for inflation but with no interest. Customers, however, are not entitled
to other remedies. Over the last five years, we have only cancelled two developments.



Construction



Gafisa has been engaged
in the construction business for over 50 years. Our experience spans across the entire construction chain. Before engaging in each
new project, we develop sketches and research and develop projects and plans to create the most appropriate product possible. Our
standardized construction techniques and unique control system are designed to optimize productivity and minimize raw material
losses. Our monitoring tools are available on our intranet where all employees regularly review costs and key performance indicators
of each development such as actual versus budget comparisons, volume consumption for each raw material, and construction schedule.



We use strict quality
control methods. We have developed proprietary procedure manuals that describe in significant detail each task of each stage of
the construction project. These manuals are also used for the training sessions that we require all of our workers to attend. In
addition, we keep quarterly records of projects delivered.



The reviews focus
on identifying problems in order to take corrective and preventive actions in projects underway and thus avoid costly repetition.
We have adopted a quality management system that was certified for ISO 9002 by Fundação Bureau Veritas, from
Universidade de São Paulo. In 2007, we received a certification from Programa Brasileiro de Qualidade e Produtividade
do Habitat (PBQP-H), which is part of the Ministry of Cities. In addition, the Eldorado Business Tower building was certified
as a Green Building, category Platinum, by the U.S. Green Building Council, which attests that it is environmentally sustainable,
through the rational use of energy, natural lighting and pollution control and recycling. Eldorado Business Tower was the first
building in Latin America to achieve this category.



We invest in technology.
We believe that we have pioneered the adoption of advanced construction techniques in Brazil such as dry wall and plane pre-stressed
slabs, which present numerous advantages over traditional techniques. We also optimize costs by synchronizing our projects’
progress so as to coordinate the purchase of raw material and benefit from economies of scale. We have long-term arrangements with
a number of suppliers which allow us to build our developments with quality, using brand name construction materials and equipment,
and advanced technology. Moreover, our centralized procurement center enables us to achieve significant economies of scale in the
purchase of materials and retention of services.



We do not own heavy
construction equipment and we employ directly only a small fraction of the labor working on our sites. We generally act as a contractor,
supervising construction while subcontracting more labor-intensive activities. Substantially all on-site construction is performed
for a fixed price by independent subcontractors. We have policies in place in order to hire reputable, cost-oriented and reliable
service providers that are in compliance with labor laws and have performed their work diligently and on time in the past. Hiring
subcontractors instead of employing workers directly has some financial and logistical advantages. For instance, we do not need
to incur fixed costs to maintain a specialized labor force even when they are not actively working at a construction site and we
do not need to pay for frequent transfers of labor to different construction locations.



Our construction engineering
group coordinates the activities of service providers and suppliers, monitors compliance with safety and zoning codes, and monitors
completion of the project on a timely basis. We provide a five-year limited warranty covering structural defects in all our developments.



Risk Management



Our risk management
procedures require that all of our projects be approved by our investment committee, which meets on a monthly basis, or more frequently
on an as-needed basis, and consists of our chief executive officer and two members of our board of directors. Our investment committee
carefully reviews the various studies conducted by us and described above. In addition, we have a board of officers, which meets
monthly, and is in charge of overseeing



37


Table of Contents


and approving major decisions. See “Item 6. Directors,
Senior Management and Employees—E. Share Ownership” in this annual report.



Customer Financing



The table below sets
forth the percentage of each type of customer financing we typically provide for each type of development as of December 31, 2019:



|Sales Term                  |  | Luxury and Middle Income (average) |       | Entry-Level (average)
|--------------------------- |  | ---------------------------------- | ----- | ---------------------
|Mortgage lending (delivery) |  |                                    | 90.15 | %                    
|Gafisa 36 months            |  |                                    | 5.47  | %                    
|Gafisa 60 months            |  |                                    | 0.36  | %                    
|Gafisa 120 months           |  |                                    | 4.02  | %                    



Mortgages.
In 2019, approximately 96.51% of our sales value was financed by bank mortgages, where the customer paid us approximately 25% to
60% of the sales price of the property during the period of construction, and upon delivery of the property paid the balance of
the sales price through a bank mortgage. We analyze the credit history of each customer at the time of sale to see if the customer
would qualify for a bank mortgage based on banks’ standard credit rating policies. Although there is no assurance that the
customer will qualify for a mortgage at the time of delivery, our analyses have been fairly successful in predicting whether the
customer would qualify for a mortgage. The following table sets forth the credit limits established by mortgage sources available
in Brazil in 2019:



|Credit
Lines                                                                                                                 | Typical
Interest rate        | Maximum
Home Value | Maximum
Loan Value
|---------------------------------------------------------------------------------------------------------------------------- | ---------------------------- | ------------------ | ------------------
|Mortgage portfolio (Carteira Hipotecária) or CH                                                                              | up to 7.99% annually + TR(1) | No limit           | No limit          
|Housing Finance System (Sistema Financeiro da Habitação) or SFH                                                              | up to 7.99% annually + TR    | R$1,500,000.00     | R$1,500,000.00    
|Government Severance Indemnity Fund for Employees (Fundo de Garantia do Tempo de Serviços) or FGTS for Minha Casa Minha Vida | up to 9.16% annually + TR    | R$240,000.00       | R$240,000.00      




_________________

| | (1) | TR refers to the daily reference rate.
| | --- | --------------------------------------



Financing by Gafisa
during construction. We finance some of our own sales during the construction period, with a down payment of 20-30% and financing
of the balance through monthly installments up to the delivery of the unit.



Financing by Gafisa
after delivery. In addition, we offer financing plans to prospective customers using our own capital, where we finance purchases
for up to 120 months after the completion of the construction. For completed units we require a down payment of 30% and financing
of the remaining balance with up to 120 monthly installments. For units under construction we require a down payment of 10% and
provide financing for the remaining balance of 25-35% with up to 30 monthly installments until the delivery of the unit and financing
of the remaining 75-65%, respectively, with up to 120 additional monthly installments. All of our financing plans are guaranteed
by a conditional sale of the unit, with the transfer of the full property rights of the unit to the customer upon the full payment
of the outstanding installments.



We have developed
a strict credit policy in order to minimize risks. We take the following steps whenever we conduct a credit review process:



| | · | trained independent brokers interview each potential customer to collect personal and financial
information and fill out a registration form;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------



| | · | registration forms are delivered, along with a copy of the property deed, to us and, if the bank
providing the financing requests, to an independent company specialized in real estate credit scoring;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | · | credit is automatically extended by us to the customer if his or her credit analysis is favorable.
However, if the credit analysis report raises concerns, we will carefully review the issues and accept or reject the customer’s
application depending on the degree of risk. To the extent financing is provided by a bank, such financial institution will follow
their own credit review procedures; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | after approving the application, our staff accepts the down payment which is given as a deposit
on the purchase of the unit.
| | - | ----------------------------------------------------------------------------------------------------------------------------



Sales contracts.
Our sales contracts generally provide for adjustment of the sales price according to the INCC during construction and at an annual
interest rate of 12% plus IGP-M over the receivables balance after a stated date in our sales contracts. We have historically experienced
a low rate of customer default on our sales. On December 31, 2019, our clients’ default level, related to amounts overdue
for over 30 days, was 15.1% of our accounts receivable for Gafisa.



In order to maintain
low rates of customer default, we have adopted a conservative and robust credit and receivables management policy, pursuant to
which: (1) we conduct database research on the socio-economic background of our prospective customers; (2) our agreements discourage
default and cancellation of the purchase by imposing immediate penalty fees, interest and liquidated damages which are adjusted
for inflation, and we retain approximately 25-50% (Gafisa) of the total amount paid to us plus expenses incurred by us, which in
general represents all or a substantial portion of the amount that the defaulted clients have already paid us; and (3) we offer
several options to our customers if they experience financial difficulties, such as offering them a greater number of installment
payments or exchanging the unit bought for a less expensive one. When a default occurs, we endeavor to renegotiate the outstanding
loan with our customers before taking any legal action.



We will only transfer
title of the unit to a buyer after the release of the certificate of acceptance of occupancy by local authority and the full payment
of all outstanding installments.. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Launches
and Contracted Sales—Contracted Sales” for a discussion of the sales value of contracts cancelled by our customers
and penalties paid in connection with such cancellations.



The table below sets
forth client default levels:



|                       | As
of and for the year ended December 31,
|---------------------- | -----------------------------------------
|Customer
default level | 2019                                     
|Gafisa                 | 15.1%                                    



The increase in our
default levels is mainly due to the weakening economic conditions and political instability in Brazil since 2018.



Cancelation of sales contracts.



Until December 2018,
sales contracts involving real estate development activities were irrevocable under Brazilian law. The buyer did not have the unilateral
ability to terminate a contract once it was executed, nor did the buyer have the ability to require a refund of amounts previously
paid unless Gafisa agreed. To the extent the customer was not in compliance with its obligations under a contract, Gafisa could,
at its sole discretion, either force compliance through Brazilian courts, or agree to a “default” by the customer.
In this case, if Gafisa agreed at its sole discretion to refund part of the amounts paid to the defaulting party, the penalty set
forth in the contract would be normally applied.



In recent years, however,
the Brazilian real estate market has seen an unprecedented level of noncompliance by customers, many of which went to court to
ask for the unilateral judicial termination of sales contracts. This was triggered by a number of factors, including a national
economic crisis, high levels of unemployment and a crisis in the real estate market, leading to a distorted fluctuation in real
estate prices.



In view of the excessive
number of judicial proceedings filed to redeem consumer rights, Law No. 4,591 of December 16, 1964 was amended by Law No. 13,786
on December 12, 2018, to regulate the unilateral termination of real estate contracts and clarified the parameters of the commercial
relationship between customer and contractor.



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Pursuant to Law No.
13,786, upon termination of a real estate sale contract due to the default of a buyer’s obligation, the buyer is entitled
to a partial restitution of the amounts already paid to the developer. The penalty due by the buyer in these cases must not exceed:



(i) 25% of the amounts
paid, if the development is not being constructed legally segregated from the developer’s assets, as per Law No. 10,931 of
August 2, 2004 (“Detached Assets”); or



(ii) 50% of the amounts
paid, if the development is subject to Detached Assets.



In case the buyer
finds a new buyer for the returned unit, the penalty fees can be avoided, provided the requirements defined by law are satisfied.



The real estate developer
must refund the referred amounts in a single installment no later than (i) 30 days from the issuance of the occupancy permit by
the relevant Municipality, if subject to Detached Assets; (ii) 180 days from the termination of the relevant agreement, if not
subject to Detached Assets; or (iii) 30 days from the resale of the returned unit, if prior to the other terms.



In addition, Brazilian
law also grants the developer the right to force the unit to be auctioned in case the buyer’s proceeds from the auction are
used to reimburse the buyer for the amounts already paid to the developer, deducting the amounts stipulated by the relevant legislation.
When no third party is willing to acquire the unit in the auction, the ownership of the unit returns to the developer, which shall
reimburse the buyer portion of the amounts already paid, also in accordance with the law.



The table below provides
the number and sales value of contracts canceled by customers for the periods presented:



|                                        |  | As of December 31, 2019 |      | As of December 31, 2018            |  | As of December 31, 2017
|--------------------------------------- |  | ----------------------- | ---- | ---------------------------------- |  | -----------------------
|Year Segment                            |  | Number of contracts     |      | Sales
value (in thousands of reais |  | Number of contracts    
|Gafisa                                  |  |                         |      |                                    |  |                        
|Contracted sales                        |  |                         | 832  |                                    |  |                        
|Volume/Sales value of cancelations      |  |                         | (193 | )                                  |  |                        
|Percentage                              |  |                         | 23.2 | %                                  |  |                        
|Volume/Sales value, net of cancelations |  |                         | 639  |                                    |  |                        
|Total sales value net of cancelation    |  |                         | 639  |                                    |  |                        



Receivables securitization



We release capital
for new projects by seeking not to maintain receivables after our projects are completed. The securitization (mortgage-backed securities)
market in Brazil is expanding. This expansion is helped significantly by recent development in Brazilian foreclosure laws.



With the growing availability
of mortgages from commercial banks and the increasing liquidity of CRIs, we expect to further reduce our role as a financing provider
to our customers. Our goal is to optimize our working capital by transferring the financing activities to securitization companies
and banks.



Main Raw Materials and Suppliers



We purchase a wide
variety of raw materials for our operations. Even though these raw materials have represented on average, over the last three years,
approximately 45% of our total costs of development, aside from land, the only raw materials that represent more than approximately
5% of our total costs are steel and concrete. Prices of some raw materials have increased over the last three years at a rate higher
than inflation. The index that measures the fluctuation of construction costs, the INCC, increased 12.75% during the three year
period ended December 31, 2019, resulting in an increase in the construction costs of Gafisa over that period. During the three
year period ended December 31, 2019 the IGP-M increased 15.41%. We have been working on the development of new construction techniques
and the utilization of alternative materials in order to reduce costs and improve our construction process with advanced technology.



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We contract with major
suppliers for the materials used in the construction of the buildings. We receive general pricing proposals from various suppliers
of raw materials and select the proposal with the best terms and conditions for each development. In addition to pricing, we select
our suppliers by the quality of their materials. We set forth specific minimum quality requirements for each construction project,
and the chosen supplier must meet this quality requirement. The materials for our developments are readily available from multiple
sources and, accordingly, we do not rely on any one supplier for our raw materials.



Our five largest suppliers
in terms of volume are Gerdau Aços Longos S.A., Votorantim Cimentos Brasil Ltda., Elevadores Atlas Shindler S.A., Portobello
S.A. and IBRAP Industria Brasileira de Aluminio e Plastico S.A. In general terms, we purchase products for our construction based
on the scheduled requirements, and we are given approximately 30 days to pay. The products we purchase generally come with a five-year
warranty. We do not have any exclusive arrangements with our suppliers. We work closely with suppliers, enabling them to schedule
their production in order to meet our demand or notify us in advance in the event they anticipate delays. We have good relationships
with our suppliers and have experienced no significant construction delays due to shortages of materials in recent years. We do
not maintain inventories of construction materials.



We achieve significant
economies of scale in our purchases because we:



| | · | use standard construction techniques,
| | - | -------------------------------------



| | · | engage in a large number of projects simultaneously, and
| | - | --------------------------------------------------------



| | · | have long-term relationships with our suppliers. We periodically evaluate our suppliers. In the
event of problems, we generally replace the supplier or work closely with them to solve the problems.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Customer Service



In our industry, customer
satisfaction is based in large part on our ability to respond promptly and courteously to buyers before, during and after the sale
of our properties, including providing an owner’s guide. These services are provided with the objective of educating customers
on the progress of the construction and improving customers’ experience with the purchase of our units. Other customer service
efforts include:



| | · | a dedicated outsourced call center with consultants and specialists trained to answer our customers’
inquiries;
| | - | ---------------------------------------------------------------------------------------------------------------



| | · | the development of the “Gafisa Viver Bem” web portal, through which our customers can,
for example, follow the project’s progress, alter their registration information, simulate unit designs and check their outstanding
balances; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the development of the “Gafisa House Up Store,” through which buyers of certain units
are able to customize their units in accordance with plans and finishing touches offered by Gafisa. Such options vary by development.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As part of our customer
service program in our residential developments, we conduct pre-delivery inspections to promptly address any outstanding construction
issues. We also conduct monitored inspections of our developments to allow buyers to gather more information from our technical
personnel. In addition, we send a monthly status report on the construction of the unit. We also provide a five-year limited warranty
covering structural defects, which is required by Brazilian law.



Competition



The real estate market
in Brazil is highly fragmented and competitive with low barriers to entry. The main competitive factors include price, financing,
design, quality, reputation, reliability, meeting delivery expectations, partnerships with developers and the availability and
location of land. Certain of our competitors have greater financial resources than we do, which could provide them an advantage
over us in the acquisition of land using cash. In addition, some of our competitors have better brand recognition in certain regions,
which could give them a competitive advantage in increasing the velocity of their sales. Because of our geographic diversification,
we believe that we have access to different markets within Brazil that have different demand drivers.



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Because of the high
fragmentation of the markets in which we operate, no single developer or construction company is likely to obtain a significant
market share. With the exception of São Paulo and Rio de Janeiro, where we face competition from major publicly-traded competitors,
in other regions we generally face competition from small and medium-sized local competitors that are not as well-capitalized.
We expect additional entrants, including foreign companies in partnership with Brazilian entities, into the real estate industry
in Brazil, particularly the São Paulo and Rio de Janeiro markets.



The table below sets
forth the most recent data available on our market share in the São Paulo market:



São Paulo (1) — Gafisa’s Market Share



|                      |  | Year ended December 31, 
|--------------------- |  | ------------------------
|Year                  |  | 2019                    
|                      |  | (Launches in R$ million)
|Local market          |  |                         
|Gafisa(2)             |  |                         
|Gafisa’s market share |  |                         
|                      |  |                         




_________________

Source:
EMBRAESP and SECOVI.



| | (1) | Metropolitan region.
| | --- | --------------------



| | (2) | Gafisa interest.
| | --- | ----------------



In 2019, 2018 and 2017, we did not launch
any development in Rio de Janeiro.



Seasonality



Although the Brazilian
real estate market is not generally seasonal, there are a few months of the year when the market slows down (January, February
and July) each year. These months coincide with school vacations and result in the postponement of investment decisions. We are
impacted similarly as the rest of the market during such periods.



Subsidiaries



We carry out our real
estate developments directly or through our subsidiaries or our jointly-controlled entities in partnership with third parties.
Many of Gafisa’s subsidiaries and joint-ventures are SPEs, many of which have been incorporated by us as joint ventures together
with other real estate and construction companies in Brazil.



As of December 31,
2019, Gafisa had 138 direct and indirect subsidiaries, 22 jointly-controlled entities under operations and 4 entities in which
it had minority stakes. The majority of such subsidiaries, jointly-controlled entities and entities in which Gafisa has a minority
stake are incorporated as special purpose entities, are headquartered in Brazil and operate exclusively in the real estate sector.



Of our 138 SPEs or
invested companies, 112 are wholly-owned by us, and we hold an interest of 50% or less in 26.



Intellectual Property



Trademarks



Our trademarks are
filed or registered in Brazil with the Brazilian Institute of Industrial Property (Instituto Nacional de Propriedade Industrial),
or the “INPI,” which is the competent body for, among others, trademarks’ and patents’ registries in Brazil.
Additionally, the trademark “Gafisa” is also registered before the competent agency for registering trademarks in the
United States.



Currently, the registration
process of a trademark takes approximately 24 months from the date of filing of the application until the definitive registration.
From the date of filing of the application to the date of the definitive registration, the applicant has an expectation of right
for the use of the trademark in connection with the products and services for which the trademark was applied.



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Each trademark registration
is effective for a 10-year period and is renewable for equal and successive periods. The renewal of a trademark registration is
granted upon request accompanied by payment of renewal fees during the final year of the trademark’s registration period
or within the 6-month waiting period after its expiration. In case of non-payment, the registration is definitively archived by
INPI, requiring the filing of a new application.



A trademark registration
may be cancelled in the case of (1) the expiration of its renewable 10-year validity term; (2) the trademark owner’s or holder’s
waiver, in whole or in part, of the rights granted by registration; (3) the forfeiture, or the applicant’s or the holder’s
failure to use a registered trademark in connection with related goods or services for a period longer than five years; or (4)
the failure to appoint a Brazilian resident with the power to represent the applicant or holder in administrative or judicial proceedings,
in cases where the applicant or the holder resides abroad.



As of the date of
this annual report, we had approximately 50 pending trademark applications and 136 trademarks registered in Brazil with the INPI.



Our most significant
trademark is “Gafisa,” which is duly registered with the INPI in the relevant market segment.



Domain Name



As of the date of
this annual report, we, together with our subsidiaries, were the owners of approximately 59 domain names including our and our
subsidiaries’ principal websites. The term of each domain name registration is usually one year and is renewable for equal
and successive periods. An annual fee payment is necessary for the maintenance of the domain name registrations. Other than non-payment
of the annual fee, domain name registration may be cancelled by: (1) express waiver of the owner; (2) irregularities in the data
form as requested by the respective agency; (3) non-compliance with applicable regulations; (4) judicial order; or (5) in the case
of foreign companies, non-compliance with the obligation to initiate the company’s activities in Brazil. Our domain names
will, unless renewed, expire between April 2020 and April 2023. We will seek to renew our domain names expiring in April 2020,
after evaluating their continuing applicability.



Patents



We have no patents
registered in our name.



Software Licenses



Most of the software
we use in our daily business refers to common computer programs, such as Windows, SAP and AutoCAD. Additionally, we own all required
licenses of use in connection with such software. The use of computer software without the acquisition of proper licenses is considered
a felony subject to both criminal and civil liabilities, including the payment of fines and restrictions of future use of the applicable
software.



Licenses



Under Brazilian laws,
we are required to obtain a variety of licenses for each of our new developments. As of the date of this annual report, we have
obtained all necessary licenses and permits to operate our business.



Insurance



We maintain insurance
policies with leading Brazilian insurance companies, such as Allianz Seguros S.A., Chubb do Brasil Companhia de Seguro, AXA Seguros
S.A., Porto Seguro Cia de Seguros Gerais, Swiss RE, Fator Seguradora, Ace Seguradora, Berkley Seguros, Tokio Marine Seguradora
S.A., J Malucelli Seguradora S.A., Zurich Brasil Seguros and Pottencial Seguradora with coverage for, among others, (1) potential
risks arising from the commencement of construction, including property damages, business interruption, engineering risks, fire,
falls, collapse, lightning, and gas explosion; (2) construction errors; (3) performance bonds; and (4) losses arising from damages
or defense costs associated with litigation resulting from misconduct of directors and officer. Such insurance policies contain
customary specifications, limits and deductibles. Additionally, we do not maintain any insurance policy for our properties after
construction is completed.



According to Brazilian
Federal Law, it is mandatory that homebuilders have insurance policies in force with coverage for, among others, damages and losses
related to civil liabilities and performance bonds. Failure or default in contracting any compulsory insurance required by applicable
legislation is subject to a penalty amounting to the



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higher amount between (1) twice the premium price of the insurance
that should have been contracted; and (2) ten percent of the insured property value. Additionally, no operating authorization or
license (or the renewal of any existing license) shall be granted to companies subject to compulsory insurance in default of the
aforementioned obligations.



Our management believes
that the insurance coverage for our properties is adequate and that our insurance policies are customary for our industry in Brazil
and adequate for applicable regulations.



Regulatory Framework



Brazilian Government and Real Estate
Sector Regulations.



The real estate sector
is directly regulated by the Brazilian government and is indirectly impacted by the government’s regulations on the availability
of credit. Regulations include development policies, zoning restrictions and environmental laws which can determine the availability
of different products offered in the market. For example, city master plans and zoning laws restrict the types of real estate developments
that can be constructed in a given area.



As a general rule,
the NBCC requires that the transfer of title of real estate properties, as well as the assignment, transfer, change or waiver of
rights on real estate properties, be carried out by means of a public deed, except in certain cases, such as when the Real Estate
Finance System (Sistema Financeiro Imobiliario), or SFI, or the SFH, are involved. The intent of this rule is to increase
the security of real estate property transfers.



According to applicable
law, transfer of real estate title is only deemed effective upon the registration of the transfer with the relevant Real Estate
Registry Office. The procedure for the execution of public deeds and also the respective registration with the Real Estate Registry
Office (Registro Imobiliário) is regulated by the Brazilian Law of Public Registers (Lei de Registros Públicos),
in particular Law No. 6,015 of December 13, 1973.



Real estate development



Real estate development
activities are regulated by Federal Law No. 4,591 of December 16, 1964, as amended, or Law No. 4,591. The main duties of a developer
are to: (1) obtain all required construction approvals and authorizations from the proper authorities; (2) register the development
with the Real Estate Registry Office (without registration, the developed units cannot be sold); (3) indicate in the preliminary
documents the deadline for the developer to withdraw from the development; (4) indicate in all advertisements and sales contracts
the registration number of the development with the Real Estate Registry Office; (5) oversee the construction of the project established
by the contract which must be in accordance with the approval granted by the authorities; (6) deliver to the final owner the completed
units, in accordance with the contractual specifications, and transfer to the final owner the title of the unit by signing the
final sale deed; (7) assume sole responsibility for the delivery of the developed units to the respective purchasers; (8) assume
sole responsibility in the event the construction of the unit is not in accordance with the advertisements and sale contracts;
and (9) provide construction blueprints and specifications along with the joint ownership agreement to the proper Real Estate Registry
Office. The final owner is obligated, in turn, to pay the price related to the cost of the land and the construction.



The construction of
the real estate units may be contracted and paid for by the developer or by the final owners of the units. Brazilian law provides
for two pricing methods in real estate development: (1) construction under contract and (2) construction under a system of management.
In construction under contract, the contracting parties will either set a fixed price, stipulated before the construction begins,
or agree on an adjustable price pegged to an index determined by the contracting parties. In construction under a system of management,
an estimated price is agreed upon by the contracting parties, but no fixed final price is provided at the beginning of the construction
process. The actual amount that purchasers of the units pay depends on the monthly costs of the developer or contractor.



In addition, in order
to increase the legal and economic confidence in the real estate development sector, Law No. 4,591 was recently amended by Law
No. 13,786, enacted on December 12, 2018, providing for and regulating the possibility of unilateral dissolution or termination
of purchase and sale agreements involving real estate development activities.



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Urban land subdivisions



Urban land subdivisions
consist of subdivisions of urban land parcels into building lots and the construction of new roads and other infrastructure, and
are regulated by Law No. 6,766 of December 19, 1979 - the Brazilian Law of Urban Land Subdivision (Lei de Parcelamento do Solo),
as amended, or Law No. 6,766. Law No. 6,766 governs urban land subdivisions and establishes, among other things, the planning and
technical requirements for this form of land parceling and the obligations of the developers, and also provides for fines and sanctions
in the event of violation of its provisions.



Under Law No. 6,766,
land subdivisions are intended for the creation of lots in urban areas or urban expansion zones, as defined by the planning director
or approved by municipal law, and must comply with Law No. 6,766.



For the construction
of land subdivisions, the developer must proceed through the following steps: (1) prior to developing the land subdivision plan,
it must request the municipality in which the development will be located to issue directives on use policies specifically to the
land, such as the delineation of lots, road and street systems and areas reserved for municipal or community properties; (2) pursuant
to the directives issued by the municipality, it must develop a plan for the proposed land subdivision and present it to the municipality
for approval, including the plans, designs, descriptions, and schedule for performance of the work, among other documents; and
(3) after approval for the land subdivision project is obtained, it must be submitted for recording in the property registry of
the appropriate Real Estate Registry Office within 180 days. The approval may be revoked and treated as expired if it is not submitted
for recording within the 180-day period.



In addition to the
approval of the project by the municipality in which the development will be located, the approval of other governmental bodies
may be necessary in cases where the land subdivision: (1) is located in an area of special interest, such as a protected cultural,
historical, landscape and archeological heritages site as defined by state or federal legislation; (2) is located in the boundary
area of a city, belongs to more than one municipality, or is in a metropolitan region or urban agglomeration as defined in state
or federal law; or (3) has an area greater than 1 million square meters. In the case of land subdivisions located in a municipality
area that is within a metropolitan area, the examination and prior consent to the approval of such project will be subject to the
metropolitan authority.



The legal requirements
for the approval of the land subdivision by a municipality include: (1) the developer must preserve a percentage of the land used
for residential communities as open spaces for public use and for municipal or community properties with the percentage determined
by each municipal zoning code; (2) each lot must have a minimum area of 125 square meters and the distance between the building
and the street must be at least five meters; (3) the developer must reserve 15 meters of land on either side of running or still
water and of strips of public domain land for roads and highways; and (4) the allotment procedures must be coordinated with the
official adjacent tracks, existing or projected, and harmonized with the local topography.



Law No. 6,766 also
sets forth locations where subdivisions are not permitted, such as: (1) on wetlands and lands subject to flooding, until measures
have been taken to assure water drainage; (2) on land that has been filled with material that is a public health hazard, unless
previously cleaned up; (3) on land that has a slope equal to or greater than 30 degrees, unless the requirements of the appropriate
authorities have been met; (4) on lands where geological conditions make buildings inadvisable; and (5) in ecological preserves
or areas where pollution creates unacceptable sanitary conditions, until corrected.



In order to offer
greater security to the property market, Law No. 6,766 prohibits the sale or promise of sale of any lot that is the result of a
subdivision where the developer has not previously obtained approval by the appropriate municipality and the development has not
been recorded with the respective Real Estate Registry Office. If any such lot is sold or contracted to be sold, the developer
and any person or legal entity benefiting from such sale or promise of sale shall be jointly liable for the resulting damages to
the purchaser and the public authorities.



Law No. 6,766 was
recently amended by Law No. 13,786, enacted on December 12, 2018, which granted the buyer the right to restitution of the amounts
already paid to a developer when the agreement is terminated due to the breach of the buyer’s obligations as provided therein,
increasing and/or deducting, whichever is applicable, the amounts originally stipulated thereby. The penalty due by the buyer must
not exceed 10% of the value of the agreement adjusted for inflation, and the amounts must be reimbursed by the developer, who can
make the payments in up to 12 installments, the first one being due no later than (i) 180 days from the date expected for the conclusion
of the construction, or (ii) 12 months from the termination of the relevant agreement, if the construction has been concluded.



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Assets for Appropriation



Law No. 10,931 of
August 2, 2004, as amended, provides for certain protection of real estate assets. Accordingly, such protected assets are segregated
from other properties, rights and obligations of the developer, including other assets previously appropriated, and such appropriated
assets can only be used to guarantee debts and obligations related to the respective development. The appropriated assets are considered
bankruptcy free and will not be affected in the event of bankruptcy or insolvency of the developer. In the event of a bankruptcy
or insolvency of the developer, joint ownership of the construction may be instituted by a resolution of the purchasers of the
units or by judicial decision. The joint owners of the construction will decide whether the project will proceed or the assets
appropriated will be liquidated. Developers may also opt to submit a project to appropriation in order to benefit from a special
tax system. Under this system, land and objects built on the land, financial investments in the land, and any other assets and
rights with respect to the land are considered to be protected for the benefit of the construction of that development and the
delivery of the units to the final owners, and are thus separate from the remaining assets of the developer.



In addition, in order
to encourage the use of the appropriation system, Laws No. 11,977 of July 7, 2009 (amended by Law No. 12,249 enacted on June 11,
2010, Law No. 12,424 enacted on June 16, 2011, Law No. 12,693 enacted on July 24, 2012, Law No. 12,722 enacted on October 3, 2012,
Law No. 13,043 enacted on November 13, 2014, Law No. 13,097 enacted on January 19, 2015, Law No. 13,274 enacted on April 26, 2016,
Law No. 13,465 enacted on July 11, 2017 and Law No. 13,590 enacted on January 4, 2018) and No. 12,844 of July 13, 2013, which granted
tax benefits for the adoption of the system by reducing tax rates on appropriated assets from 7% to 4% and, in the case of the
appropriated assets under the public housing program “Minha Casa, Minha Vida,” the rates were reduced from 7%
to 1%, until December 31, 2018, by Law No. 13,097, enacted January 19, 2015.	We have not yet utilized the appropriation system
for any of our real estate developments. We prefer to use our subsidiaries and our jointly-controlled entities for each specific
real estate development. Our subsidiaries and jointly-controlled entities allow us to borrow funds by segregating the credit risk
taken on by the financial institutions.



Credit Policy Regulations



The real estate sector
is highly dependent on the availability of credit in the market, and the Brazilian government’s credit policy significantly
affects the availability of funds for real estate financing, thus influencing the supply of and demand for properties.



Housing Finance System, or “SFH”



Law No. 4,380 of August
21, 1964, as amended, created the SFH to promote the construction and ownership of private homes, especially for low income earners.
Financing resources under the SFH’s control are provided by the Government Severance Indemnity Fund for Employees (Fundo
de Garantia do Tempo de Serviço), or “FGTS,” and from savings account deposits. The FGTS, created by Law
No. 5,107 of September 13, 1966 and regulated by Law No. 8,036 of May 11, 1990, imposes a mandatory 8% employee payroll deduction
on all employees in Brazil. Employees maintain FGTS accounts, which are similar to pension funds, and are allowed, among other
things, to use the funds deposited in the accounts for the acquisition of real estate property under certain circumstances, as
set forth by applicable law. The CEF is the agency responsible for managing the funds deposited in the FGTS. In order to be eligible
for the financing, the beneficiary must purchase a completed unit or unit under construction priced at up to R$950,000 (price applicable
to the States of Rio de Janeiro, São Paulo, Minas Gerais and Distrito Federal) or R$800,000 (price applicable to other Brazilian
States). In addition, the beneficiary shall (1) not own or be the committed purchaser of any residential real estate financed by
the SFH within Brazil; (2) not own or be the committed purchaser of, any real estate property built or under construction in both
his or her current city of residence and the city where the beneficiary conducts his or her main activities; (3) reside for at
least one year in the city where the property is located; (4) pay the FGTS; and (5) be registered for at least three years with
the FGTS regime. The unemployed also have access to the FGTS to purchase real estate property provided that he still has funds
on the FGTS account (where the 8% payroll deduction was deposited while employed).



Financings that originate
from savings account deposits in the entities comprising the Brazilian Saving and Loan System (Sistema Brasileiro de Poupança
e Empréstimo), or “SBPE,” are regulated by the Central Bank. Such financings can be obtained through the
SFH, which is strictly regulated by the Brazilian government, or through the mortgage portfolio system, where banks are free to
set the financing conditions. SFH financing offers fixed interest rates lower than the market rates, capped at around 12% per year,
and SFH financing contract terms vary, in general,



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between 15 and 30 years. The mortgage portfolio system financing
offers market interest rates as determined by the financial institutions, generally varying between 18.5% and 12% per year.



CMN Resolution No.
3,932/2010 provides for the allocation of the funds deposited in savings accounts in the entities comprising SBPE and states that
the following conditions must be met for SFH financing: (1) the maximum amount of the financing is 80% of the appraisal price of
the property, as a general rule; (2) the maximum appraisal price for the financed unit is R$950,000 (applicable to the States of
Rio de Janeiro, São Paulo, Minas Gerais and Distrito Federal) or R$800,000 (applicable to other Brazilian States); (3) the
maximum actual cost to the borrower, which includes charges such as interest, fees and other financial costs, except insurance
and other costs, may not exceed 12% per year; and (4) the borrower is responsible for the potential outstanding balance verified
at the end of the financing term, (such term might be extended by half of the initial term).



SFH financings need
to be secured by at least one of the following: (1) a first mortgage over the unit that is being financed; or (2) a conditional
sale over the unit that is being financed, as prescribed by Law No. 9,514 of November 20, 1997, as amended by Law No. 10,931 of
August 2, 2004, Law No. 11,076 of December 30, 2004, Law No. 11,481 of May 31, 2007, Law No. 12,703 of August 07, 2012, Law No.
12,810 of May 15, 2013, Law No. 13,043 enacted on November 13, 2014, Law No. 13,097 enacted on January 19,2015 and Law No. 13,465
enacted on July 11, 2017 (“Law no. 9,514”), (3) a first mortgage or conditional sale, as determined by Law No. 9,514,
of other property owned by the borrower or by a third party or (4) other guarantees, as established by the financing agent. SFH
funds are only released upon the formalization of one of these methods of guaranteeing the loan.



As of 2014, the federal
government implemented changes to the regulations on financing and construction in order to promote growth in the real estate market.
The implemented measures are, among others: (1) all the acts involving real estate will be entered on the property’s record
in the land registry office, i.e., unregistered acts and actions enforceable against third parties in good faith, even if the unregistered
act or action challenges ownership to the property; (2) the buyer of a real estate property will be able to give property as guarantee
to finance another, or to purchase other assets with funds raised in savings accounts; (3) banks can issue Real Estate Covered
Bonds (Letras Imobiliárias Garantidas, or “LIGs”), pursuant to CMN Resolution No. 4,598, enacted on August
29, 2017, which is exempt from income tax to raise more funds and borrow to finance the purchase of real estate; and (4) banks
may grant payroll loans, in which the parcels will be charged to the worker’s salary in the private sector with more facilities,
resulting in lower interests.



Mortgage portfolio



While a large portion
of the funds in the deposits in saving accounts are allocated to the SFH, some of the funds are allocated to loans granted at market
rates. CMN Resolution No. 3,932/10, as amended, established that at least 65% of these deposits should be used for real estate
financing, with a minimum of 80% of the financing going to housing loans under the SFH and the remaining balance for loans granted
at market rates which are usually higher than in SFH loans, including mortgage portfolio used by banks for the concession of housing
loans.



In early 2005 the
Brazilian government took a number of measures to better regulate the use of the funds raised in savings account deposits in order
to promote growth of the real estate sector, these measures included: (1) the cancellation of payments to the Central Bank of funds
not invested in real estate financing in January, February and March; (2) the creation of a real estate interbank deposit market
to allow financial institutions with excessive investments in real estate to trade with financial institutions that have capacity
for more real estate credits; (3) a review of the factors used in the calculation guidelines of the SFH in order to stimulate financing
for the acquisition of new real estate properties at a low cost, applicable as of January 1, 2005; and (4) authorization for the
SFH to provide financing to legal entities for the construction of development projects for their employees, provided that such
entities follow all SFH guidelines.



In 2014, the Brazilian
government adopted measures to facilitate the purchase of financed properties, as discussed in SFH above, and in 2016, the increase
in the operating limits of the SFH to units with a maximum sales prices of R$800,000 and R$950,000 (applicable only to the States
of Rio de Janeiro, São Paulo, Minas Gerais and the Distrito Federal). These changes have significantly increased
the funds available for investments in the Brazilian real estate sector.



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Real Estate Finance System, or “SFI”



The SFI was created
by Law No. 9,514 to establish assignment, acquisition and securitization criteria for real estate credits. The system seeks to
develop primary (loans) and secondary (trading of securities backed by receivables) markets for the financing of real estate properties
by creating advantageous payment conditions and special protection of creditors’ rights. The SFI supervises real estate financing
transactions carried out by savings banks, commercial banks, investment banks, real estate credit portfolio banks, housing loan
associations, savings and loan associations, mortgage companies and other entities authorized by the CMN to provide such financing.
SFI real estate credits may be freely negotiated by the parties, under the following conditions: (1) the amount loaned and the
related adjustments must be fully reimbursed; (2) interest must be paid at the rates established by the contract; (3) interest
must be capitalized; and (4) borrowers must purchase life and permanent disability insurance.



Real estate sales,
rental, or other real estate property financing in general, can be negotiated with non-financial institutions under the same conditions
permitted by authorized entities under the SFI. In these cases, non-financial entities are authorized to charge capitalized interest
rates greater than 12% per year.



The following types
of guarantees are applicable to loans approved by the SFI: (1) mortgages; (2) fiduciary assignment of credit rights resulting from
sales contracts; (3) guarantee of credit rights resulting from contracts of sale or promise of sale of property; and (4) conditional
sale of real estate property.



Law No. 9,514 also
reformed securitizations of real estate assets provisions, making them less expensive and more attractive. The securitization of
credits in the context of the SFI is made through real estate securitization companies, non-financial institutions formed as joint
stock companies whose objective is to acquire and securitize real estate credits. Funds raised by the securitizing companies can
be made through the issuance of debentures or notes, or the creation of a new type of CRI. According to applicable law, CRIs are
nominative credit securities issued exclusively by securitizing companies, backed by real estate credits, freely negotiated, and
payable in cash. CRIs tend to have, among others, the following characteristics: they are issued in book-entry form, they may have
fixed or floating interest rates and can be paid in installments, they may contain adjustment provisions, they are registered and
traded through centralized systems of custody and financial settlement of private securities and they can be secured by the assets
of the issuing company.



Minha Casa, Minha Vida program



Provisional Measure
No. 459 enacted on March 25, 2009, converted into Law No. 11,977 enacted on July 7, 2009, amended by Law No. 12,249 enacted on
June 11, 2010, Law No. 12,424 enacted on June 16, 2011, Law No. 12,693 enacted on July 24, 2012, Law No. 13,043 enacted on November
13, 2014 and Law No. 13,097 enacted on January 19, 2015, created a public housing program called “Minha Casa, Minha Vida.”
Provisional Measure No. 514 enacted on December 1, 2010, converted into Law No. 12,424 enacted on June 16, 2011, modified the aforementioned
legislation, which calls for government investment of more than R$30 billion and is focused on building one million houses for
families with monthly incomes of up to ten times the minimum wage. Under this program, the government is authorized to finance
families purchasing houses with assessed values between R$90,000 and R$240,000. Law No. 12,868 enacted on October 15, 2013, released
resources for “Minha Casa Melhor”, in which CEF provides to each beneficiary of the program “Minha
Casa Minha Vida” subsidized credit up to R$5,000 for the purchase of furniture and appliances, with interest rate of
5% per year and repayable in 48 months.



Municipal Legislation



Municipal planning
is regulated by articles 182 and 183 of the Federal Constitution and by Law No. 10,257 of July 10, 2001 (Estatuto da Cidade),
as amended, or Law No. 10,257. Law No. 10,257 provides, among other things, for the establishment of (1) rules for the parceling,
use and occupation of urban tracts of land in each municipality for the collective welfare and environmental balance of the community;
and (2) a master plan, which shall be reviewed every 10 years. The master plan is the guiding tool used to plan developments in
the urban areas of each municipality and is used as a reference by all public and private agents acting within the municipality.
It establishes the strategic goals and general guidelines for urban construction, the objectives and guidelines for differentiated
areas of planning and the instruments for their deployment.



We set out below certain
details of the laws governing the municipal planning of the two major cities in which we operate, São Paulo and Rio de Janeiro:



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São Paulo municipality



City laws govern the
zoning, construction, parceling, use and occupation of land in the municipality of São Paulo. They set forth technical and
urban planning requirements for parceling, and provide that the division, subdivision or segregation of urban tracts of land are
subject to the prior approval of the São Paulo municipal government. Moreover, the zoning laws describe the types of permissible
uses for the land and their respective characteristics, by dividing São Paulo into areas of use with fixed locations, limits
and boundaries. They also provide for fines and sanctions for noncompliance.



Municipal Law No.
11,228 of June 25, 1992, approved the Code of Works and Construction, regulated by Decree 32,329 of September 23, 1992, which governs
administrative and executive procedures and sets forth the rules to be followed in the planning, licensing, execution, maintenance
and use of public works and construction within properties in the municipality of São Paulo, and provides for sanctions
and fines applicable in cases of non-compliance with these rules.



On July 31, 2014,
Municipal Law No. 16,050 was published, replacing Municipal Law No. 13,430 of September 13, 2002, approving the master plan and
creating the Planning System of the municipality of São Paulo and regulating the new master plan of the municipality. The
new master plan provides a series of guidelines for the development and growth of the city of São Paulo for the next 16
years, in order to (i) incentivize the use of public and non-motorized forms of transport; (ii) reduce the housing deficit; (iii)
improve the access of residential areas to commercial areas of the city; and (iv) incentivize the development of urban areas already
equipped with public transportation infrastructure, among other guidelines.



On March 22, 2016,
Municipal Law No. 16,402 was published, replacing Municipal Law No. 13,885 of August 25, 2004, regulating the new rules regarding
the parceling, use and occupation of land in the municipality of São Paulo.



Rio de Janeiro municipality



Decree 322 of March
3, 1976, as amended, of the Municipality of Rio de Janeiro, and Decree “E” 3,800 of April 20, 1970, as amended, of
the then State of Guanabara, jointly created the municipality’s Zoning Regulation, Land Parceling Regulation and Construction
Regulation. These regulations control the use of the municipality land, including urban zoning, use of properties, development
of construction sites and conditions for the use of each zone in the municipality. The Ten-year master plan of the municipality,
approved pursuant to Supplementary Law No. 111 of January 1, 2011, establishes rules and procedures related to urban policy of
the municipality, determines guidelines, provides instruments for its execution and defines area policies and their related programs,
aiming at meeting the social needs of the city.



On January 14, 2019,
Municipal Law No. 198 was published, replacing the former Code of Works and Construction of the Municipality of Rio de Janeiro.
The new Code has only 40 articles, replacing the over 500 provided for in the former code, and its principal goal is to modernize
and simplify the rules for developers. The simplification of the licensing process allows for more flexible urbanization parameters.
Among the important changes brought about by Law No. 198, we highlight the following:



(i) Minimum Size:
The new rule allows for properties with a minimum size of 25 square meters (or 82 square feet), except in the boroughs of Barra
da Tijuca, Recreio dos Bandeirantes, Vargem Grande, Vargem Pequena and Ilha do Governador. According to the old rules, the minimum
useable area of the apartments varied from 28 square meters (91 square feet) in the Central and Northern regions and 60 square
meters (196 square feet) in the Southern Region;



(ii) Parking: It is
no longer required for a building built within a radius of 800 meters (2,624 feet) from an underground, train, BRT and/or VLT station
to have at least one parking space for each one of its individual units. The requirement now is one parking space for every four
apartments;



(iii) Playground:
It is no longer required for a building to have a playground;



(iv) Marquees: Marquees,
which have been forbidden since 2007, are once again allowed in the city’s building designs;



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(v) Elevators: Elevators
are now required only in buildings with more than five stories;



(vi) Cultural Heritage
Buildings: Cultural Heritage Buildings may have their use changed, pursuant to the compliance with the rules enforced by the preservation
regulatory bodies;



(vii) Balconies: No
limits on the construction of a balcony were established in the new code. Sealing off balconies is still allowed, provided that
the legal requirements are met;



(viii) Mezzanines:
Non-residential units may have a mezzanine that occupies 100% of its useable area pursuant to payment of a fee to City Hall;



(ix) Condo Villages:
It is once again permitted to build condo villages in town, which may have up to 36 units. According to the old rules, these used
to be allowed only in the boroughs of Campo Grande and Tijuca. The code also determines that the upkeep of the village street,
its entrance and common services are the obligation of its occupants;



(x) Bike Racks: It
is now required of residential buildings to have a designated place for storing bicycles; and



(xi) Retrofit: The
rules for the calculation of the Total Built Area, parking spaces and adaptation of the building in the retrofitting of existing
buildings have been made more flexible.



Environmental Issues



We are subject to
a variety of Brazilian federal, state and local laws and regulations concerning the protection of the environment, as well as urban
regulations and zoning restrictions, as described below. Applicable environmental laws may vary according to the development’s
location, the site’s environmental conditions and the present and former uses of the site. Compliance with these environmental
laws may result in delays, cause us to incur in substantial costs, and prohibit or severely restrict project development. Before
we purchase any real estate, we conduct investigations of all necessary and applicable environmental issues, including the possible
existence of hazardous or toxic materials, as well as any inadequately disposed waste substances. During the investigations we
also identify the existence of water wells and protected vegetation, observing the proximity of the real estate property to permanent
preservation areas. We generally condition the real estate property acquisitions on obtaining the required regulatory approvals
prior to closing.



We have adopted certain
practices to further our commitment to environmental protection and landscape development. Through our Selective Collection Project,
we have partnered in environmental education initiatives with private and governmental entities, including non-governmental organizations.
We provide training to all of our outsourced workers (before we begin work on any particular project), that focuses on the importance
of preserving the environment and how to effectively collect, store and control materials for recycling. Alphaville was given the
“ECO Award” in 2006 and 2007 (by the American Chamber of Commerce), the “Top Ambiental Award” (Top Environmental
Award) in 2007 and 2008 (by the Brazilian Association of Marketing and Sales Agents, in recognition for its environmentally responsible
practices) and the “Top Social Award” in 2008 and 2009 (by the Brazilian Association of Marketing and Sales Agents,
in recognition for its socially responsible practices). Our Eldorado Business Tower building is the first building in Latin American,
to be pre-certified by the U.S. Green Building Council as a Leed CS 2.0 Platinum building for leadership in energy and environmental
design.



Environmental licenses and authorizations



Brazilian environmental
policy requires environmental licenses and permits for the construction and operation of real estate projects. Environmental licensing
is required for both initial construction and alteration in existing developments, and the licenses must be periodically renewed.
The Brazilian Institute of Environment and Renewable Natural Resources (Instituto Brasileiro do Meio Ambiente e dos Recursos
Naturais Renováveis), or the IBAMA, is responsible for granting such licenses for projects developed in two states or
in federal conservation units. In other cases, state or municipal environmental agencies are responsible for granting such environmental
licenses, depending on the extent of environmental impacts caused by certain projects.



The environmental
licensing process is comprised of three stages: preliminary license, installation license and operational license. The preliminary
license, issued during the preliminary planning phase of the project, authorizes the location and basic development, and establishes
the conditions and technical requirements to be observed in further stages of development. The installation license authorizes
the facility’s construction. The operating license authorizes



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the commencement and continuation of operational activities.
Operating licenses are subject to compulsory renewal depending on their validity. The licensing of activities that may significantly
impact the environment, as determined by the competent environmental agency and according to the Environmental Impact Assessment
and its related Report (“EIA/RIMA”), requires environmental offset payments, to be invested in conservation units (e.g.
national parks, biological reserves etc.), pursuant to Article 36 of Law No. 9,985/00. The value of the environmental offset is
established by the environmental agency conducting the licensing proceeding, according to the “ecosystem impact level”
of the proposed activity, pursuant to Article 31-A of Federal Decree No. 6,848/09.



The installation,
operation or alteration of projects without proper and valid environmental licensing or the non-compliance with the conditions
or technical requirements of the respective environmental licenses, may subject the violator to administrative sanctions that may
range from fines (R$500 to R$10 million), as well as the suspension of activities and, depending on the specific circumstances,
criminal liability (of individuals and/or companies), pursuant to Federal Law No. 9,605/98 and civil liability (in case environmental
damage occurs).



The construction,
maintenance and sale of our projects may be hampered or halted by delays in the issuance of applicable licenses or even by failure
to obtaining such licenses.



The construction of
real estate developments often requires land moving activities, and in many cases, the cutting down of trees. In addition to environmental
licenses and permits, Brazilian legislation requires specific environmental authorizations for the development of projects, based
on the characteristics of the project, its location and the natural features inherent to the area. The development of projects
that require the cutting of trees or removing vegetation must receive specific authorizations from environmental agencies. Companies
that apply for an authorization for vegetation removal are required to perform the reforestation of other areas as a compensatory
measure, such as reforestation or to repair the affected areas, which may imply additional expenses. Brazilian legislation also
requires special protections for certain specific types of flora and areas with special ecological purpose, imposing additional
legal requirements to removal of such vegetation.



The removal of vegetation
without proper and valid authorization, or non-compliance with the authorization requirements, may subject the transgressor to
civil liability (in case environmental damage occurs), administrative sanctions (such as fines) and, according to specific circumstances,
criminal liability (of individuals and/or companies), pursuant to Federal Law No. 9,605/98.



The licensing of projects
with relevant environmental impacts located in a conservation unit or within its buffer zone will depend on prior authorization
from the conservation unit’s managing office.



In addition, the development
of projects that require water abstraction from bodies of water or groundwater, as well as the discharge of effluents into water
bodies, are subject to specific water use grants, to be issued by the relevant authorities. Water use grants are subject to certain
conditions and technical requirements, including maximum capacity requirements and effluent treatment standards, and are subject
to automatic renewal.



Moreover, some of
our projects require the transfer of wildlife to other areas, which is subject to specific authorizations issued by the state environmental
agencies. To catch, handle and transfer wildlife without the proper authorization may result in administrative sanctions of up
to R$5,000.00 per animal, pursuant to Federal Decree 6,514/08.



Waste disposal



Brazilian legislation
relies on several standards and procedures for waste management. All waste must be properly stored, treated, transported and disposed
of, in order to avoid the occurrence of environmental damages – and as a result, environmental liability.



The Brazilian “National
Waste Management Policy” (Federal Law No. 12,305/10) and CONAMA Resolution 307/2002 specifically regulate the handling of
solid waste generated by the construction sector. As part of their licensing procedure, companies are required to present and have
a solid waste management plan approved by competent environmental agency and must comply with the conditions and obligations set
forth in such plan. Failure to comply with such obligations may lead to civil (obligation to repair/indemnify in case of pollution),
administrative (e.g. fines, suspension of activities etc.) and, according to specific circumstances, criminal liability.



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Regarding civil liability,
because Brazilian legislation imposes strict, joint and several liability for environmental damages, companies may be held liable
for any environmental damages that may arise as a result of its activities, including waste generated thereof, which must be properly
stored, treated, transported and disposed of. Likewise, the hiring of third parties for management of waste generated from our
activities does not exempt us from civil environmental liability.



Contaminated areas



We develop and construct
projects in several states within Brazil. Each state has its Environmental Secretary and/or Environmental Agency. The São
Paulo State Secretary of Environment (Secretaria de Estado do Meio Ambiente de São Paulo), or the “SMA,”
and the State Environmental Agency of São Paulo (Companhia Ambiental do Estado de São Paulo), or “CETESB,”
are the principal environmental regulatory entities of the State of São Paulo, and they have adopted procedures with regard
to the management of contaminated areas, including the creation of environmental standards to preserve the quality of land and
underground water, as well as procedures to be complied with if contamination is confirmed. The standards established by CETESB
are used as reference by most Brazilian states that have no specific regulation on contaminated land management.



In addition, the Rio
de Janeiro State Secretary of Environment (Secretaria de Estado do Meio Ambiente e Desenvolvimento Urbano do Rio de Janeiro)
and the Rio de Janeiro State Environmental Agency, or “INEA,” also maintain their own quality standards, in combination
with those established by the National Environmental Council (Conselho Nacional do Meio Ambiente), or “CONAMA.”
Other states have similar requirements.



If contaminated areas
are identified in the development of our projects, we must provide proper disclosure to environmental authorities and registration
before real estate property records. Given the strict liability regime, we may be required to proceed with the remedial actions
deemed necessary by environmental agencies in order to comply with technical standards set forth for each kind of project, even
if we have not caused the contamination, and may result in delays for the project development’s completion. Prior approval
from environmental agencies before engaging in remedial actions may be necessary. All emergency actions to prevent and mitigate
risks to the environment and public health, if required, must be adopted promptly and at our expense.



Non-compliance with
the guidelines established by the environmental and health entities may result in criminal, as well as administrative penalties.
Moreover, the owners and holders of properties may be required to pay for costs relating to the clean-up of any contaminated soil
or groundwater located in their properties, even if they did not cause the contamination.



If there are contaminated
areas in the properties where our projects will be developed, this must be disclosed to our clients.



Environmental liability



Article 225 of the
Brazilian Federal Constitution, provides that “activities that are harmful to the environment shall subject violators, whether
individuals or companies, to criminal and administrative sanctions, regardless of the obligation to repair the damage caused.”
Therefore, the Brazilian Federal Constitution provided for environmental liability in three distinct fields: civil, administrative
and criminal. As an example, payment of an administrative fine does not offer exemption from the duty to make reparations or indemnify
for damages that might be caused by harmful conduct, nor does it offer exemption from possible criminal charges prompted by the
event.



Civil environmental
liability in Brazil is considered by case law as propter rem, that is, liability attaches to the real estate property. Therefore,
whoever buys or holds environmentally damaged land will succeed in the liability for the clean-up or recovery and for reparation
of potential damage to third parties. Although this liability can be contractually allocated between the parties, it cannot be
opposed either administratively or before third parties, meaning the concept of a bona fide prospective purchaser does not
exist in civil environmental liability in Brazil.



In addition, Federal
Law No. 6,938/81 establishes strict liability for the recovery of environmental damages or, if not possible, compensation or indemnity
for such damages, with joint and several liability established among all those directly or indirectly contributing to environmental
degradation, regardless of the degree of participation in the damage. Each of those involved may be held liable for the full amount
of the damages. Moreover, pursuant to Article 4 of Federal Law 9,605/1998, Brazilian environmental legislation determines that
the corporate veil may be pierced



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whenever the veil is considered to be an obstacle to recovery
for environmental damages. As a result, the controlling legal entity can be found liable despite a limited liability legal status.



At the administrative
level, environmental liability may be assigned through administrative sanctions imposed by the competent environmental entities,
pursuant to Law No. 9,605/98 which “rules on the criminal and administrative sanctions deriving from conduct and activities
that are harmful to the environment” and pursuant to Federal Decree No. 6,514/08. These sanctions may include, among
others: (1) fines of up to R$50 million, tailored to the economic capacity and track record of the offender, in addition to the
severity of the facts and past performance, with the possibility of these fines being imposed at double or triple rates for repeated
offenses; (2) suspension or interdiction of the activities of the respective enterprise; and (3) withdrawal of tax incentives and
benefits. Administrative liability falls on the person engaged in the conduct described as an administrative offense.



Criminal liability
is personal, arising directly from the unlawful conduct of the agent, with the crimes necessarily being specifically addressed
in the law. Brazilian law allows criminal liability to be assigned to individual persons as well as corporate entities. When liability
is assigned to the latter, the individual persons taking the decision that resulted in the criminal conduct (such as directors,
officers, administrators, board members, members of technical entities, auditors, managers, agents or representatives) may also
be penalized to the extent of their culpability.



C.       Organizational
Structure



The following chart
shows our organizational structure for our principal subsidiaries, all of them incorporated in Brazil:



Tela de celular com texto preto sobre fundo branco

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For more information
on our remaining subsidiaries and jointly-controlled entities, see “—B. Business Overview—Subsidiaries.”



D.       Property and
Equipment



We lease our headquarters
located at Av. Pres. Juscelino Kubitschek, No. 1830, Block 2, 3rd Floor, 04543-900 – São Paulo, SP – Brazil.
Currently, we lease approximately 950 square meters in this office. We believe our current facilities are adequate for the full
development of our operations.



As of December 31,
2019, our property and equipment recorded on our balance sheet mainly consisted of sales stands, facilities, model apartments,
computer equipment, vehicles and leasehold improvements, among others, the balance of which was R$14.2 million.



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ITEM 4A. UNRESOLVED STAFF COMMENTS



None.



ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS



A.       Operating Results



The financial statements
for the years ended December 31, 2019, 2018, 2017, 2016 and 2015 were prepared in accordance with the accounting practices adopted
in Brazil, which comprise the rules of the Brazilian Securities Commission (CVM), and the standards, interpretations and guidelines
of the Accounting Standards Pronouncements Committee (CPC), and are in compliance with the International Financial Reporting Standards
(IFRS) adopted in Brazil, including the guidance contained in Circular Letter CVM/SNC/SEP 02/2018, of December 12, 2018, which
establishes the accounting procedures for recognition, measurement and disclosure of certain types of transactions arising from
contracts for purchase and sale of real estate unit not yet completed in real estate development entities. The Brazilian GAAP applied
by us is not in compliance with IFRS as issued by IASB.



In December 2016,
following the conclusion of our analysis of certain strategic options, our management decided to sell 50% of Tenda’s total
capital stock, and transfer the remaining 50% of Tenda’s total capital stock to our shareholders in connection with a reduction
in our total capital stock. Accordingly, on December 14, 2016, we entered into an SPA with Jaguar pursuant to which we agreed to
sell Tenda shares representing up to 30% of the total capital stock of Tenda, at a price equal to R$8.13 per share.



The spin-off of the
Tenda business unit was consummated on May 4, 2017, following: (i) a reduction of the capital stock of Tenda (without the cancellation
of shares), pursuant to which Gafisa, as sole shareholder at that time, received R$100 million (adjusted by the SELIC); (ii) a
reduction of the capital stock of Gafisa, resulting in the distribution to Gafisa shareholders of shares corresponding to 50% of
the capital stock of Tenda; (iii) the conclusion of the preemptive rights exercise pursuant to which Gafisa shareholders acquired
up to 50% of the total share capital of Tenda, at the price per share set forth in the SPA with Jaguar and for a total amount of
R$219.5 million, with no shares being acquired by Jaguar; and (iv) the satisfaction of other conditions precedent for the consummation
of the spin-off. In addition, on May 4, 2017, the Tenda shares were listed on the B3 and began to publicly trade.



As a result of this
transaction, the results of operations of Tenda have been presented as discontinued operations under Brazilian GAAP in the Company’s
2017, 2016, and 2015 consolidated statements of operations, and the Company recorded an impairment loss in the amount of R$610.1
million for the year ended December 31, 2016, related to the measurement of disposal group held for sale at the lower of its carrying
value and the fair value less cost to sell, taking into account the price of R$8.13 per share described above. Additionally, for
the period ended May 4, 2017, under Brazilian GAAP, the fair value of discontinued operations was adjusted in the amount of R$215.4
million, considering the weighted average price per share at R$12.12 and the amount of R$107.7 million related to the obligation
to sell Tenda shares at a price equal to R$8.13 per share, which was reflected in the profit or loss of discontinued operations,
in order to reflect the difference between the fair value of the group of assets held for sale and the effective selling price.



See “Item 4.
Information on the Company—A. History and Development of the Company—Historical Background and Recent Developments.”
Our chief executive officer, who is responsible for allocating resources among these businesses and monitoring their progress,
uses economic present value data, which is derived from a combination of historical operating results and forecasted operating
results, to assess segment information primarily on the basis of different business segments.



Overview



We generate our revenues
mainly from the development and sale of real estate developments. We recognize revenues from the sale of real estate developments
over the course of their construction periods, based on a financial measure of completion and not at the time that the sales agreements
are executed. To a lesser extent, we also generate revenues from real estate services such as construction, technical and real
estate management we render to third parties. We structure some of our projects through either our subsidiaries or jointly-controlled
entities organized as special purpose vehicles.



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Brazilian Economic Environment



We believe that our
results of operations and financial performance are and will continue to be affected by the following macroeconomic trends and
factors:



All of our operations
are located in Brazil. As a result, our revenues and profitability are affected by political and economic developments in Brazil
and the effect that these factors have on the availability of credit, disposable income, employment rates and average wages in
Brazil. Our operations, and the industry in general, are particularly sensitive to changes in economic conditions.



Brazil is the largest
economy in Latin America, as measured by gross domestic product, or GDP. The following table shows data for real GDP, inflation
and interest rates in Brazil and the U.S. dollar/real exchange rate at the dates and for the periods indicated.



|                                               |  | Year ended December 31,     
|---------------------------------------------- |  | ----------------------------
|                                               |  | 2019                        
|                                               |  | (%, unless otherwise stated)
|Real growth in GDP                             |  |                             
|Inflation rate (INPC)(1)                       |  |                             
|Inflation rate (IGP—M)(2)                      |  |                             
|National Construction Cost Index (INCC)(3)     |  |                             
|TJLP rate(4)                                   |  |                             
|CDI rate(5)                                    |  |                             
|Appreciation (devaluation) of the real vs. US$ |  |                             
|Exchange rate (closing) — US$1.00              |  |                             
|Exchange rate (average)(6) — US$1.00           |  |                             




_________________

| | (1) | INPC: consumer price index measured by the IBGE.
| | --- | ------------------------------------------------



| | (2) | General Market Price Index (Índice Geral de Preços-Mercado) measured by the
FGV.
| | --- | --------------------------------------------------------------------------------



| | (3) | National Index of Construction Cost (Índice Nacional de Custo da Construção)
measured by the FGV.
| | --- | -------------------------------------------------------------------------------------------------



| | (4) | Represents the interest rate used by BNDES for long-term financing (end of period).
| | --- | -----------------------------------------------------------------------------------



| | (5) | Represents an average of interbank overnight rates in Brazil (accumulated for period-end month,
annualized).
| | --- | ------------------------------------------------------------------------------------------------------------



| | (6) | Average exchange rate for the last day of each month in the period indicated.
| | --- | -----------------------------------------------------------------------------



Brazilian Real Estate Sector



The Brazilian real
estate sector is characterized by cyclical performance influenced by various macroeconomic factors. For example, demand for housing,
the availability of financing and growth in population and incomes are, among others, factors that influence the performance of
the real estate market.



In addition, since
2006, the Brazilian government has enacted incentives in the real estate sector, including the following:



| | · | Provisional Measure No. 321 enacted on September 12, 2006, later converted into Law No. 11,434
enacted on December 28, 2006 and amended by Law No. 12,599 enacted on March 23, 2012, gave banks the option to charge fixed interest
rates on mortgages;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Law No. 10,820 enacted on December 17, 2003, amended by Law No. 10,953 enacted on September 27,
2004, regulated by Decree No. 5,892 enacted on September 12, 2006, as amended by Decree No. 4,840 enacted on September 17, 2003,
as amended by Law No. 13,097 enacted on January 19, 2015, allowed payroll deductible mortgage loans to employees of both public
and private entities;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Decree No. 6,006 enacted on December 28, 2006, replaced by Decree No. 7,660 enacted on December
23, 2011, implemented a 50% tax cut on Tax on Manufactured Products (Imposto sobre Produtos
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Industrializados),
or IPI, levied on the acquisition of important construction products, including certain types of tubes, ceilings, walls, doors,
toilets and other materials. In 2009, other decrees eliminated the IPI levied on the acquisition of similar products, but were
implemented for a limited term only and were set to expire in March 2010, but were extended until December 31, 2012;



| | · | Provisional Measure No. 656 enacted on October 7, 2014, converted into Law No. 13,097 enacted on
January 19, 2015 (“Law No. 13,097”), which establishes mechanisms for protecting purchasers and recipients of in
rem rights which enter into legal transactions based on the information contained in the real estate records. In addition,
deals with payroll loans, establishing the concentration of acts in the real estate property registration and creates the LIG.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Normative Instructions No. 30 and No. 31 enacted on December 30, 2015, which establish new interests
rates and loan limit subsidies for the 2nd and 3rd brackets of the “National Individual Loan Program” segment of the
FGTS.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | CMN Resolution No. 4,598/2017, which regulates the issuance of LIGs by financial institutions,
establishing its general characteristics, procedures and applicable requirements, including with regards to underlying assets backing
such securities, as well as other guidelines applicable to the LIG trustee and to LIG holders’ meetings.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Law No. 13,777 enacted on November 20, 2018, established a new form of condominium - a “multi-property”
condominium. Multi-property allows the co-owners of a property to each use it for a pre-determined period of time as its single
owner. Each “time fraction” is indivisible and bound to the right of use of the property for periods of no less than
7 days, which can be fixed and determined or change from year to year.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Law No. 13,786 enacted on December 12, 2018, which regulates the dissolution or termination of
purchase and sale agreements involving real estate development activities, in order to foster legal and economic confidence in
the real estate development sector.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Municipal Law No. 198 enacted on January 14, 2019, which replaced the former Code of Works and
Construction of the municipality of Rio de Janeiro. The new Code has only 40 articles, replacing the over 500 provided for in the
former code, and its principal goal is to modernize and simplify the rules for developers. The simplification of the licensing
process allows for more flexible urbanization parameters.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Critical Accounting Policies and Estimates



The preparation of
financial statements in accordance with Brazilian GAAP requires management to make judgments, estimates and adopts assumptions
that affect the reported amounts of revenue, expenses, assets and liabilities, as well as the disclosure of contingent liabilities,
at the balance sheet date. Assets and liabilities subject to estimates and assumptions include the useful life of property plant
and equipment, impairment of assets, deferred tax assets, provision for uncertainty tax positions, labor and civil risks, and the
measurement of the estimated cost of ventures and financial instruments. Estimates are used for, among other things, impairment
of non-financial assets, transactions with share-based payment, provisions for tax, labor and civil risks, fair value of financial
instruments, estimated costs of ventures, realization of deferred income tax and other similar provisions. Although we believe
that our judgments and estimates are based on reasonable assumptions, as they are subject to several risks and uncertainties and
are made in light of information available to us, our actual results may differ from these judgments and estimates.



In this sense, we
set forth below summarized information related to our critical accounting policies. See Note 2.2 to our consolidated financial
statements, included elsewhere in this annual report for further information on these and other accounting policies we adopt.



Impairment of non-financial assets



We annually review
the carrying amount of assets, with the objective of evaluating events or changes in the economic, operational or technological
circumstances that may indicate a decrease or loss in the recoverable amount of such assets. Should such evidence exist, and the
carrying amount exceeds the recoverable amount, a provision for impairment loss is recognized in the statement of operations by
adjusting the carrying amount to the recoverable amount. A test for impairment of intangible assets with indefinite useful lives
and goodwill is performed at least



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annually or when circumstances indicate a decrease in the carrying
amount. As of December 31, 2014, the Company recorded a provision for impairment for land and goodwill related to the acquisition
of Cipesa Empreendimentos Imobiliários S.A. As of December 31, 2016, the Company recorded an impairment loss related to
Tenda’s discontinued operations in the amount of R$610.1 million. As of December 31, 2017 and 2018, the Company recorded
an impairment loss related to the goodwill on the remeasurement of the investment in AUSA in the amounts of R$127.4 million and
R$112.8 million, respectively. On December 27, 2019, we sold our remaining stake in Alphaville and the remaining goodwill balance
was written down in the amount of R$161.1 million. The recoverable amount of an asset or of a certain cash-generating unit is defined
as the greater of its value in use and its fair value less costs to sell. When estimating the value in use of an asset, the estimated
future cash flows are discounted to present value using a pre-tax discount rate that reflects the weighted average cost of capital
for the industry in which the cash-generating unit operates. Cash flows are derived from the budget for the following five years,
and do not include restructuring activities for which the Company has not yet committed or future significant investments that
will improve the asset basis of the cash-generating unit being tested. The recoverable amount is sensitive to the discount rate
used under the discounted cash flow method, as well as the estimated future cash inflows and the growth rate used. The fair value
less costs to sell is determined, whenever possible, based on a binding sale agreement in an arm’s length transaction between
knowledgeable and willing parties, adjusted for expenses attributable to the sale of the asset, or, in the absence of a binding
sale agreement, based on the market price in an active market, or on a recent transaction with similar assets.



Properties for sale



Our properties for
sale are stated at construction cost, which cannot exceed its net realizable value. In the case of real estate developments in
progress, the portion in inventory corresponds to the cost incurred for units that have not yet been sold.



The cost of properties
for sale includes expenditures incurred in the acquisition of the land and in construction (including foundation, structure, finishing
and the respective costs of construction materials), costs of own and outsourced labor, and financial costs directly related to
the ventures.



Land is recorded at
acquisition cost. See “Item 4. Information on the Company—B. Business Overview—Our Real Estate Activities—Land
Acquisition”. Land can be acquired for cash, in installments, through barter for units that are completed or in construction
of other ventures, or through barter for receivables from future sales of ventures. The cost of land related to bartered units
comprises the estimated sale price in cash, this fair value being recorded as contra-entry to the advances from customers-barter.



The interest on loans
and financing directly related to ventures financed by the National Housing System (SFH) and other credit facilities which funds
are used to finance the construction and acquisition of land are capitalized over the development and construction stage, and recognized
in the statement of operations in the proportion to the units sold.



We have the policy
of annually conducting tests on our landbank, comparing its carrying amount and its recoverable amount, and on the units in construction
and completed units, comparing the unit construction cost with the sale value of units in inventory. The assumptions that usually
underlie the calculation of the recoverable value of assets are based on expected cash flows, and economic viability studies of
real estate ventures that show the recoverability of assets or its market value, all discounted to present value.



The classification
of land into current or non-current assets is carried out by the Management based on the schedule of the real estate venture launches.
Management periodically reviews the estimates of real estate venture launches.



In accordance with
our internal policy, each individual project launched has been internally evaluated taking into consideration the following: (1)
assumptions for market, sales forecast, economics and operating conditions; (2) cash flow analysis using the discounted cash flow
method; (3) approval by an investment committee; and (4) inclusion in the business plan regarding the timetable and backlog for
development releases. This process is part of our corporate governance practices. We update the assumptions on an annual basis
and consider the continuing viability for each project for impairment test purposes.



57


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Transactions with share-based payment



We measure the cost
of transactions with employees to be settled with shares based on the fair value of equity instruments on the grant date. The estimate
of the fair value of share-based payments requires the determination of the most adequate pricing model to granted equity instruments,
which depends on the grant terms and conditions. It also requires the determination of the most adequate data for the pricing model,
including the expected option life, volatility and dividend income, and the corresponding assumptions.



Provisions for legal claims



We recognize a provision
for tax, labor and civil claims. The assessment of the probability of a loss includes the evaluation of the available evidence,
the hierarchy of Laws, existing case law, the latest court decisions and their significance in the judicial system, as well as
the opinion of external legal counsel. The provisions are reviewed and adjusted to take into account the changes in circumstances,
such as the applicable expiration term, findings of tax inspections, or additional exposures found based on new court issues or
decisions. The settlement of transactions involving these estimates may result in amounts different from those estimated in view
of the inaccuracies inherent in the process of estimating them. The Company reviews its estimates and assumptions on a monthly
basis.



Taxes on income



Current income tax and social contribution



Current income tax
is the expected tax payable or receivable to be offset in relation to taxable profit or loss for the year. To calculate the current
income tax and social contribution on net profits, we adopt the regime set forth by Law No. 12,973 enacted on May 13, 2014 and
in force as of January 1, 2015. The new regime is based on the Brazilian accounting standards introduced by Laws No. 16,638/2007
and No. 11,941/2009, from the tax basis of such taxes, thus revoking the Brazilian Transitory Tax Regime, or “RTT.”



Taxes on income in
Brazil comprise income tax (25%) and social contribution on net profits (9%), for entities on the standard profit regime, for which
the composite statutory rate is 34%. Deferred taxes for these entities are recognized as at the balance sheet date for all temporary
tax differences between the tax bases of assets and liabilities, and their carrying amounts.



As permitted by tax
legislation, certain subsidiaries opted for the presumed profit regime, a method under which taxable profit is calculated as a
percentage of gross sales. For these companies, income tax is calculated on presumed profits of 8% of gross revenues and social
contribution on presumed profits of 12% on gross revenues, to which income tax and social contribution rates of 25% and 9%, respectively,
are applied.



As permitted by tax
legislation, the development of certain ventures are subject to the “afetação” regime, whereby
the land and its features where a real estate will be developed, as well as other binding assets and rights, are separated from
the assets of the developer and comprise the “patrimônio de afetação” (Detached Assets)
of the corresponding development and which real estate units will be delivered to the buyers. In addition, certain subsidiaries
elected the irrevocable option for the Special Taxation Regime (RET), adopting the “patrimônio de afetação”,
according to which the income tax, social contribution on net profits, PIS and COFINS are calculated at 4% on monthly gross revenues.



On May 13, 2014, Provisional
Measure No. 627 was converted into Law No. 12,973/14, revoking the RTT and bringing significant changes to Brazilian tax legislation.
The new rules came into effect on January 1, 2015, with an option to adhere to the new rules from January 1, 2014. During 2014,
we analyzed the potential impact of the new rules on our consolidated financial statements and internal control structure. Based
on our analysis, we concluded that the new rules would not have a material impact on how we account for taxes in 2014 and we therefore
opted not to adopt them from January 1, 2014. We have adhered to the new rules since January 1, 2015.



Deferred income tax and social contribution



Deferred tax is recognized
in relation to tax losses and temporary differences between the carrying amount of assets and liabilities for accounting purposes
and the corresponding amounts used for tax purposes. It is recognized to the extent that it is probable that future taxable income
will be available to be used to offset deferred tax assets, based on profit projections made using internal assumptions and considering
future economic scenarios that estimate their full or partial use. The recognized amounts are periodically reviewed and the impacts
of realization or settlement are



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reflected in compliance with tax legislation provisions. Tax
credits on accumulated tax losses do not have an expiration date, however, they can only be offset against up to 30% of the taxable
profit for each year. Companies that opt for the presumed profit tax regime do not record tax losses and do not have temporary
differences, and for this reason, deferred taxes are not recognized.



To the extent that
the realization of deferred tax assets is not considered to be probable, this amount is not recorded. We record deferred tax on
a net basis, determined by legal entity and same jurisdiction. For entities with cumulative tax losses for the last three years,
the Company and its subsidiaries recognized deferred tax assets and liabilities based on the following assumptions:



| | · | 100% of deferred tax liabilities on temporary differences;
| | - | ----------------------------------------------------------



| | · | Deferred tax assets on temporary differences that have realization terms similar to deferred tax
liabilities, and relate to the same legal entity, are recorded up to the limit of the deferred tax liabilities; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In situations where recent losses indicate that future taxable income is uncertain, deferred tax
assets are not recognized on deductible temporary differences in excess of deferred tax liabilities recorded on taxable temporary
difference liabilities nor is an asset recognized for the carry forward of unused tax losses.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Measurement of deferred tax asset



Our projections assume
that a significant portion of our business will be conducted in our principal holding companies, and this enables the recovery
of a substantial portion of our accumulated tax losses.



However, several external
factors, beyond our control, may affect such tax calculations, in addition to possible requirements to segregate ventures in their
own development entities (SPEs, for example) to a greater extent than we intend. There is also the possibility that taxation rulings
relating to new ventures or even ventures that have already been developed within the principal holding companies, may require
the exclusion of such businesses and for such businesses to file their own tax returns separate from that of the Company.



A reduction in the
concentration of projects in holding companies with tax losses carried forward may, therefore, compromise the expected recovery
of losses carried forward, which is the reason we partially recognized a deferred income tax asset.



Fair value of financial instruments



When the fair value
of the financial assets and liabilities presented in the balance sheet cannot be obtained in the active market, it is determined
using valuation techniques, including the discounted cash flow method. The data for such methods is based on those available in
the market, when possible; however, when such data is not available in the market, a certain level of judgment is required to establish
the fair value. This judgment includes considerations on the data used, such as liquidity risk, credit risk, and volatility. Changes
in the assumptions about these factors may affect the presented fair value of financial instruments.



Estimated cost of construction



Total estimated costs,
mainly comprising the incurred and future costs for completing the construction works, were reviewed in the preparation of these
financial statements, and changes to estimates are possible. The percentage of completion, which is the method for revenue recognition,
is measured in view of the incurred cost in relation to the total estimated cost of the respective project.



Real estate development and sales



The Company applied
CPC 47 – Revenue from Contracts with Customers from January 1, 2018, including the guidance contained in Circular Letter
CVM/SNC/SEP 02/2018, of December 12, 2018, which establishes the accounting procedures for recognition, measurement and disclosure
of certain types of transactions arising from contracts for purchase and sale of real estate unit not yet completed in real estate
development entities.



According to CPC 47,
the recognition of revenue from contracts with customers became subject to a new regulation, based on transfer of control over
promised goods or service, which can be at a point in time or over time,



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according to the satisfaction or not of the “contractual
performance obligations”. Revenue is measured in an amount that reflects the consideration the entity expects to be entitled
to and is based on a five-step model as follows: (1) identification of contract; (2) identification of performance obligations;
(3) determination of transaction price; (4) allocation of transaction price to performance obligations; (5) revenue recognition.



The Company records
the accounting effects of contracts only when: (i) the parties to the contract have approved the contract; (ii) the Company can
identify each party’s rights and the established payment terms; (iii) the contract has commercial substance; and (iv) the
Company has determined that the collection of consideration to which the Company is entitled is probable.



Revenues, as well
as costs and expenses directly relating to real estate development units sold and not yet finished, are allocated to the statement
of operations over the construction period and the following procedures are adopted:



(a)       For
the sales of completed units, revenues are recorded when the sale is completed and the transfer of control, regardless of the receipt
from the customer of the contracted amount;



(b)       For
the sales of units under construction, the following applies:



| | · | The incurred cost, including the cost of land, and other directly related expenditure, that correspond
to the units sold is fully recognized in the consolidated statement of operations;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Sales revenues are recognized in profit or loss, using the percentage-of-completion method for
each venture, this percentage being measured in view of the incurred cost in relation to the total estimated cost of the respective
ventures;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Revenue recognized in excess of actual payments received from customers is recorded as either a
current or non-current asset in “Trade accounts receivable”. Any payment received in connection with the sales of units
that exceeds the amount of revenue recognized is recorded as “Payables for purchase of land and advances from customers”;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Interest and inflation-indexation charges on accounts receivable as from the time the units are
delivered, as well as the adjustment to present value of accounts receivable, are recognized in profit or loss on a pro rata basis
using the effective interest method;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The financial charges on accounts payable for acquisition of land and those directly associated
with the financing of construction are recorded in properties for sale and recorded in the incurred cost of finished units until
their completion, and follow the same recognition criteria as for the recognition of the cost of real estate units sold while under
construction;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Taxes levied and deferred on the difference between real estate development revenues and the cumulative
revenue subject to tax are calculated and recognized when this difference in revenue is recognized; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Advertising and publicity expenses are recorded in the consolidated statement of profit or loss
as incurred.
| | - | ------------------------------------------------------------------------------------------------------------



Construction services



Revenues from real
estate services are recognized as services are rendered and consist primarily of amounts received in connection with construction
management activities for third parties, and technical advisory services, mainly related to developments where we retain an equity
interest.



Barter transactions



Barter transactions
have the objective of receiving land from third parties and are settled with the delivery of real estate units or transfer of portions
of the revenue from the sale of real estate units of ventures. The value of the land acquired is determined based on the fair value,
as a component of inventory of properties for sale, with a corresponding entry to advances from customers’ liabilities. Revenues
and costs incurred from barter transactions are included in profit or loss over the course of construction period of ventures,
as described in item (b) above.



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Allowance for expected credit losses



We annually review
the assumptions used in establishing an allowance for expected credit losses, in view of the revision of historical data of its
current operation and improvement of measurement estimates.



We record an allowance
for expected credit losses for all sales contracts of real estate units, and the amounts are accrued as a contra-entry to the recognition
of the respective development revenue, based on data history of its current operations and estimates. Such analysis is individually
made for each sales contract, in line with CPC 48 – Financial Instruments, item 5.5.17 (c).



Disposal group held for sale and profit
or loss from discontinued operations



The Company classifies
a disposal group as held for sale if its carrying value is recovered by the sale transaction. The asset or group of assets held
for sale are available for immediate sale at current market conditions, subject only to applicable customary terms for the sale
of such assets held for sale, resulting in a high sale probability.



For a sale to be highly
probable, management must be committed to the sale of the asset, and must initiate an active search to identify a buyer and complete
the sale. In addition, the asset held for sale shall also be effectively marketed for sale at a price that is reasonable in relation
to its current fair value and, the sale must be completed within one year of the classification date, unless events beyond the
control of the Company result in an extension of such period.



The asset held for
sale is measured at the lower of its carrying value and the fair value less cost to sell. In case the carrying value is higher
than the fair value, an impairment loss is recognized in statement of profit or loss for the year. Any reversal or gain will only
be recorded within the limit of the recognized loss. As of December 31, 2016, the Company recorded an impairment loss related to
Tenda’s discontinued operations in the amount of R$610.1 million. For the period ended May 4, 2017, the Company carried out
the remeasurement of the fair value of the disposal group held for sale, related to Tenda, considering the weighted average value
per share for exercising preemptive rights traded over the period between March 17, 2017 and March 31, 2017, as measurement basis,
leading to the price of R$12.12 per share, and, accordingly, valuing Tenda at R$754.5 million (R$539.0 million in 2016).



The assets and liabilities
of the group of discontinued assets are shown in single line items in our assets and liabilities. The profit or loss of discontinued
operations is presented as a single amount in the statement of profit or loss, contemplating the total post-tax profit or loss
of such operations less any impairment-related loss.



Launches and Contracted Sales



Launches



The table below presents
detailed information on our launches for the periods presented, including developments launched by our jointly-controlled entities
in partnership with third parties:



|                                | As
of and for the year ended December 31,
|------------------------------- | -----------------------------------------
|                                | 2019                                     
|Launches (in millions of reais) | —                                        
|Number of projects launched     | —                                        
|Number of units launched(1)     | —                                        
|Launched usable area (m2)(2)    | —                                        
|Percentage of Gafisa investment | —                                        




_________________

| | (1) | The units delivered in exchange for land pursuant to barter arrangements are not included.
| | --- | ------------------------------------------------------------------------------------------



| | (2) | One square meter is equal to approximately 10.76 square feet.
| | --- | -------------------------------------------------------------



| | (3) | The information as of and for the year ended December 31, 2017 and December 31, 2016 does not include
developments launched under the Tenda brand, the results of operations of which have been presented as discontinued operations
in our consolidated statements of operations as of December 31, 2016, and its spin-off was concluded in May 2017.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In 2019, we did not launch any residential
developments.



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In 2018, we launched under the Gafisa brand
6 residential developments with a total potential sales value of R$728.7 million and 100% of these developments were located in
the state of São Paulo.



In 2017, we launched under the Gafisa brand
5 residential developments with a total potential sales value of R$553.9 million and 80% of these developments were in the state
of São Paulo and 20%, 1 project, is located in Curitiba. During the year, approximately 10.3% of our launches in terms of
potential sales value was generated from launches outside the states of São Paulo and Rio de Janeiro.



Gafisa segment



In 2019, we did not launch any residential
developments.



Contracted sales for 2019 totaled R$ 195.7
million, a decrease of 75.9% from 2018. This amount is 100% related to sales of inventories. The lack of new project launches for
the year directly affected sales performance.



In 2018, Gafisa launches totaled R$728.7
million, a 31.5% increase compared with 2017.



Contracted sales for 2018 totaled R$813.2
million, up 12.9% from 2017. Sales of units launched over the year accounted for 49.4%, while sales of inventories accounted for
the remaining 50.6%.



In 2017, Gafisa launches totaled R$553.9
million, a 39.8% decrease compared with 2016.



Contracted sales for 2017 totaled R$720.2
million, down 11.1% from 2016. Sales of units launched over the year accounted for 38.5%, while sales of inventories accounted
for the remaining 61.5%.



In 2019, Gafisa delivered 2 ventures/stages
and 365 units, accounting for R$171.4 million in Potential Sales Volume.



The market value of Gafisa segment inventories
reached R$ 881.7 million at the end of 2019, compared to R$1.23 billion at the end of 2018 and R$1.5 billion at the end of 2017.



Contracted sales



The following table shows the composition
of our contracted sales by the type of development, according to units sold during the same year that they were launched and the
units sold in the years after they were launched, as well as their respective percentages in relation to total sales for the periods
presented:



|                                          |  | As of and for the year ended December 31,      
|----------------------------------------- |  | -----------------------------------------------
|                                          |  | 2019                                           
|Type of development                       |  | (in millions of reais, unless otherwise stated)
|Luxury middle-income buildings            |  |                                                
|Entry-level developments                  |  |                                                
|Commercial                                |  |                                                
|Total contracted sales(1)                 |  |                                                
|Sale of units launched in the year        |  |                                                
|Percentage of total contracted sales      |  |                                                
|Sale of units launched during prior years |  |                                                
|Percentage of total contracted sales      |  |                                                




_________________

| | (1) | Amount net of sales cancellation.
| | --- | ---------------------------------



| | (2) | The information as of and for the year ended December 31, 2017 do not include developments launched
under the Tenda brand, which was spun off on May 4, 2017.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------



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The following table
shows our and our main subsidiaries’ contracted sales for the periods presented:



|                       |  | As of and for the year ended December 31,      
|---------------------- |  | -----------------------------------------------
|                       |  | 2019                                           
|                       |  | (in millions of reais, unless otherwise stated)
|Contracted sales(1)    |  |                                                
|Gafisa                 |  |                                                
|Total contracted sales |  |                                                




_________________

| | (1) | Amount net of sales cancellation.
| | --- | ---------------------------------



In 2019, we did not
launch any developments.



In 2018, we sold 49%
of the launched units, which combined with the sales of units launched during prior periods, resulted in total contracted sales
of R$813.2 million, an increase of approximately 13% compared to 2017.



In 2017, we sold 50.0%
of the launched units, which combined with the sales of units launched during prior periods, resulted in total contracted sales
of R$720.2 million, a decrease of approximately 11% compared to 2016.



We provide a limited
amount of post-construction client financing. Our default rate was 15.1%, 14.3% and 14.1% as of December 31, 2019, 2018 and 2017,
respectively.



The table below shows
the penalties charged to customers that have defaulted and had their contracts cancelled for the periods presented:



|       | As
of and for the year ended December 31,
|------ | -----------------------------------------
|       | 2019                                     
|       | (in millions of reais)                   
|Gafisa | 3.2                                      



The following table
sets forth our contracted sales expected to be recognized, as well as the amount corresponding to the expected cost of units sold,
and the expected margin, all of them to be recognized in future periods, for the periods presented:



|                                              |  | As of and for the year ended December 31,      
|--------------------------------------------- |  | -----------------------------------------------
|                                              |  | 2019(4)                                        
|                                              |  | (in millions of reais, unless otherwise stated)
|Sales to be recognized                        |  |                                                
|Net sales to be recognized(1)                 |  |                                                
|Cost of units sold to be recognized(2)        |  |                                                
|Expected gross margin—yet to be recognized(3) |  |                                                
|Expected margin percentage                    |  |                                                




_________________

| | (1) | Excludes indirect PIS and COFINS taxes of 3.65%. This information includes ventures that are subject
to restriction due to a contractual clause, which defines the legal period of 180 days in which the Company can cancel a development.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | The estimated gross profit shown does not consider the tax effects or the present value adjustment,
and the costs of lands, financial charges and guarantees, which will be carried out to the extent they are realized.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Based on management’s estimates.
| | --- | --------------------------------



| | (4) | This amount relates to the Gafisa segment only, since Tenda was spun off on May 4, 2017.
| | --- | ----------------------------------------------------------------------------------------



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Gross Operating Revenues



Our revenues are derived
mainly from the development and sale of real estate and, to a much lesser extent, the rendering of construction services to third
parties on certain developments in the Gafisa segment where we retain an equity interest.



Real estate development and sales



Real estate development
revenues, including inflation adjustments and interest from credit sales, comprise revenues from the sales of units in the residential
buildings we develop, and to a lesser extent, the sales of lots and commercial buildings.



Construction services rendered



Our revenues generated
by real estate services consist substantially of amounts received in connection with construction management activities for third
parties, technical management and real estate management, related to developments in the Gafisa segment where we retain an equity
interest. As of December 31, 2019, 0.03% of our net operating revenues were derived from constructions services rendered.



Operating Costs



Our operating costs
consist of real estate development costs and, to a lesser extent, costs of services rendered.



Real estate development costs



Real estate development
costs consist of costs of land, construction (which includes costs for a broad variety of raw materials and labor), capitalized
interest (financial costs) from project specific financing, projects, foundations, structuring and furnishing, as well as costs
for outsourced labor. The items making up our costs, as a percentage of our total cost were as set forth for the periods presented.



|                   |  | For the year ended December 31,
|------------------ |  | -------------------------------
|                   |  | 2019                           
|Land               |  |                                
|Construction costs |  |                                
|Financial costs    |  |                                
|Development costs  |  |                                
|Total              |  |                                



One of our principal
real estate development costs is the cost of land. Over the last five years, land represented, on average, 27.90% of our total
cost of development. However, this is an extremely volatile component, varying according to characteristics of the land, the region
where the land is located, the type of development to be launched and market conditions. Land can be acquired for cash, through
the exchange of units once the building is constructed, through financial swaps (whereby a portion of sales is given to the owner
of land as a form of financing for the land), or through a combination of the three options.



No single raw material
alone represents a significant portion of our total costs of development, but over the last five fiscal years, raw materials represented,
on average, 35% of our total cost of development. The index that measures construction cost variation, the INCC, increased by 4.2%,
3.8% and 4.3% in 2019, 2018 and 2017, respectively. Although some of the principal raw materials, such as steel, have experienced
significant price increases well above the level of inflation over the last four years, we have reduced our raw materials costs
by developing and using new construction techniques and materials.



Over the last five
years, we have incurred most of our construction costs from the 1st to the 18th month of construction of a development, as shown
in the table below:



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|Period of construction | Percentage
of costs incurred(1)
|---------------------- | -------------------------------
|1st to 6th month       | 10%                            
|7th to 12th month      | 22%                            
|13th to 18th month     | 23%                            
|19th to 24th month     | 18%                            
|25th to 30th month     | 17%                            




_________________

| | (1) | Including cost of land.
| | --- | -----------------------



Real estate services



Our costs of real
estate services consist of direct and indirect labor fees and outsourced services.



Operating Expenses



Our operating expenses
include selling, general and administrative expenses, depreciation and amortization expenses and revenues and revaluation of investment
in affiliates.



Selling expenses



Selling expenses include
advertising, promotion, brokerage fees and similar expenses.



General and administrative expenses



General and administrative
expenses principally include the following:



| | · | employee compensation and related expenses;
| | - | -------------------------------------------



| | · | fees for outsourced services, such as legal, auditing, consulting and others;
| | - | -----------------------------------------------------------------------------



| | · | management fees and expenses;
| | - | -----------------------------



| | · | stock option plan expenses;
| | - | ---------------------------



| | · | overhead corporate expenses;
| | - | ----------------------------



| | · | expenses related to legal claims and commitments; and
| | - | -----------------------------------------------------



| | · | legal expenses related to public notaries and commercial registers, among others.
| | - | ---------------------------------------------------------------------------------



Depreciation and amortization



Depreciation expenses
consist of depreciation of our property and equipment.



Financial Income and Expenses



Financial income includes
income from financial investments. Interest revenues are recognized on effective interest method. Financial expenses generally
consist of interest payable on loans, financings and debentures and are also recognized on effective interest method.



Taxes on Income



In general, taxes
on income in Brazil consist of federal income tax (25%) and social contribution on net profits (9%), for a composite statutory
tax rate of 34%. We calculate income tax and social contribution in accordance with the “taxable profit” regime. Our
subsidiaries and jointly-controlled entities, however, with annual billings lower than a specified threshold, may calculate their
respective income and social contribution taxes through either this “taxable profit” regime or through the “presumed
profit” regime, depending on our strategic tax planning. For the companies that opt for the “presumed profit”
regime, the income tax basis is calculated as 8% of gross revenues and the social



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contribution basis is calculated as 12% of gross revenues, to
which income tax and social contribution rates of 25% and 9%, respectively, are applied.



As permitted by tax
legislation, the development of certain ventures are subject to the “afetação” regime, whereby the land
and its features where real estate will be developed, as well as other binding assets and rights, are separated from the assets
of the developer and comprise the “patrimônio de afetação” (Detached Assets) of the corresponding
development and whose real estate units will be delivered to the buyers. In addition, certain subsidiaries made the irrevocable
option for the Special Taxation Regime (RET), adopting the “patrimônio de afetação”, according
to which the income tax, social contribution on net profits, PIS and COFINS are calculated at 4% monthly on gross revenues.



Net loss from discontinued operations



The net income (loss)
from discontinued operations represents the results of operations of Tenda for the period ended May 4, 2017, as well as the results
of operations for this entity for the comparative periods. This line item also contains the impairment (loss) reversal related
to the measurement of disposal group held for sale at the lower of its carrying value and the fair value less cost to sell.



The income (loss)
of discontinued operations is presented as a single amount in statement of operations, which includes the total after-tax-income
of these operations, less any impairment-related loss.



Results of Operations



The following discussion
of our results of operations is based on our consolidated financial statements prepared in accordance with Brazilian GAAP. References
to increases or decreases in any given period relate to the corresponding preceding period, unless otherwise indicated.



As explained in Note
8.2 to our consolidated financial statements for the year ended December 31, 2019, the results of operations of Tenda have been
presented as discontinued operations under Brazilian GAAP in the Company’s 2017 consolidated statements of operations.



Results of Operations for the Years Ended
December 31, 2019 and 2018



Net operating revenue



Net operating revenue
for the year ended December 31, 2019, recognized by the percentage of completion revenue recognition method, was R$400.4 million,
a decrease of 58% from R$960.9 million for the year ended December 31, 2018, mainly due to the lack of new launches during the
year.



The gross revenue
generated from the sale of property and barter transactions, net of the cancellation provision (reversal) totaled R$437.3 million
for the year ended December 31, 2019, a decrease of R$610.9 million or 58.3% compared with the same period in 2018 of R$1.05 billion.
The tax deductions from gross revenue reached R$36.8 million in 2019 from R$87.3 million in 2018, representing a decrease of 57.8%,
which was mainly impacted by the lack of new launches during the year.



During 2019, inflation
as measured by the INCC, the main Brazilian indicator for civil construction costs, was 4,2%. This resulted in an increase in our
construction costs and consequently, the prices of our units for some projects, notably those launched in 2018 and 2019 and expected
to be delivered in 2020. This increase was offset by (i) monthly increases in the sale prices of our inventory units, and (ii)
monthly upward adjustments of outstanding balances on our units sold, in order to reflect inflationary increases.



Operating costs



Operating costs in
2019 totaled R$282.6 million, a 66.6% decrease compared to R$846.2 million in 2018, as a result of the lack of new launches and
a reversal of impairment adjustments in our landbank and inventory in the amount of R$27.1 million, compared to an expense of R$63.1
million in 2018.



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Gross profit



Gross profit in 2019
totaled R$117.7 million, representing an increase of approximately 3% from gross profit of R$114.7 million in 2018. This increase
reflects the more efficient measures taken by the Company’s new management during the period, despite the decrease in revenues
during the same period.



In 2019, the gross
margin generated from our activities increased to 29.4% compared to 11.9% in 2018.



Selling expenses



Selling expenses in
2019 totaled R$14.8 million, representing a decrease of 82.4% compared to R$84.4 million in 2018.



General and administrative expenses, not including
depreciation and amortization expenses



General and administrative
expenses were R$54.1 million in 2019, a 5.2% decrease from the R$57.1 million recorded in 2018. However, recurring general and
administrative expenses decreased from R$74.4 million in 2018 to R$50.8 million in 2019, with savings of R$23.6 million, or 31.7%
Overall, these savings are attributable to implementation of our expenses reduction plan over the course of the year, which adjusted
our expenses structure in line with our new business model.



Depreciation and amortization



Depreciation and amortization
in 2019 was R$14.1 million, a decrease of 33.4% when compared to the R$21.3 million recorded in 2018. This decrease was mainly
due to the lack of new launches in 2019 and lower investments in sales stands.



Other income and
expenses, net



Net other expenses
totaled R$31.6 million in 2019, compared to R$298.9 million in 2018. This decrease is mainly due to (i) the result of the divestment
in Alphaville Urbanismo in the amount of an expense of R$78.0 million, (ii) an income of R$66.4 million related to the outcome
of the arbitration decision related to venture construction contracts with partners and (iii) a lawsuits related expense of R$20.6
million. In 2018, the amount of R$298,9 million was related to loss on realization of investment stated at fair value in the amount
of R$112.8 million and R$172.4 million related to lawsuits expenses.



Financial income and expenses, net



Net financial expenses
totaled R$59.6 million in 2019, compared to net financial expenses of R$80.5 million in 2018. The decrease is mainly due to a decrease
in interest expenses as a result of a decrease in our levels of indebtedness during the period.



Taxes on income



Income tax and social
contribution had a positive impact of R$37.2 million in 2019 compared to R$25.1 million in 2018. This increase was mainly due to
a net tax credit of R$49.2 million from the write down of goodwill related to the divestment in AUSA and the gain from the acquisition
of GDU Loteamentos in the business combination operation. Accordingly, the provision for income tax and social contribution had
a positive impact of R$35.3 million in 2019, compared to R$25.1 million in 2018.



Net income attributable to non-controlling
interest



Net income attributable
to non-controlling interests decreased from a net loss of R$1.8 million in 2018 to a net loss of R$0.4 million in 2019.



Net income (loss) attributable to owners of
Gafisa



Net loss attributable
to owners of Gafisa was of R$26.0 million in 2019, compared to a net loss of R$419.5 million in 2018. This variation resulted from
the Company ́s comprehensive restructuring process, reducing expenses, renegotiating material indebtedness, a reduction in
accounting provisions and the reestablishment of healthy margins.



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If we exclude the effect of the divestment of Alphaville Urbanismo
S.A., we would have had a net profit of R$15.1 million.



Results of Operations for the Years Ended
December 31, 2018 and 2017



Net operating revenue



Net operating revenue
for the year ended December 31, 2018, recognized by the percentage of completion revenue recognition method, was R$960.9 million,
an increase of 22.2% from R$786.2 million for the year ended December 31, 2017, mainly due to (i) the increase in the recognition
of revenue from construction projects and their improved performance, and (ii) the two projects launched in 2018, Upside Pinheiros
and Moov Belém, which are almost 100% sold as of December 31, 2018.



The gross revenue
generated from the sale of property and barter transactions, net of the cancellation provision (reversal) totaled R$1.05 billion
for the year ended December 31, 2018, an increase of R$213.1 million or 26% compared with the same period in 2017 of R$835.1 million.
The tax deductions from gross revenue reached R$87.3 million in 2018 from R$48.9 million in 2017, representing an increase of 78%,
which was mainly impacted by higher launch volumes.



During 2018, inflation
as measured by the INCC, the main Brazilian indicator for civil construction costs, was 3.84%. This resulted in an increase in
our construction costs and consequently, the prices of our units for some projects, notably those launched in 2017 and 2018 and
expected to be delivered in 2019. This increase was offset by (i) monthly increases in the sale prices of our inventory units,
and (ii) monthly upward adjustments of outstanding balances on our units sold, in order to reflect inflationary increases.



Operating costs



Operating costs in
2018 totaled R$846.2 million, a 6.7% decrease compared to R$906.5 million in 2017, as a result of a lower impact of impairment
adjustments in our landbank and inventory in the amount of R$63.1 million, compared to R$147.3 million in 2017



Gross profit



Gross profit in 2018
totaled R$114.7 million, representing an increase from gross loss of R$120.3 million in 2017. This increase was mainly due to (i)
higher volume of launches and sales, (ii) better macroeconomic conditions in Brazil, (iii) a decrease in dissolutions (cancellations
of sales), and (iv) the effects of the impairment adjustments in our landbank and inventory in the amount of R$63.1 million.



In 2018, the gross
margin generated from our activities increased to 11.9% as compared to negative 34.5% in 2017.



Selling expenses



Selling expenses in
2018 totaled R$84.4 million, representing a decrease of 3.6% as compared to R$87.6 million in 2017, mainly due to a decrease in
(i) product marketing and selling expenses, as a result of our corporate restructuring; and (ii) brokerage and sales commission
expenses, as a result of lower sales volume during the period. Selling expenses in 2018 represented 8.8% of our net operating revenue
compared to 14.4% in 2017.



General and administrative expenses, not including
depreciation and amortization expenses



General and administrative
expenses were R$57.1 million in 2018, a 38% decrease from the R$92.7 million recorded in 2017. This decrease was mainly due to
(i) the net reversal of bonus provisions for 2017 and 2018, amounting to R$14.8 million in 2018; (ii) reduced services expenses;
and (iii) lower salaries and charges expenses.



Depreciation and amortization



Depreciation and amortization
in 2018, was R$21.3 million, a decrease of R$10.7 million when compared to the R$32.0 million recorded in 2017. Additionally, in
2017 the amount of R$25.5 million was recognized as an amortization related to the write off of the goodwill on the AUSA acquisition.



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Financial income and expenses, net



Net financial expenses
totaled R$80.5 million in 2018, compared to net financial expenses of R$107.3 million in 2017. The decrease is mainly due to a
decrease in interest expenses as a result of a decrease in our levels of indebtedness during the period.



Taxes on income



Income tax and social
contribution had a positive impact of R$25.1 million in 2018 compared to R$25.9 million in 2017, reflecting a tax credit of R$26
million from the impairment of goodwill that resulted from the remeasurement of our remaining 30% interest in AUSA in 2018. Accordingly,
the provision for income tax and social contribution had a positive impact of R$21.7 million in 2018, compared to R$23.1 million
in 2017.



Net income attributable to non-controlling
interest



Net income attributable
to non-controlling interests increased from a loss of R$0.3 million in 2017 to a net loss of R$1.8 million in 2018.



Net income (loss) attributable to owners of
Gafisa



Net loss attributable
to owners of Gafisa was of R$419.5 million in 2018, compared to a net loss of R$760.2 million in 2017. This variation was mainly
due to (i) higher launches and sales, (ii) lower cancellations and (iii) reduced expenses.



Business Segment



See “Item 4.
Information on the Company—A. History and Development of the Company—Historical Background and Recent Developments.”



Following the consummation
of the Tenda spin-off on May 4, 2017 and the completion of the discontinuation of Tenda’s operations (see Note 8.2 to our
consolidated financial statements), the Company operates one business segment. Accordingly, our management, who is responsible
for monitoring our business progress, uses data derived from our consolidated financial statements to make decisions. Therefore,
in line with CPC 22 – Operating Segments, the Company understands that there is no reportable business segment to be disclosed
in the years ended December 31, 2019, 2018 and 2017.



B.       Liquidity and
Capital Resources



Our transactions are
financed mainly through the contracting of real estate financing and securitization of receivables. When necessary and in accordance
with market demands, we carry out long-term financing for the sale of our developments. In order to turn over our capital and accelerate
its return, we try to transfer to banks and sell to the market the receivables portfolio of our units.



In 2019, we did not
carry out any receivables sales with recourse.



In 2018, we did not
carry out any receivables sales with recourse.



In 2017, we carried
out the following receivables sales with recourse:



On March 28, 2017,
Gafisa and its subsidiaries entered into a CCI transaction related to a portfolio comprising selected residential real estate receivables
from Gafisa and its subsidiaries. The assigned portfolio of receivables amounts to R$30.2 million in exchange for cash at the transfer
date, discounted to present value, for R$23.0 million.



Construction financing
lines of credit are available and we have fulfilled substantially all of our construction financing needs for 2019, 2018 and 2017
at consolidated rates similar to the CDI rate. In order to mitigate the effects of the 2008 global credit crisis, the Brazilian
government has announced additional lines of credit to assist the construction industry and its customers, including R$6 billion
from the FGTS (a Government Severance Indemnity Fund for Employees). In 2009, we approved the issue of two series of debentures
for Gafisa and Tenda in the total amount of R$1.2 billion. In addition, local financial institutions are financing up to 80% of
construction costs, through



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the Brazilian Saving and Loan System (Sistema Brasileiro
de Poupança e Empréstimo — SBPE) indexed to TR (Taxa Referencial) and a fixed rate spread.



During 2019, our customers’
ability to obtain bank mortgage loans continued to improve, with interest rates in the range of 7.99% to 9.75%+TR, depending on
family income and credit score.



The following table
shows the balance of our receivables from clients for the development and sale of properties for the periods presented:



|                                                                                                |  | As of December 31,    
|----------------------------------------------------------------------------------------------- |  | ----------------------
|                                                                                                |  | 2019                  
|                                                                                                |  | (in millions of reais)
|Real estate development receivables:                                                            |  |                       
|Current                                                                                         |  |                       
|Long-term                                                                                       |  |                       
|Total                                                                                           |  |                       
|Receivables to be recognized on our balance sheet according to percentage of completion method: |  |                       
|Current                                                                                         |  |                       
|Long-term                                                                                       |  |                       
|Total                                                                                           |  |                       
|Total receivables from clients – portion recognized plus portion not recognized                 |  |                       

_________________

| | (1) | This amount relates to the Gafisa segment only, since Tenda’s results of operations have
been presented as discontinued operations in our consolidated financial statements as of December 31, 2017, and since the Tenda
business spin-off was completed on May 4, 2017.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The total balance
of receivables on the balance sheet has the following maturity profile:



|             |  | As of December 31, 2019
|------------ |  | -----------------------
|             |  | (in millions reais)    
|Maturity     |  |                        
|Overdue      |  |                        
|2020         |  |                        
|2021         |  |                        
|2022         |  |                        
|2023         |  |                        
|2024 onwards |  |                        
|Total        |  |                        



Loans made to our
clients are generally adjusted on a monthly basis as follows: (1) during construction, by the INCC in São Paulo, Rio de
Janeiro and other Brazilian cities; and (2) after delivery set forth in the contract, by the IGP-M plus 12% per annum in all markets.



We limit our exposure
to credit risk by selling to a broad customer base and by continuously analyzing the credit of our clients. As of March 31, 2020,
our clients’ default level was 15.3% of our accounts receivable for Gafisa. We annually review the assumptions used in establishing
an allowance for expected credit losses and cancelled contracts, in view of the revision of historical data of its current operation
and improvement of measurement estimates. The Company records an allowance for expected credit losses with a factor applied over
the accounts receivables not impaired based on credit loss experiences for each real estate development and cancelled contracts
for customers when a cash inflow risk is identified. Contracts are monitored to identify the moment when these conditions are mitigated.
This allowance is calculated based on the percentage of the construction work completion, a methodology adopted for recognizing
income for the year. The allowance for expected credit losses and cancelled contracts totaled R$53.8 million as of December 31,
2019 and is considered sufficient by our management to cover incurred losses on the realization of accounts receivable.



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Cash Flows



Operating activities



In 2019, net cash
generated from operating activities totaled R$44.0 million, compared to R$31.5 million in 2018. In 2018, net cash generated from
operating activities totaled R$31.5 million, compared to R$206.9 million in 2017. This decrease is mainly composed of (i) a R$95.7
million increase in receivables from clients and a R$339.6 million decrease in inventory; (ii) a R$14.5 million decrease in related
party transactions; (iii) expenses in the net amount of R$227.2 million which did not affect our cash and cash equivalents, of
which R$38.1 million relates to impairment adjustments of AUSA goodwill and impairment adjustments in our landbank and inventory,
R$15.5 million of equity losses during the period, and R$172.4 million of which relates to provisions for contingencies; and (v)
other less relevant increases and decreases in other operational categories.



Investing activities



Net cash used in investing
activities, including the acquisition of assets, equipment and new investments was R$300.6 million in 2019, compared to R$3.1 million
in 2018. This variation is mainly due to the increase in short term investments in the amount of R$387.3 million, related to the
capital increases in 2019.



Net cash used in investing
activities, including the acquisition of assets, equipment and new investments was R$3.1 million in 2018, compared to cash generated
from investing activities of R$445.4 million in 2017.



Financing activities



Net cash generated
from financing activities in 2019 totaled R$236.7 million, compared to the net cash used from financing activities in 2018 of R$24.6
million. The higher cash generated in 2019 compared to 2018 was mainly attributable to (i) the R$404.9 million capital increases
in 2019 (ii) a reduction on increase and amortization of loans and financing.



Net cash used from
financing activities in 2018 totaled R$24.6 million, compared to the net cash used from financing activities in 2017 of R$528.6
million. The lower cash used in 2018 compared to 2017 was mainly attributable to (i) the R$250.8 million capital increase concluded
in February and (ii) a reduction on amortization of loans and financing. There was no net cash used from financing activities related
to the disposal group held for sale in 2018 compared to R$24.1 million in 2017.



Pledged mortgage receivables and short-term
investments



As of December 31,
2019, substantially all of our mortgage receivables totaling R$132.3 million are pledged. In addition, R$33.6 million of our short-term
investments and collaterals are restricted as they have been pledged.



Capital Expenditures



In 2019, we invested
R$3.6 million in machinery and equipment, information technology equipment, software, project



In 2018, we invested
R$12.5 million in machinery and equipment, information technology equipment, software, project planning and information technology
projects. Our main investments during the period were related to sales stands, which amounted to R$9.7 million.



In 2017, we invested
R$20.5 million in machinery and equipment, information technology equipment, software, project planning and information technology
projects. Our main investments during the period were related to sales stands and software acquisitions, which amounted to R$7.3
million and R$6.4 million, respectively.



Our capital expenditures
are all made in Brazil and are usually funded by local debt capital markets. We currently do not have any significant capital expenditures
in progress.



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Indebtedness



When we consider appropriate,
we have incurred indebtedness within SFH, which offers lower interest rates than the private market. When our customers obtain
a mortgage, we use the proceeds to redeem our SFH indebtedness. We intend to continue our strategy of maintaining low levels of
debt comprised mainly of transactions within SFH or long-term transactions.



As of December 31,
2019, we had outstanding debt in the total amount of R$730.7 million, a decrease of 17.8% as compared to December 31, 2018. As
of December 31, 2019, our indebtedness principally consisted of: (1) debentures totaling R$197.5 million, (2) working capital loans
totaling R$55.0 million, and (3) other loans (mainly SFH) totaling R$478.2 million.



As of December 31,
2018, we had outstanding debt in the total amount of R$889.4 million, a decrease of 19.5% as compared to December 31, 2017. As
of December 31, 2018, our indebtedness principally consisted of: (1) debentures totaling R$265.7 million, (2) working capital loans
totaling R$95.6 million, and (3) other loans (mainly SFH) totaling R$528.1 million.



|                                |  | Maturity as of December 31, 2019
|------------------------------- |  | --------------------------------
|                                |  | Total                           
|                                |  | (in millions of reais)          
|Debentures (Projects)           |  |                                 
|Housing Finance System (SFH)    |  |                                 
|Real State Finance System (SFI) |  |                                 
|Bank credit notes (Projects)    |  |                                 
|Project debt total              |  |                                 
|Debentures (Working Capital)    |  |                                 
|Other Working Capital           |  |                                 
|Working Capital debt total      |  |                                 
|Total                           |  |                                 



On March 28, 2017
we issued a CCB in a total amount of R$47 million due in 2021. The CCB is guaranteed by real estate receivables.



On November 30, 2017
we issued a CCB in the amount of R$40 million due in 2021. The CCB is guaranteed by real estate receivables.



On September, 2018,
we issued a CCB in the amount of R$40 million due in 2021. The CCB is guaranteed by real estate receivables.



In April 2019, we
issued a CCB in the amount of R$10 million due in 2022. The CCB is guaranteed by real estate receivables.



The actual ratios
and minimum and maximum amounts stipulated by restrictive covenants related to these CCBs at December 31, 2019 are as follows:



|                                                                                                                                                                                                     | At
December 31, 2019
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------
|Loans and Financing                                                                                                                                                                                  |                     
|Total accounts receivable (2) plus inventory required to be below zero 
or 2.0 times over venture debt (3)                                                                                           | 4.52 times          
|Total account receivable plus inventory of completed units required to 
be below zero or 2.0 times over net debt (1) less venture debt (3)                                                           | (9.04) times        
|Total debt, less venture debt, less cash and cash equivalents and short-term 
investments, cannot exceed 75% of equity plus non-controlling interests                                                | 16.03%              
|Total receivable (2) plus unappropriated income plus total inventory of 
completed units required to be 1.5 time over the net debt plus payable 
for purchase of properties plus unappropriated cost | 3.79 times          



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_________________

| | (1) | Net debt refers to total debt less cash and cash equivalents.
| | --- | -------------------------------------------------------------



| | (2) | Total accounts receivables, whenever mentioned, refers to the amount reflected in the Balance Sheet
plus the amount to be recognized according to the PoC and not yet shown in the Balance Sheet.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Venture debt and general guarantee debt refer to SFH debts, defined as the sum of all disbursed
borrowing contracts which funds were provided by SFH, as well as the debt related to the seventh placement.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Debenture program



In November 2017,
we issued two series of non-convertible debentures totaling R$120 million on a private placement basis. The first series of debentures
totaling R$90 million is secured by (i) first-priority mortgages over select real estate ventures of the Company and (ii) fiduciary
assignments of real estate receivables generated by such select real estate ventures. In November 2017, the debenture holders assigned
their fiduciary rights in the real estate receivables to a real estate securitization special purpose entity, which issued CRIs
backed by such real estate receivables. The second series of debentures totaling R$30 million, and guaranteed by a fiduciary guarantee,
has not been placed with investors as of the date of this annual report. The proceeds of the debentures will be used to fund the
development of the aforementioned real estate ventures only.



In May 2018, we issued
non-convertible debentures, with a general guarantee, as a single series in the total amount of R$76 million, with final maturity
in July 2020. The proceeds from the placement will be used in the development of select real estate ventures and their guarantees
are represented by the conditional sale of real estate receivables and the purchase of completion bond related to a specific venture.
The face value of the private placement will accrue interest equal to the cumulative variation of Interbank Deposit (DI) plus 3.75%
per annum.



In July 2018, we issued
non-convertible debentures, with a general guarantee, as a single series in the total amount of R$90 million, with a final maturity
in June 2022. The proceeds from the placement will be used in the development of select real estate ventures and their guarantees
are represented by the conditional sale of real estate receivables. The face value of the private placement will accrue interest
equal to the cumulative variation of Interbank Deposit (DI) plus 3% per annum.



In April 2019, we
issued non-convertible debentures, with a general guarantee, as a single series in the total amount of R$40 million, with a final
maturity in October 2020. The proceeds from the placement will be used in the development of the “Gafisa Square Ipiranga”
and “Moov Espaço Cerâmica” real estate ventures, and their guarantees are represented by the fiduciary
assignment of real estate receivables and conditional sale of units. The face value of the private placement will accrue interest
equal to the cumulative variation of Interbank Deposit (DI) plus 5% per annum.



We have various covenants
relating to our debentures issuances described above. These mainly consist of (i) cross default provisions, whereby outstanding
indebtedness will become immediately due and payable in the event that the Company or its subsidiaries do not comply with their
obligations under any other credit facility for a value in excess of the amounts set forth therein; (ii) restrictions on transfer
of control and merger and acquisition transactions; (iii) limitations on our ability to incur debt; (iv) limitations or creating
liens on assets; (v) limitations on the distribution of dividends if we are under default and (vi) the following ratios and limits
to be calculated on a quarterly basis. The table below sets forth these ratios and limits as amended.



The actual ratios
and minimum and maximum amounts stipulated by these restrictive covenants at December 31, 2019 are as follows:



|                                                                                                                                                            | At
December 31, 2019
|----------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------
|Total accounts receivable (2) plus inventory required to be below zero or 2.0 times over net debt (4) less venture debt (3)                                 | (14.62) times       
|Total debt less venture debt (3), less cash and cash equivalents and short-term investments (1), cannot exceed 75% of equity plus non-controlling interests | -15.81%             




_________________

| | (1) | Cash and cash equivalents and short-term investments refer to cash and cash equivalents and marketable
securities.
| | --- | ------------------------------------------------------------------------------------------------------------------



| | (2) | Total accounts receivables, whenever mentioned, refers to the amount reflected in the Balance Sheet
plus the amount to be recognized according to the PoC and not yet shown in the Balance Sheet.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | (3) | Venture debt and general guarantee debt refer to SFH debts, defined as the sum of all disbursed
borrowing contracts which funds were provided by SFH, as well as the debt related to the seventh placement.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | Net debt refers to total debt less cash and cash equivalents
| | --- | ------------------------------------------------------------



We expect to comply
with the covenants in the agreements governing our outstanding indebtedness which may limit our long-term growth prospects by hindering
our ability to incur future indebtedness or grow through acquisitions. See “Item 3. Key Information—D. Risk Factors—Our
level of indebtedness could have an adverse effect on our financial health, diminish our ability to raise additional capital to
fund our operations and limit our ability to react to changes in the economy or the real estate industry.”



As of December 31,
2019, the Company and its subsidiaries were in compliance with the contractual covenants provided for in our debentures and our
credit instruments.



Financing through the Housing Finance System
(SFH)



Most of our financing
is incurred directly or through our subsidiaries or jointly-controlled entities from the principal banks that operate within SFH.
As of December 31, 2019, the interest rates on these loans generally varied between 10.0% and 14.2% per annum, plus TR, and the
loans generally mature through March 2020 and July 2021. This financing is secured by mortgages on property and by security interests
on the receivables from clients. As of December 31, 2019, we had 13 loan agreements in effect, with a balance of R$456.2 million.
At the same date we also had R$4.5 million in aggregate principal amount of financing agreements with SFH, the funds of which will
be released through the date of completion as construction of the corresponding development’s progress.



On March 26, 2020,
we completed the renegotiation of our financial liabilities with Banco do Brasil S.A. in the total amount of R$138.4 million. As
part of the renegotiation, the final maturity of such financial liabilities was extended to June 2025 and we reduced the cost of
servicing them, giving us the time we need to sell the units in inventory tied to this debt. The completion of this renegotiation
strengthens our capital structure and our credit relationship with Banco do Brasil and the financial markets in general.



Securitization deals and Fund — FIDC



On June 27, 2011,
the Company and its subsidiaries entered into a CCI transaction relating to a portfolio comprising select residential real estate
receivables from Gafisa and its subsidiaries. The assigned portfolio of receivables amounts to R$203.9 million (R$185.2 million
– Gafisa’s interest) in exchange for cash, at the transfer date, discounted to present value, for R$171.7 million (R$155.9
million – Gafisa’s interest), recorded under “Obligations assumed on assignment of receivables”.



On December 22, 2011,
Gafisa and its subsidiaries entered into a CCI transaction relating to a portfolio comprising select residential real estate receivables
from Gafisa and its subsidiaries. The assigned portfolio of receivables amounts to R$72.4 million in exchange for cash at the transfer
date, discounted to present value, by R$60.1 million, classified as “Obligations with assignment of receivables.”



On July 6, 2012, Gafisa
and its subsidiaries entered into a CCI transaction relating to a portfolio comprising select residential real estate receivables
from Gafisa and its subsidiaries. The assigned portfolio of receivables amounts to R$18.2 million in exchange for cash at the transfer
date, discounted to present value, for R$11.5 million.



On December 27, 2012,
Gafisa and its subsidiaries enter into a CCI transaction relating to a portfolio comprising select residential real estate receivables
from Gafisa and its subsidiaries. The assigned portfolio of receivables amounts to R$72.0 million in exchange for cash at the transfer
date, discounted to present value, by R$61.6 million.



On November 29, 2013,
a selected portfolio of sales receivables from Gafisa and its subsidiaries was transferred to investors. The assigned portfolio
amounts to R$24.2 million in exchange of cash at the transfer date, discounted to present value, by R$19.6 million.



On November 25, 2014,
a selected portfolio of sales receivables from Gafisa and its subsidiaries was transferred to investors. The assigned portfolio
amounts to R$15.2 million in exchange of cash at the transfer date, discounted to present value, by R$12.4 million.



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On December 3, 2015,
a selected portfolio of sales receivables from Gafisa and its subsidiaries was transferred to investors. The assigned portfolio
amounts to R$32.2 million in exchange of cash at the transfer date, discounted to present value, by R$24.5 million.



On March 4, 2016,
a selected portfolio of sales receivables from Gafisa and its subsidiaries was transferred to investors. The assigned portfolio
amounts to R$36.4 million in exchange for cash at the transfer date, discounted to present value, for R$27.3 million.



On May 09, 2016, a
selected portfolio of sales receivables from Gafisa and its subsidiaries was transferred to investors. The assigned portfolio amounts
to R$23.0 million in exchange for cash at the transfer date, discounted to present value, for R$17.5 million.



On August 16, 2016,
a selected portfolio of sales receivables from Gafisa and its subsidiaries was transferred to investors. The assigned portfolio
amounts to R$21.4 million in exchange for cash at the transfer date, discounted to present value, for R$14.9 million.



On December 21, 2016,
a selected portfolio of sales receivables from Gafisa and its subsidiaries was transferred to investors. The assigned portfolio
amounts to R$27.0 million in exchange for cash at the transfer date, discounted to present value, for R$19.5 million.



On March 28, 2017,
a selected portfolio of sales receivables from Gafisa and its subsidiaries was transferred to investors. The assigned portfolio
amounts to R$30.2 million in exchange for cash at the transfer date, discounted to present value, for R$23.0 million.



In 2019 and 2018,
we did not perform any transfer of sales receivables from Gafisa and its subsidiaries to investors.



Pursuant to Article
125 of the Brazilian Civil Code, the CCI-Investor carries general guarantees represented by statutory liens on real estate units,
effective as soon as the conditional restrictions included in the registration are lifted, as reflected in the real estate deed
on (i) the assignment of receivables from the assignors to SPEs, as provided for in Article 167, item II, (21) of Law No. 6,015,
of December 31, 1973; and (ii) the issue of CCI-Investor by SPEs, as provided for in Article 18, paragraph 5 of Law No. 10,931/04.



We will be compensated
for, among other things, the reconciliation of the receipt of receivables, guarantee the CCIs, and the collection of past due receivables.
The transaction structure provides for the substitution of us as collection agent in the event of non-fulfillment of the responsibilities
described in the collection service contract.



Working Capital



We believe that our
current working capital is sufficient for our present requirements and that our sources of funds from financing activities are
sufficient to meet the financing of our activities and cover our need for funds for at least the next twelve months. Additionally,
as a result of the Tenda spin-off which was consummated on May 4, 2017, we received cash totaling R$219.5 million in connection
with the exercise by the Gafisa shareholders of their preemptive rights to acquire up to 50% of the share capital of Tenda, as
well as cash totaling R$105.2 million in connection with the Tenda share capital reduction, both of which have contributed to solidifying
the liquidity and capital structure of the Company. As a result of the gradual recovery of the Brazilian economy and as part of
the Company’s strategy to reinforce its liquidity, strengthen its capital structure and solidify the Company’s strategic
and operational positioning for a new cycle of the real estate market, we issued and sold 16,717,752 new common shares of the Company
for a total amount of R$250.8 million, all in registered, book-entry form, and with no par value, at a price per share equal to
R$15.00, of which R$0.01 per share was allocated to capital, and R$14.99 per share was allocated to capital reserves.



In 2019, our Board
of Directors ratified the following capital increases:



| | · | On June 24, 2019: subscription and payment of 26,273,962 new common shares, of which 12,170,035
shares were subscribed at the price of R$5.12 and 14,103,927 shares were subscribed at the price of R$4.96, totaling R$62.3 million
and R$69.9 million, respectively.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | · | On October 23, 2019: subscription and payment of 48,968,124 new common shares, of which 45,554,148
shares were subscribed at the price of R$5.58 and 3,413,976 shares were subscribed at the price of R$5.42, totaling R$254.2 million
and R$18.5 million, respectively.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



U.S. GAAP Reconciliation



We prepare our consolidated
financial statements in accordance with Brazilian GAAP, which differs in significant respects from U.S. GAAP. Our net income attributable
to owners of Gafisa, in accordance with Brazilian GAAP, was a net loss of R$26.0 million, R$419.5 million and R$760.2 million in
2019, 2018 and 2017, respectively. Under U.S. GAAP, our net losses were R$60.7 million, R$452.6 million and R$621.8 million in
2019, 2018 and 2017, respectively.



Our equity, in accordance
with Brazilian GAAP, was R$882.8 million, R$493.2 million and R$715.1 million as of December 31, 2019, 2018 and 2017, respectively.
Under U.S. GAAP, we recorded total equity of R$595.4 million, R$240.4 million and R$495.4 million as of December 31, 2019, 2018
and 2017, respectively.



The following items
generated the most significant differences between Brazilian GAAP and U.S. GAAP in determining net income and shareholders’
equity:



| | · | revenue recognition; and
| | - | ------------------------



| | · | effects of deferred taxes on the difference above.
| | - | --------------------------------------------------



For a discussion of
the principal differences between Brazilian GAAP and U.S. GAAP as they relate to our financial statements and a reconciliation
of net income and equity see Note 32 to our consolidated financial statements included elsewhere in this annual report and “Item
3.A. Key Information—Selected Financial Data.”



New Accounting Pronouncements, Interpretations and Guidance



Pronouncements (new or revised) and interpretation
applicable to years beginning January 1, 2019



The Company adopted
all of the pronouncements (new or revised) and interpretations issued by the CPC applicable to its operations which were effective
as of December 31, 2019.



The following standards
are in effect beginning on January 1, 2019:



On January 13, 2016,
the IASB published IFRS 16 – Leases (“IFRS 16”), which establishes principles that will apply to the recognition,
measurement, presentation and disclosure of leases in the financial statements of lessors and lessees. IFRS 16 will require lessors
to recognize a lease liability reflecting future lease payments and a “right-of-use assets” for all lease contracts,
except certain short-term leases and leases for low-value assets. The principles that apply to the recognition, measurement, presentation
and disclosure of leases in the financial statements of lessees will remain substantially the same. IFRS 16 will be effective for
annual periods beginning on or after January 1, 2019, and earlier application of IFRS 16 will be permitted for IFRS purposes. In
Brazil, earlier application of IFRS 16 will be subject to the implementation of IFRS 16 in Brazil and the prior approval of the
CPC and the CVM. The standard can be applied either on the cumulative catch-up approach or the full retrospective method, and is
currently being evaluated by the Company.



Based on available
information, the right-of-use assets and lease liabilities was recognized in the amount of R$4.5 million as of January 1, 2019.



The ICPC 22 –
Uncertainty Over Income Tax Treatments deals with the recognition of income taxes in the cases in which the tax treatments involve
uncertainty that affects the application of IAS 12 (CPC 32) and does not apply to taxes out of the scope of IAS 12 nor do specifically
include the requirements related to the interest and fines associated with uncertain tax treatments. The interpretation did not
have impact on the Company’s Financial Statements.



The following standard
amendments and interpretations will not have a significant impact on the consolidated financial statements of the Company:



| | · | Amendments to references to the conceptual framework in IFRS standards (CPC 00)
| | - | -------------------------------------------------------------------------------



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| | · | Definition of a business (amendments to the CPC 15/IFRS 3)
| | - | ----------------------------------------------------------



| | · | Definition of materiality (amendments to the CPC 26/IAS 1 and CPC 23/IAS8)
| | - | --------------------------------------------------------------------------



| | · | IFRS 17 Insurance Contracts
| | - | ---------------------------



There is no other
standard, amendment or issued interpretation that is not yet adopted that could, in the opinion of our management, have a significant
impact on our financial statements upon adoption.



Recently Adopted and Issued U.S. GAAP Accounting Standards



Please refer to Note
32(c) to our consolidated financial information for a description of recently adopted U.S. GAAP accounting standards and recently
issued U.S. GAAP accounting standards.



C.       Research and
Development, Patents and Licenses, etc.



We have a research
and development department for new products, processes and methodologies focused on reducing the construction cycle. Our research
and development expenditures in 2019, 2018 and 2017 were immaterial. See also “Item 4. Information on the Company—B.
Business Overview—Construction.”



D.       Trend Information



Elsewhere in this
annual report, including under “Item 3. Key Information—D. Risk Factors” and “Item 5. Operating and Financial
Review and Prospects—A. Operating Results—Brazilian Real Estate Sector,” we discuss trends, uncertainties, demands,
commitments or events which could have a material effect upon our net sales or revenues, income from continuing operations, profitability,
liquidity or capital resources, or that could cause reported financial information to not necessarily be indicative of future operating
results or financial condition.



In addition, while
we believe the long-term prospects for the Brazilian housing market have not changed over the past five years, we recognized that
we needed to adjust how we have approached the demand for high growth and diversification in the market in order to achieve sustainable,
profitable growth. In the Brazilian housing market, demand has outstripped supply on all fronts, from units and availability of
skilled labor, to reliable and experienced suppliers and building partners, to financing, and to the ability to rapidly issue permits
and obtain the necessary approvals to deliver units.



In December 2016,
following the conclusion of our analysis of certain strategic options, our management decided to sell 50% of Tenda’s total
capital stock, and transfer the remaining 50% of Tenda’s total capital stock to our shareholders in connection with a reduction
in our total capital stock. Accordingly, on December 14, 2016, we entered into an SPA with Jaguar Real Estate Partners LP (“Jaguar”)
pursuant to which we offered to sell Tenda shares representing up to 30% of the total capital stock of Tenda, at a price equal
to R$8.13 per share.



The spin-off of the
Tenda business unit was consummated on May 4, 2017, following: (i) a reduction of the capital stock of Tenda (without the cancellation
of shares), pursuant to which Gafisa, as sole shareholder at that time, received R$100 million (adjusted by the SELIC); (ii) a
reduction of the capital stock of Gafisa, resulting in the distribution to Gafisa shareholders of shares corresponding to 50% of
the capital stock of Tenda; (iii) the conclusion of the preemptive rights exercise pursuant to which Gafisa shareholders acquired
up to 50% of the total share capital of Tenda, at the price per share set forth in the SPA with Jaguar and for a total amount of
R$219.5 million, with no shares being acquired by Jaguar; and (iv) the satisfaction of other conditions precedent for the consummation
of the spin-off. In addition, on May 4, 2017, the Tenda shares were listed on the B3 and began to publicly trade.



On September 25, 2018,
GWI convened an Extraordinary Shareholders’ Meeting for the purpose of dismissing members of the Board of Directors and electing
new members through a multiple-vote process. GWI approved the dismissal of the entire Board of Directors and elected directors
for five of the seven vacant seats. See “Item 6. Directors, Senior Management and Employees—C. Board Practices”,
for further information about our Board of Directors. Within three days of the dismissal and election of the new Board of Directors,
the Company’s executive board was removed from office.



On November 26, 2018,
our Board of Directors approved the voluntary delisting of our ADSs from the NYSE and a proposal to maintain our ADR facility as
a Level 1 ADR program to enable investors to retain their ADSs. On



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December 7, 2018, we filed a Form 25 with the SEC to effect
the delisting of the ADSs, and sent a copy to the NYSE on the same day. The last day of trading on NYSE for our ADSs was December
14, 2018, and our ADSs were delisted from the NYSE on December 17, 2018. Our ADSs remain eligible for trading in the over-the-counter
markets in the United States, and our common shares will continue to be listed and admitted to trading in the Novo Mercado segment
of the B3. In addition to the information we are required to report under applicable Brazilian regulations, we intend to continue
publishing English translations of our annual report, interim results and communications on our investor relations website at (www.ri.gafisa.com.br),
in accordance with Rule 12g3-2(b) under the Exchange Act.



During February, March
and April 2019, the members of the Company’s Board of Directors elected in late 2018 resigned, with the exception of Pedro
Carvalho de Mello, and new members were elected to replace them. As of the date of this annual report, following the Annual General
Meeting held on April 15, 2019, Gafisa’s Board of Directors is composed of the following members: (i) Leo Julian Simpson
(nominated as chairman of the Board of Directors on April 15, 2019), (ii) Antonio Carlos Romanoski, (iii) Demian Fiocca, (iv) Eduardo
Larangeira Jácome, (v) Nelson Sequeiros Rodriguez Tanure, (vi) Roberto Luz Portella and (vii) Thomas Cornelius Azevedo Reichenheim,
all nominated on April 15, 2019.



On April 15, 2019,
at the Annual General Meeting, the shareholders resolved to suspend the shareholder rights of GWI Asset Management S.A. and the
other members of the GWI Group due to GWI Group’s non-compliance with the Company’s Bylaws as they relate to the Tender
Offer request. In addition, it was resolved to increase the limit of authorized capital of the Company from 71,031,876 ordinary
shares to 120,000,000 ordinary shares. This increase in the Company’s authorized capital enables us to issue new shares in
a sufficient amount to accommodate the financial restructuring of the Company.



On April 15, 2019,
following the General Meeting, in order to raise funds for investments, the newly appointed Board of Directors approved a capital
increase of 26,273,962 new common shares. These newly issued common shares were offered privately to the Company’s shareholders,
and were issued at the reference price of R$ 6.02 per common share (which was determined following an audit conducted by a specialized
firm). The Board of Directors also appointed Roberto Luz Portella as Chief Executive Officer, Chief Financial Officer and Investor
Relations Officer and Eduardo Larangeira Jácome as Operational Executive Officer.



On August 15, 2019,
the Board of Directors approved another capital increase of 48,968,124 new common shares. These newly issued common shares were
offered privately to the Company’s shareholders at B3 S.A. – Brasil, Bolsa, Balcão (former BM&FBovespa),
and were issued at the reference price of R$ 6.57 per common share (which was determined following an audit conducted by a specialized
firm). Following the preemptive rights exercise period and subsequent subscriptions periods, we issued and sold 45.554.148 and
3,413,976, respectively, new common shares of the Company for a total amount of R$254.2 million and R$18.5 million, respectively,
all in registered, book-entry form, and with no par value, at a price per share equal to R$5.58 and R$5.42, respectively. Accordingly,
on October 23, 2019, our board of director approved a capital increase in the amount of R$272.7 million. As of the date of this
annual report, the share capital of the Company totaled R$2,926.3 million, represented by 120,000,000 common shares, all in registered,
book-entry form, and with no par value.



On August 30, 2019
the Board of Directors appointed André Luis Ackermann as Chief Financial Officer, and Eduardo Larangeira Jácome tendered
his resignation to the position of Management Officer, effective as of September 30, 2019. Eduardo Larangeira Jácome remains
as a member of the Restructuring Committee until December 31, 2019 and a member of the Company’s Board of Directors.



Also, on September
20, 2019, Roberto Luz Portella resigned from his position as Chief Executive Officer and Investor Relations Officer. Following
his resignation, on September 23, 2019, the Board of Directors appointed André Luis Ackermann as Investor Relations Officer
cumulating with his former responsibilities as Chief Financial Officer.



On December 27, 2019,
we concluded the sale of our remaining 21.20% stake in Alphaville for R$100 million, which was paid through the offsetting of certain
credits and the delivery of assets. This transaction is in line with the Company’s strategy to optimize and improve the Company’s
portfolio and capital allocation, aiming at creating value for our shareholders.



At a Board of Directors
meeting held on February 2, 2020, Mr. Roberto Luz Portella tendered his resignation as a member of the Company’s Board of
Directors. At the same meeting, Mr. João Antônio Lopes Filho was elected as the new member of the Company’s
Board of Directors.



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On March 2, 2020,
with the aim to strengthen our executive team, our Board of Directors approved a new organizational structure and elected the following
three new Executive Officers: (i) Guilherme Augusto Soares Benevides as Chief Operations Officer and Vice-president of Operations;
(ii) Fábio Freitas Romano as Assistant Vice-president of Operations; and (iii) Ian Masini Monteiro de Andrade as Chief Financial
Officer and Investor Relations Officer and Vice-president of Management and Finance.



On March 27, 2020,
our Board of Directors approved the establishment of the Company’s share buyback program with the objective of generating
value for the Company’s shareholders, that was confirmed by the General Shareholders Meeting held on April 30, 2020. Shares
purchased by the Company as part of the buyback program will be held in treasury, and may subsequently be canceled, sold and/or
used in connection with the exercise of stock options granted by the Company. The maximum number of shares the Company may acquire
under this program is 10,327,558 common shares, pursuant to Article 8 of CVM Instruction No. 567/15. This buyback program ends
on May 4, 2021. Under our current shares repurchase program, any acquisition by us of our own shares must be made on a stock exchange
and cannot be made by means of a private transaction. See “Item 10. Additional Information—B. Memorandum and Bylaws—Purchases
by us of our own Shares,” for further information.



On March 2, 2020,
the Administrative Council for Economic Defense (CADE) approved, without restriction, the merger of UPCON into the Company. On
April 30, 2020 all required approvals were obtained, and UPCON became a wholly-owned subsidiary of Gafisa.



Since March 2020,
the COVID-19 pandemic has spread across Brazil and other countries, and governments have implemented a series of measures including
travel restrictions and quarantines to contain COVID-19, which has adversely affected the real estate industry in the regions where
we operate. The duration and severity of the COVID-19 pandemic in Brazil and globally is still uncertain, which may further delay
the recovery of the real estate industry and negatively impact it. As of the date of this annual report, we have not suffered a
significant increase in customer default or a reduction in sales volume. Moreover, the construction of our projects continue to
be on schedule. However, due to the COVID-19 pandemic, we have postponed launches planned for the second quarter and the second
half of 2020. Accordingly, considering the scenario of uncertainty as to when the COVID-19 pandemic will end and normal economic
activity will resume, as well as the negative impacts the COVID-19 pandemic will have on Brazil’s economy, management has,
as of the date of this annual report, evaluated the effects of COVID-19 on our business, including on our projections of profit
or loss and cash generation based on our best estimates, and has concluded that there is no need to recognize additional loss allowance,
and that there is no material adverse effect on our operations. Given the uncertainty surrounding COVID-19, we are going to continue
to monitor the COVID-19 pandemic to continually update our projections and analysis on any effect on our financial information,
and we cannot currently estimate the impact that COVID-19 will have on our 2020 financial performance and cash flows.



E.       Off Balance
Sheet Arrangements



We currently do not
have any off-balance sheet arrangements or significant transactions with unconsolidated entities not reflected in our consolidated
financial statements. All of our interests in and/or relationships with our subsidiaries or jointly-controlled entities are recorded
in our consolidated financial statements.



F.       Disclosure
of Contractual Obligations



The table below presents
the maturity of our significant contractual obligations as of December 31, 2019. The table does not include deferred income tax
liability.



|                                       |  | Maturity Schedule     
|-------------------------------------- |  | ----------------------
|                                       |  | Total                 
|                                       |  | (in millions of reais)
|Loans and financing                    |  |                       
|Debentures                             |  |                       
|Interest(1)                            |  |                       
|Real estate development obligations(2) |  |                       
|Obligations for land purchase          |  |                       
|Credit assignments                     |  |                       
|Obligations from operating leases      |  |                       
|Other accounts payable                 |  |                       
|Total                                  |  |                       





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_________________

| | (1) | Estimated interest payments are determined using the interest rate as of December 31, 2019. However,
our long-term debt is subject to variable interest rates and inflation indices, and these estimated payments may differ significantly
from payments actually made.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Including commitments not reflected in the balance—CFC Resolution No. 963. Pursuant to Brazilian
GAAP, and since the adoption of CFC Resolution No. 963, the total costs to be incurred on the units launched but not sold are not
recorded on our balance sheet. As of December 31, 2019, the amount of “real estate development obligations” related
to units launched but not sold was R$178.5 million.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We also recorded provisions
for contingencies in relation to labor, tax and civil lawsuits in the amounts of R$153.0 million and R$123.9 million in current
and non-current liabilities, respectively, as of December 31, 2019.



G.       Safe Harbor



See “Cautionary
Statement Regarding Forward-Looking Statements.”



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



A.       Directors and
Senior Management Board of Directors



The table below shows
the names, positions, and terms of office of the members of our board of directors:



|Name                                     | Age | Position | Election
Date  | Term
of Office(1)                           
|---------------------------------------- | --- | -------- | -------------- | --------------------------------------------
|                                         |     |          |                |                                             
|Leo Julian Simpson (2)                   | 64  | Chairman | April 15, 2019 | Annual Shareholders’ General Meeting in 2021
|Antonio Carlos Romanoski (2)             | 74  | Director | April 15, 2019 | Annual Shareholders’ General Meeting in 2021
|Thomas Cornelius Azevedo Reichenheim (2) | 73  | Director | April 15, 2019 | Annual Shareholders’ General Meeting in 2021
|Nelson Sequeiros Rodriguez Tanure (2)    | 68  | Director | April 15, 2019 | Annual Shareholders’ General Meeting in 2021
|João Antonio Lopes Filho                 | 56  | Director | April 30, 2020 | Annual Shareholders’ General Meeting in 2021
|Eduardo Larangeira Jácome                | 64  | Director | April 15, 2019 | Annual Shareholders’ General Meeting in 2021
|Denise dos Passos Ramos                  | 44  | Director | April 30, 2020 | Annual Shareholders’ General Meeting in 2021
|Gilberto Benevides                       | 68  | Director | April 30, 2020 | Annual Shareholders’ General Meeting in 2021




_________________

| | (1) | Under Brazilian corporate law, an annual general shareholders’ meeting must take place within
the first four months of the calendar year.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Independent member pursuant to Brazilian Law. According to Brazilian Law, a director is considered
independent when: (1) he/she has no relationship with the company, except for holding shares; (2) he/she is not a controlling shareholder,
spouse or relative of the controlling shareholder, has not been in the past three years linked to any company or entity related
to the controlling shareholder; (3) he/she has not been in the past three years an employee nor an executive of the company, of
the controlling shareholder or of any subsidiary of the company; (4) he/she is not a supplier or buyer, direct or indirect, of
the company where the arrangement exceeds a certain amount; (5) he/she is not an employee or manager of any company which renders
services to the company or which uses services or products from the company; (6) he/she is not a spouse or relative of any member
of the
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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company’s
management; and (7) he/she does not receive any compensation from the company, except for the compensation related to its position
as a board member.



Our directors are
not subject to mandatory retirement due to age.



The following is a
summary of the business experience and principal outside business interests of the current members of our board of directors.



Antonio Carlos
Romanoski. Mr. Antonio Carlos Romanoski held several positions at the Electric Power Company of Paraná - COPEL for 17
years, including Manager of Finance and Human Resources, Administrative Officer, Chief Financial Officer and member of the Board
of Directors. He also served as Superintendent (resident) overseeing the construction of the Salto Osório and Foz do Areia
Power Plants. He was also responsible for attracting foreign financing from international agencies. Mr. Romanoski also worked for
15 years at Refrigeração Paraná S.A., the second largest manufacturer of Domestic Appliances in Brazil, where
he held the positions of Chief Financial Officer, General Director and Market Relations Officer. He oversaw the merger and acquisition
process of Industries Pereira Lopez and led the restructuring process of the Prosdócimo Organizations, overseeing the merger
and incorporation of 14 companies. He coordinated the logistics of the sale of the company to Electrolux do Brasil S.A., where
he then served as Chief Executive Officer for three years and as Member of the Board of Directors. He supported the merger of Refripar
with Electrolux S.A., creating Electrolux do Brasil, as well as the merger of the Electrolux / Prosdócimo brands. In addition,
Mr. Romanoski served as president of the Atlas of Home Appliances industry, where he has remained a member of the Board of Directors
since 1988. Mr. Romanoski served as Member of the Board of Directors of TEKA - Tecelagem Kuenrich S.A. in 2003 and 2004, and in
the same period, he was a member of the Board of Directors of Ferropar - Ferrovia Paraná S.A. He has been a shareholder
of CEFI - Center of Excellence in Finance since 1994, which provides business advice with specialization in mergers, acquisitions,
family businesses and financial structuring. He coordinated the following projects, among others: City Hall of Curitiba - Financial
restructuring and capitalization - Inepar S / A Indústria e Construção - Restructuring of the Group and creation
of the Holding Company - De Lara Transportes - Evaluation of the company and advisor in the sale to ALL - Sonae Emplanta - Advisory
on fundraising for Shopping Center - Copel - Member of the Consortium for the privatization of the company - HSBC - Training of
2,000 managers and directors in the EVA concept - Souza Cruz - Advice on investment project in the State of Paraná - Unimed
Rio - Restructuring and market adequacy. He is also a shareholder of Romanoski & Associados.



Nelson Sequeiros
Rodriguez Tanure. Mr. Nelson Sequeiros Rodriguez Tanure is Chief Executive Officer of Docas Investimentos S.A. He has been
an investor of PETRO RIO S.A. since 2013, and he acquired Editora Pesos S.A. in 2006. He entered into a usufruct agreement for
the Jornal do Brasil, Gazeta Mercantil and Forbes magazine brands in 2001. Mr. Tanure acquired control of Docas S.A. and of its
subsidiaries Boavista S.A. and Boavista Trading in 1999, and he incorporated ISHIBRAS, forming the company Indústrias Verolme-Ishibras
S.A. in 1994. He served as Chairman of the Board of Directors of SADE VIGESA S.A. (a union of South American Engineering and Villares
equipment) in 1991, and he acquired EMAQ VEROLME ESTALEIROS S.A. (a merger of EMAQ Engenharia e Máquinas S.A. and Verolme
Shipyard) in 1989. In 1983, he founded Representação e Comércio Internacional Ltda., a Brazilian trading and
holding company which is the controlling shareholder of Serviços de Engenharia e Equipamentos S.A. and Engenharia e Máquinas
S.A. He holds a degree in Business Administration from the Federal University of Bahia in 1975, and he graduated from the Institut
des Hautes Etudes de Development Economique et Social - Université Paris I in 1976. He holds a specialization from the Owner
/ President Management Program at Harvard Business School.



Leo Julian Simpson.
Mr. Leo Julian Simpson began his career as a financial lawyer at Rickerbys & Pardoes, working in property development of industrial
and recreational facilities in England. In 1986, he expanded these skills at Shimizu Corporation, Japan’s largest finance
and leisure entrepreneur in Europe and Asia. In 1987, he began working at McKenna & Co. documenting and financing international
infrastructure projects in the telecommunications, energy and transportation sectors, including in the construction of airports
and power plants in the United Kingdom. In addition, Mr. Simpson provided legal advice supporting the creation of companies such
as National Grid, France Telecom, Sprint Corporation and Intelig Telecomunicações in Brazil. He became commercial
director and then president of Intelig Telecomunicações, a position he held until the company was sold by Brazilian
investors to TIM. Mr. Simpson graduated with a degree in law from Bristol University in England in 1977.



Eduardo Langeira
Jácome. Mr. Jácome has served as Officer and Director of Gafisa S.A. since March 15, 2019 and April 15, 2019,
respectively. He graduated in Business Administration from the School of Political and Economic Sciences of Rio de Janeiro. He
has 45 years of experience in Business Management and Human Resources, 35 of



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which have been in executive positions. He worked for 23 years
at IBM, three years at Coca Cola Andina, five years at Telemar / Oi, four years at Cia. Brasileira de Multimídia and one
year at HRT / PetroRio. He has held planning, implementation and management positions at People & Business Solutions (2006),
Global Sports Network (2010) and PBS Technology (2015). He is a member (2018-2020) of the Executive Board of MercoSerra, the Development
Agency of Serra Carioca, which is a private entity created to support the economic development of the region formed by Nova Friburgo,
Petrópolis and Teresópolis. Mr. Jácome serves as Member of the Fiscal Council (2018-2020) of ACIANF - Commercial,
Industrial and Agricultural Association of Nova Friburgo, and in 2016, he was approved as an Associate Member of the Brazilian
Institute of Corporate Governance (IBGC).



João Antonio
Lopes Filho.Mr. João Antonio Lopes Filho was the founding partner of Portcapital and manager of the Aespoespacial Fund.
He was a partner at Banco Fator S.A. from 1994 to 2008, responsible for the Corporate Finance, Mergers and Acquisitions, Capital
Markets and Private Equity division. He was responsible for the Venture Capital Fund between 1999-2006 (Santa Catarina Emerging
Companies Fund). He was a member of the Board of Directors of Trafo Equipamentos Elétricos SA from 2003 to 2007. He was
Managing Partner of Trevisan Auditores Independentes, having developed the Mergers, Acquisitions and Privatizations Advisory Area
and coordinated the Human Resources, Productivity, Quality Advisory Areas and Training. He was an auditor at Price Watherhouse,
having participated in audits at large banks and multinational companies. He holds a degree in Economic Sciences from Universidade
Mackenzie and Fund Manager at CVM.



Thomas Cornelius
Azevedo Reichenheim. Mr. Thomas Cornelius Azevedo Reichenheim is the former Director of several companies, notably Auxiliary
Bank, Auxiliary Investment Bank, Auxiliar Seguradora, La Fonte Fechaduras and LFTel S.A. He is also the owner of Carisma Comercial
Ltda. of T.R Portfolios Ltda. where he advises on the creation of capital and financial institutions. Mr. Reichenheim graduated
with a degree in Business Administration from the Fundação Getúlio Vargas, in 1972, and in Law from Faculdades
Metropolitanas Unidas, in 1972.



Denise dos Passos
Ramos.Mrs. Ramos has over 20 years’ experience in the real estate sector, including as a lawyer at Banif – Banco
Internacional do Funchal (Brasil) S.A. and as Operating Legal Advisor to the Legal Office of Ipiranga Produtos de Petróleo
S.A. She was also head of the legal department of Petroflex Indústria e Comércio S.A., a company of the Lanxess Energizing
Chemistry group. She is currently Chief Executive Officer at Alberta Albko Ltda. Mrs. Ramos holds a Law degree from Universidade
Federal do Rio de Janeiro and completed an MBA in Business Management from Fundação Getúlio Vargas. Also,
Mrs. Ramos completed graduate programs in Contractual Law from Fundação Getúlio Vargas and Environmental Law
from Pontifícia Universidade Católica do Rio de Janeiro.



Gilberto Benevides
Mr. Gilberto Benevides has more than 40 years’ experience in the construction and real estate sector. He worked at Company
S.A. from 1984 to 2008, including between 2006 and 2008 when Company S.A. was a publicly traded company, and was part of the management
team of Company S.A. from 2008 to 2010. Since 2010, he has served as an officer for UPCON Incorporadora S.A. He graduated with
a degree in Civil Engineering from Mackenzie University, and a post-graduate degree in Business Management from Mackenzie University.



The table below shows
the names, positions, and terms of office of our executive officers:



|Name                   | Age | Position                                        | Election
Date    | Term
of Office  
|---------------------- | --- | ----------------------------------------------- | ---------------- | ----------------
|André Luis Ackermann   | 42  | Statutory Director                              | March 02, 2020   | March 02, 2023  
|                       |     |                                                 |                  |                 
|Ian Andrade            | 43  | Investors Relations and Chief Financial Officer | March 02, 2020   | March 02, 2023  
|                       |     |                                                 |                  |                 
|Guilherme Benevides    | 38  | Chief Operational Officer                       | May 17, 2019     | May 16, 2022    
|                       |     |                                                 |                  |                 
|Cauê Cardoso           | 37  | Statutory Director                              | January 28, 2020 | January 28, 2023
|                       |     |                                                 |                  |                 
|Guilherme Luis Pesenti | 36  | Statutory Director                              | January 28, 2020 | January 28, 2023
|                       |     |                                                 |                  |                 
|Luiz Fernando Ortiz    | 42  | Statutory Director                              | January 28, 2020 | January 28, 2023
|                       |     |                                                 |                  |                 
|Fabio Freitas Romano   | 45  | Statutory Director                              | March 02, 2020   | March 02, 2023  
|                       |     |                                                 |                  |                 
|Saulo Nunes            | 54  | Statutory Director                              | March 02, 2020   | March 02, 2023  





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The business address
of each of our executive officers is Av. Pres. Juscelino Kubitschek, No. 1830, Block 2, 3rd Floor, 04543-900 – São
Paulo, SP – Brazil.



Our Relationship with our Executive Officers and Directors



As of December 31,
2019, our board of officers in the aggregate held 0.0137% of our share capital and our board of directors in the aggregate held
a 0.0107% direct or indirect interest in our share capital. As of December 31, 2019, there were no material agreements entered
into by us with any members of our board of directors or with any member of our board of officers, other than those pertaining
to their roles within the Company. As of December 31, 2019, some of our executive officers held interests in our subsidiaries as
directors and/or executive officers. In none of these cases, as of the referenced date, were the interests held material.



As of December 31,
2018, our board of officers in the aggregate held 0.00046% of our share capital and our board of directors in the aggregate held
a 49.07% direct or indirect interest in our share capital. As of December 31, 2018, there were no contracts of any type or any
other material agreements entered into by us with any members of our board of directors or with any member of our board of officers.
As of December 31, 2018, some of our executive officers held interests in our subsidiaries as directors and/or executive officers.
In none of these cases, as of the referenced date, were the interests held material.



As of December 31,
2017, our board of officers in the aggregate held 0.064% of our share capital and our board of directors in the aggregate held
a 0.397% direct or indirect interest in our share capital. As of December 31, 2017, there were no contracts of any type or any
other material agreements entered into by us with the members of our board of directors and our board of officers. As of December
31, 2017, some of our executive officers held interests in our subsidiaries as directors and/or executive officers. In none of
these cases, as of the referenced date, were the interests held material.



B.       Compensation



For each of 2019, 2018 and 2017



Under Brazilian corporate
law, the company’s shareholders are responsible for establishing the aggregate amount paid to members of the board of directors,
the executive officers and the members of the fiscal council. Once the shareholders establish an aggregate amount of compensation,
the members of the board of directors are then responsible for setting individual compensation levels.



For each of 2019,
2018 and 2017, the aggregate compensation we paid to the members of the board of directors was R$0.9 million, R$1.5 million and
R$2.0 million, respectively.



For each of 2019,
2018 and 2017, the aggregate compensation we paid to the members of the fiscal council was R$112 thousand, R$219 thousand and R$243
thousand, respectively.



For each of 2019,
2018 and 2017, the aggregate compensation we paid to the executive officers was R$ 7.0 million (net of bonuses for Gafisa executive
officers), R$5.4 million (net of bonuses for Gafisa executive officers) and R$7.7 million (net of bonuses for Gafisa and Tenda
executive officers), respectively, which includes, unless otherwise indicated, fixed compensation, annual bonus amounts and the
costs related to Stock Options Programs.



Approximately 40%
of the total compensation paid to Gafisa officers is variable. For the year ended December 31, 2019, 2018 and 2017, there were
no payment related to short-term bonuses (Gafisa only).



For each of 2019,
2018 and 2017, the individual compensation we paid to members of our board of directors (fixed compensation), fiscal council (fixed
compensation) and officers (fixed compensation, short-term bonus and costs related to Stock Options Programs) is set forth in the
tables below.



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Gafisa



|2019                                             | Board
of Directors | Fiscal
Council | Executive
Officers
|------------------------------------------------ | ------------------ | -------------- | ------------------
|Number of members(1)                             | 10                 | 3              | 6                 
|Annual highest individual compensation (in R$)   | 105,067            | 39,200         | 700,000           
|Annual lowest individual compensation (in R$)(2) | 36,667             | 24,000         | 225,000           
|Annual average individual compensation (in R$)   | 85,333             | 30,200         | 333,000           




_________________

| | (1) | Based on the average number of members during the period.
| | --- | ---------------------------------------------------------



| | (2) | Annual lowest individual compensation includes only the members of board of directors, fiscal council
and executive officers and does not include members who are also executive officers (if a member is an executive officer, he or
she is paid as an executive officer).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2018                                             | Board
of Directors | Fiscal
Council | Executive
Officers
|------------------------------------------------ | ------------------ | -------------- | ------------------
|Number of members(1)                             | 5.5                | 2.83           | 4.5               
|Annual highest individual compensation (in R$)   | 182,698            | 72,000         | 842,400           
|Annual lowest individual compensation (in R$)(2) | 48,220             | 28,409         | 26,200            
|Annual average individual compensation (in R$)   | 91,193             | 51,600         | 286,534           




_________________

| | (1) | Based on the average number of members during the period.
| | --- | ---------------------------------------------------------



| | (2) | Annual lowest individual compensation includes only the members of board of directors, fiscal council
and executive officers and does not include members who are also executive officers (if a member is an executive officer, he or
she is paid as an executive officer).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2017                                             | Board
of Directors | Fiscal
Council | Executive
Officers
|------------------------------------------------ | ------------------ | -------------- | ------------------
|Number of members(1)                             | 7.00               | 3.00           | 5.17              
|Annual highest individual compensation (in R$)   | 365,141            | 81,000         | 2,428,107         
|Annual lowest individual compensation (in R$)(2) | 234,058            | 81,000         | 2,428,107         
|Annual average individual compensation (in R$)   | 290,236            | 81,000         | 1,485,097         




_________________

| | (1) | Based on the average number of members during the period.
| | --- | ---------------------------------------------------------



| | (2) | Annual lowest individual compensation includes only the members of board of directors, fiscal council
and executive officers who served an entire year and does not include members who are also executive officers (if a member is an
executive officer, he or she is paid as an executive officer).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



C.       Board Practices



General Information



We are managed by
a board of directors consisting of at least five and up to nine directors and at least two and up to eight executive officers.
Our directors are elected for a two-year term and our executive officers are elected for a three-year term. Reelection of officers
and directors is permitted. We also have (i) a fiscal council, which under Brazilian Law is not a permanent body, although currently
installed, (ii) permanent advisory committees created in accordance with our bylaws, namely: an audit committee and a corporate
governance and compensation committee and (iii) executive committees established by the Board of Directors, namely: an investment
executive committee, a finance executive committee, and an ethics executive committee. See “—A. Directors and Senior
Management Board of Directors.”



Board of Directors



Our board of directors
is our decision-making body responsible for formulating general guidelines and policies for our business, including our long term
strategies. Among other things, our board of directors is responsible for appointing and supervising our executive officers.



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Our board of directors
meets at least once every two months and at any other time when a meeting is called by its chairman or by at least two other effective
members. The decisions of our board of directors are taken by the majority vote of those members present at the respective meeting
and constituting a quorum of at least four members. In the event of a tie vote, the chairman of our board of directors has, in
addition to his personal vote, the right to cast a tie-breaking vote. In addition, pursuant to Brazilian corporate law, a member
of our board of directors is prevented from voting in any shareholders’ or board of directors’ meeting, or from acting
in any business or transaction, in which he may have a conflict of interest with our company.



Under Brazilian corporate
law, a company’s board of directors must have at least three members. Our bylaws provide for a board of directors of up to
nine members, from which at least 20% or two members, whichever is greater, shall be independent members, as determined by the
Listing Rules of the Novo Mercado. Our directors are elected at our annual general shareholders’ meeting for a two-year
term of office, with reelection permitted, and are subject to removal at any time by our shareholders at a shareholders’
general meeting. Although the Listing Rules of the Novo Mercadorequire at least 20% or two independent members, our board
of directors currently has seven independent members, out of a total of eight members.



Article 141 of Brazilian
corporate law provides that shareholders with at least 10% of a company’s total capital stock may request the adoption of
the multiple voting procedure for the election of the board of directors, even where there is no provision for this in the company’s
bylaws. The multiple voting procedure grants each share as many votes as the number of board members, and allows shareholders to
allocate either all of their votes to a single candidate or to distribute their votes among several candidates.



All the voting proceedings
discussed in the previous paragraphs currently apply to our company.



As prescribed by CVM
Instruction No. 282, of June 26, 1998, the minimum voting capital percentage required for the adoption of the multiple voting procedure
in publicly-held companies may be reduced as a result of the amount of its capital stock. Based on the current amount of our capital
stock, shareholders representing 5% of our total capital stock may request the adoption of the multiple voting procedure in order
to elect the members to our board of directors. The referred minimum percentage may vary from 5% to 10% depending on the amount
of our capital stock, as prescribed in the aforementioned CVM Instruction No. 282, of June 26, 1998. If the adoption of the multiple
voting procedure is not requested, directors are elected by a majority vote of our shareholders, and such shareholders who, individually
or collectively, represent at least 10% of our shares, are entitled to appoint, in a separate vote, a director and its alternate.



The Listing Rules
of the Novo Mercado also provide that all members of our board of directors and our board of officers must comply with the
arbitration clause in the bylaws before taking office.



Executive Officers



Under Brazilian corporate
law, a company’s board of executive officers must have at least two members, and each of such members must be a resident
in Brazil. Furthermore, no more than one-third of our directors may serve as members of our board of officers at any given time.
In addition, under the Listing Rules of the Novo Mercado, the chief executive officer of our company shall not serve as
the chairman of the board of directors.



Our executive officers
are our legal representatives and are primarily responsible for managing our day-to-day operations and implementing the general
policies and guidelines set forth in our shareholders’ general meetings and by our board of directors. Our bylaws require
that our board of officers be composed of at least two members and a maximum of eight members. The members of our board of officers
are appointed by our board of directors for a term of three-years, and may be reelected or removed by our board of directors at
any time. Our bylaws and our board of directors determine the role of our executive officers. Currently, we have a board of officers
comprised of eight members: André Luis Ackermann, Saulo Nunes, Ian Monteiro de Andrade, Guilherme Augusto Soares Benevides,
Cauê Cardoso, Guilherme Luis Pesenti e Silva, Luiz Fernando Ortiz, and Fabio Freitas Romano.



The CFO/IRO and the
COO submit the business plan, annual budget, investment plans and new expansion plans for Gafisa and our subsidiaries to the approval
of the board of directors. They enact these plans and develop our strategy and operational plan, including the manner in which
we will execute the resolutions approved at the shareholders’ meeting and by the board of directors. Together with the other
officers, they also supervises and



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coordinates our activities. The officer in charge of investor
relations supplies our financial information to investors, the CVM and the B3, and is also responsible for keeping an updated register
based on the applicable regulations.



Fiscal Council



Under Brazilian corporate
law, the fiscal council is a corporate body independent from the management of the company and its external auditors. The company
fiscal council is not a permanent body, and whenever installed, must consist of no less than three and no more than five members.
The primary responsibility of the fiscal council is to review management’s activities and the company’s financial statements
and to report its findings to the shareholders of the company. The fiscal council is not equivalent to an audit committee as contemplated
by the Securities Exchange Act, as amended. Under Brazilian corporate law, a fiscal council must be established at a shareholders’
general meeting upon request of shareholders representing at least 10% of the shares with voting rights, or 5% of the shares with
no voting rights, and its members shall remain in office until the annual general shareholders’ meeting of the year following
their election. Each member of the fiscal council is entitled to receive compensation in an amount equal to at least 10% of the
average amount paid to each executive officer (excluding benefits and profit sharing).



As prescribed by CVM
Instruction No. 324, of January 19, 2000, the minimum voting capital percentage required to request the fiscal council to be installed
may be reduced as a result of the amount of the company’s capital stock. Based on the current amount of our capital stock,
shareholders representing 2% of our voting capital stock may request the fiscal council to be installed. The referred minimum percentage
may vary from 2% to 8% depending on the amount of our capital stock, as prescribed in the aforementioned CVM instruction.



Individuals who are
also employees or members of the administrative bodies of our company, of companies controlled by us, or of companies forming a
group of companies with us (pursuant to Chapter XXI of Brazilian corporate law), as well as spouses or parents of our management,
cannot serve on the fiscal council.



Our by-laws provide
for a non-permanent fiscal council composed of at least three and up to five members, which can be formed and have its members
elected at the shareholders’ general meeting, as requested by the shareholders, in the events set forth by Brazilian corporate
law. When in operation, the compensation of our fiscal council is set at the shareholders’ general meeting that elects it.



We do not currently
have a fiscal council in place and will not form a fiscal council or have members elected to it unless requested and approved by
the shareholders at a shareholders’ general meeting, as set forth by Brazilian corporate law.



We have also established
a permanent audit committee. See “—Audit Committee.”



Audit Committee



Our bylaws provide
for an Audit Committee that convenes regularly, as often as it determines is appropriate to carry out its responsibilities. The
Audit Committee must be comprised of at least three members, all of which must be independent members. The Audit Committee is currently
composed of Gilberto Braga, Pedro Carvalho de Mello and Thomas Cornelius Azevedo Reichenheim. Our board of directors has determined
Gilberto Braga and Pedro Carvalho de Mello are each independent for the purpose of Rule 10A-3 of the Exchange Act. Our board of
directors has determined that Gilberto Braga is an audit committee financial expert within the meaning of the regulations promulgated
by the United States Securities and Exchange Commission.



This committee has
responsibility for, among others, planning and reviewing our annual and quarterly reports and accounts with the involvement of
our auditors, focusing particularly on compliance with legal requirements and accounting standards, and ensuring that an effective
system of internal financial controls is maintained, as set forth in the Company’s by-laws. The ultimate responsibility for
reviewing and approving our annual and quarterly reports and accounts remains with our directors.



Corporate Governance and Compensation Committee



Our bylaws provide
for a Corporate Governance and Compensation Committee that convenes regularly, as often as it determines is appropriate to carry
out its responsibilities. The Corporate Governance and Compensation Committee must be comprised of at least three members, all
of which must be independent. The Corporate Governance and Compensation Committee is currently comprised of Antonio Carlos Romanoski,,
Nelson Sequeiros Rodriguez



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Tanure, and Thomas Cornelius Azevedo Reichenheim. This committee,
among other things, considers and periodically reports on matters relating to the size, identification, selection and qualification
of the board of directors, executive officers and candidates nominated for the board of directors and its committees, is responsible
for overseeing compliance with the corporate governance principles applicable to us under our bylaws and other policies, as well
as for proposing improvements and changes to such applicable principles; reviews and makes recommendations to our directors regarding
its compensation policies and all forms of compensation to be provided to our executive officers and other employees.



D.       Employees



As of December 31,
2019, we had 215 employees at Gafisa across the following states:



|States         | Gafisa
Number of Employees
|-------------- | --------------------------
|Rio de Janeiro | 1                         
|São Paulo      | 214                       
|Total          | 215                       



The table below shows
the number of employees for the periods presented, within the macro areas of the company:



|Period  | Operations | Administration
& Finance | Business
Development | Sales | Total
|------- | ---------- | ------------------------ | -------------------- | ----- | -----
|2019    | 98         | 90                       | 8                    | 19    | 215  
|2018    | 234        | 127                      | 26                   | 35    | 422  
|2017    | 242        | 213                      | 60                   | 131   | 646  
|2016(1) | 1,244      | 500                      | 151                  | 565   | 2,460
|2015    | 1,297      | 499                      | 167                  | 387   | 2,350




_________________

| | * | For the years ended December 31, 2017, 2018 and 2019, the numbers presented refer to the employees
of Gafisa, and do not refer to the employees of Tenda.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | (1) | Total number includes 1,684 Tenda employees, of which 917 were allocated in Operations, 236 in
Administration and Finance, 61 in Business Development and 470 in Sales.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our administrative
employees carry out management, finance, information technology, legal and human resources activities among others. Our construction
site employees focus on management and oversight of our construction workers, the majority being outsourced. The outsourced professionals
are hired by the contractors to carry out various tasks on the construction sites. As of the date of this annual report, we estimate
that approximately 775 outsourced professionals are providing services to Gafisa across Brazil, all in the Southeast region of
Brazil.



We offer training
programs to our employees, subcontractors and outsourced employees. All of our professionals involved in the construction of our
developments are trained prior to the beginning of their work and are supervised directly by our engineers.



The majority of our
employees and outsourced professionals of the State of São Paulo are enrolled with the Civil Construction Industries Workers’
Union (SINTRACON). As a rule, the Civil Construction of Large Building Industry in the State of São Paulo (SINDUSCON-SP)
annually negotiates with SINTRACON collective bargaining agreements applicable to our employees. The most recent collective bargaining
agreement for our employees and outsourced professionals in the State of São Paulo was executed in May 2019, establishing
a salary adjustment of 5.07% as of May 2019. This collective bargaining agreement became effective in May 2019 and will expire
in April 2020. The majority of our employees and outsourced professionals of the State of Rio de Janeiro are members of the Civil
Construction, Tiles, Cement, Marble and Granite Products, Road Construction, Paving, and Land Moving and Industrial Maintenance
and Assembly Industries’ Workers Union of the Rio de Janeiro Municipality (SINTRACONST-RIO). As a rule, the Civil Construction
of Large Building Industry in the State of Rio de Janeiro (SINDUSCON-RIO) annually negotiates with SINTRACONST-RIO the collective
bargaining agreements applicable to our employees. The most recent collective bargaining agreement for our employees and outsourced
professionals in the State of Rio de Janeiro was executed in May 2019, establishing a salary adjustment of 3.5% as of May 2019.
This collective bargaining agreement became effective in May 2019 and expired in April 2020. As of the date of this



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annual report, we are negotiating the collective bargaining
agreements for our employees in the states of São Paulo and Rio de Janeiro related to 2020.



We believe that our
relationship with our employees and workers’ unions is good. In all the regions where we operate, we maintain a stable relationship
with the workers unions, which generally decreases the risk of strikes.



The benefits we offer
to our permanent employees include life insurance, dental plan, health insurance, meal tickets and profit sharing.



Health and Safety



We are committed to
preventing work-related accidents and diseases. Accordingly, we maintain a risk prevention program which seeks to maintain and
enhance the health and physical conditions of our employees, by anticipating, recognizing, evaluating and controlling any existing
or potential environmental risks in the workplace.



In addition, we have
an internal committee for the avoidance of accidents, which seeks to prevent diseases and accidents from occurring in the workplace.
We make significant investments in this area, providing frequent training programs for our construction employees as well as for
our subcontractors’ employees, and we require our subcontractors to follow strict guidelines.



E.       Share Ownership



As of the date of
this annual report, our directors and executive officers do not hold, on an aggregate basis, any direct or indirect. interest of
greater than 5% of our total share capital or of the share capital of any of our subsidiaries or jointly-controlled entities. As
of December 31, 2019, some of our executive officers held interests in our subsidiaries and jointly-controlled entities as directors
and executive officers. In none of these cases, as of the date of this annual report, were the interests held material.



The table below sets
forth the number of our total shares beneficially owned by each of our directors and executive officers as of the date of this
annual report:



|Name                                 | Position                            | Number
of Shares Owned
|------------------------------------ | ----------------------------------- | ----------------------
|Denise dos Passos Ramos              | Member of the Board of Directors    | 555                   
|Thomas Cornelius Azevedo Reichenheim | President of the Board of Directors | 5,000                 
|Andre Luis Ackermann                 | Statutory Director                  | 10,000                
|Luiz Fernando Ortiz                  | Statutory Director                  | 3,112                 
|Guilherme Luis Pesenti e Silva       | Statutory Director                  | 80,000                
|Saulo Nunes de Aquino Filho          | Statutory Director                  | 5,800                 



Stock Option Plans



Gafisa’s stock
option plans seek to: (1) encourage our expansion and success by allowing our executives and key employees to acquire shares of
our capital stock in order to encourage their integration with the company; (2) allow us to obtain and retain the services of executives
and key employees by offering them the benefit of becoming one of our shareholders; and (3) align the interests of our executives
and key employees with the interests of our shareholders.



We have individual
agreements with our key employees and executives for Gafisa, under which they are entitled to purchase shares of our capital stock
pursuant to the terms and conditions of the stock option plans and the specific conditions set forth in their agreements.



In 2002, our shareholders
ratified the terms and conditions of our stock option plan. A standard stock option program to grant subscription rights related
to our preferred shares was approved by our board of directors at a meeting held on April 3, 2000. As a result of our entry in
the Novo Mercado segment of B3, our preferred shares were converted into common shares, and therefore all options relating
to this plan grant subscription rights related to our common shares. Currently, we do not have any stock option grants related
to this plan.



On February 3, 2006,
our shareholders approved a new stock option plan. Under the 2006 stock option plan, our board of directors may release further
programs on a regular basis of options to purchase up to 5% of the total



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outstanding shares of our company, as set forth in the 2006
stock option plan. Such new programs would grant our executives and key employees the right to subscribe and/or acquire our shares
for a set price, under terms and conditions according to the agreements set for each participant. Currently, we do not have any
stock option grants related to this plan.



Our most recent stock
option plan was approved on May 18, 2008 during a special shareholders’ general meeting. Under this new stock option plan,
our board of directors may create additional programs on a regular basis for options to purchase up to 5% of the total outstanding
shares of our company, as set forth in the 2008 stock option plan.



Under this stock option
plan, the board of directors may also grant different types of options to certain beneficiaries, namely “A options”,
which are regular options, and “B options,” for the exercise price of R$0.09. The exercise of B options, if granted,
is subject to the proportional purchase of common shares or exercise of a regular option under this 2008 plan, according to the
terms and conditions set forth in each program, and to lapse two years from the common share purchase date.



As of the date of
this annual report, all active stock option Programs follow the Plan approved in 2008.



2012 Programs



Two stock option programs
were approved in 2012 for executive officers and key employees.



The first is a standard
stock option program granting subscription rights related to our common shares. Under this program, the board of directors may
grant to certain beneficiaries the right to subscribe and/or acquire our shares for a set price, under the terms and conditions
set forth in the stock option plan agreement entered into with each participant.



Under the second program,
the board of directors may grant different types of B options for the exercise price of R$0.09 per share. The exercise of B options,
if granted, is subject to the proportional exercise of regular options at market price, granted under this second program, according
to the terms and conditions set forth in such second program, and to lapse one year from the grant date.



As of the date of
this annual report, options to purchase 101,099 shares of our common shares have been granted to key employees and executive officers
pursuant to this second program. Out of the total options granted, none have been acquired or expired pursuant to such agreement.



2013 Programs



Two stock option programs
were approved in 2013 for executive officers and key employees.



The first is a standard
stock option program granting subscription rights related to our common shares. Under this program, the board of directors may
grant to certain beneficiaries the right to subscribe and/or acquire our shares for a set price, under the terms and conditions
set forth in the stock option plan agreement entered into with each participant.



Under the second program,
the board of directors may grant different types of B options for the exercise price of R$0.09 per share. The exercise of B options,
if granted, is subject to the proportional exercise of regular options at market price, granted under this program, according to
the terms and conditions set forth in this second program, and to lapse one year from the grant date.



As of the date of
this annual report, options to purchase 50,281 shares of our common shares have been granted to key employees and executive officers
pursuant to this second program. Out of the total options granted, none have been acquired or expired pursuant to such agreement.



2014 Programs



One stock option program
was approved in 2014 for executives and key employees.



Under this program,
the board of directors may grant different types of B options for the exercise price of R$0.09 per share. The exercise of B options,
if granted, is subject to the proportional exercise of regular options at market



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price, granted under this program, according to the terms and
conditions set forth in each program, and to lapse one year from the grant date.



As of the date of
this annual report, options to purchase 161,068 shares of our common shares have been granted to employees and executives pursuant
to this agreement. The options granted included 100,254 “B” options. Out of the total options granted, 10,412 have
been acquired, expired or cancelled pursuant to such program.



2015 Programs



One stock option program
was approved in 2015 for executives and key employees.



This program is a
standard stock option program granting subscription rights related to our common shares. Under this program, the board of directors
may grant to certain beneficiaries the right to subscribe and/or acquire our shares for a set price, under the terms and conditions
set forth in the stock option plan agreement entered into with each participant.



As of the date of
this annual report, options to purchase 264,570 shares of our common shares have been granted to key employees and executive officers
pursuant to this agreement. Out of the total options granted, 6,907 have been acquired, expired or cancelled pursuant to such program.



In addition to the
above stock option program, the board of directors approved a “Phantom Shares” program, payable in cash in accordance
with the amount of options exercisable by the executives and key employees during the exercise period under the 2015 stock option
program.



2016 Programs



One stock option program
was approved in 2016 for executives and key employees.



This program is a
standard stock option program granting subscription rights related to our common shares. Under this program, the board of directors
may grant to certain beneficiaries the right to subscribe and/or acquire our shares for a set price, under the terms and conditions
set forth in the stock option plan agreement entered into with each participant.



As of the date of
this annual report, options to purchase 163,900 shares of our common shares have been granted to key employees and executive officers
pursuant to this agreement. Out of the total options granted, none have been acquired or expired pursuant to such agreement.



In addition to the
above stock option program, the board of directors approved a “Phantom Shares” program, payable in cash in accordance
with the amount of options exercisable by the executives and key employees during the exercise period under the 2016 stock option
program.



2017 Programs



No stock option program
was approved in 2017 for executives and key employees.



2018 Programs



One stock option program
was approved in 2018 for executives and key employees.



This program is a
standard stock option program granting subscription rights related to our common shares. Under this program, the board of directors
may grant to certain beneficiaries the right to subscribe and/or acquire our shares for a set price, under the terms and conditions
set forth in the stock option plan agreement entered into with each participant.



As of the date of
this annual report, options to purchase 325,980 shares of our common shares have been granted to key employees and executive officers
pursuant to this agreement. Out of the total options granted, none have been acquired or expired pursuant to such agreement.



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After the vesting
period of 4 years, the options may be exercised in whole or in part as follows: 60% as of March 30, 2022; 20% as of March 30, 2023
and 20% remaining as of March 30, 2024. The price set for the 2018 Program was R$15.00.



|Gafisa Active Programs             |  | Number of Stock Options granted (2) |           | Number of Stock Options Outstanding (Not Expired or exercised) as of the date of this annual report (2) |  | Exercise Price per Stock Option (2) |           | Expiration
|---------------------------------- |  | ----------------------------------- | --------- | ------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | --------- | ----------
|August 2012 (Standard SOP) (1)     |  |                                     | 264,036   |                                                                                                         |  |                                     | 77,852    |           
|May 2013 (Standard SOP) (1)        |  |                                     | 101,612   |                                                                                                         |  |                                     | 21,210    |           
|March 2014 (Restricted Type A) (1) |  |                                     | 198,850   |                                                                                                         |  |                                     | 174,835   |           
|March 2014 (Restricted Type B) (1) |  |                                     | 124,651   |                                                                                                         |  |                                     | 70,109    |           
|April 2015 (Standard SOP) (Gafisa) |  |                                     | 264,570   |                                                                                                         |  |                                     | 276,758   |           
|April 2016 (Standard SOP) (Gafisa) |  |                                     | 163,900   |                                                                                                         |  |                                     | 176,221   |           
|March 2018 (Standard SOP) (Gafisa) |  |                                     | 2,685,474 |                                                                                                         |  |                                     | 433,398   |           
|Total                              |  |                                     |           |                                                                                                         |  |                                     | 1,230,383 |           






| | (1) | Options unvested or vested and not yet exercised.
| | --- | -------------------------------------------------



| | (2) | Considering the reverse stock split of all Gafisa’s shares at a ratio of 13.483023074 to
1 consummated on March 23, 2017 and other adjustments.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------



2019 Programs



No stock option program
was approved in 2019 for executives and key employees.



ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



A.       Major Shareholders



As of the date of
this annual report, the following shareholders held more than 5.0% of our common shares. The following table sets forth information
of our directors and officers as a group, as well as common shares held in treasury and other shares in the public float. Each
holder of common shares has the same rights.



|Shareholders       |  | Shares |             | (%)
|------------------ |  | ------ | ----------- | ---
|Board of Directors |  |        | 16,428      |    
|Treasury shares    |  |        | 2,981,052   |    
|Planner Group      |  |        | 36,344,327  |    
|Public Float       |  |        | 80,658,193  |    
|Total              |  |        | 120,000,000 |    



We had a total of
37 record shareholders located in the United States. We are not aware of any shareholders’
agreement currently in force with our main shareholder.



B.       Related Party
Transactions



Other than arrangements
which are described in “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management Board
of Directors—Our Relationship with our Executive Officers and Directors” and the transaction described below, since
January 1, 2007, there has not been, and there is not currently proposed, any material transaction or series of similar transactions
to which we were or will be a party in which any director, executive officer, holder of 5% of our capital stock or any member of
their immediate family had or will have a direct or indirect interest.



Under Brazilian corporate
law, our directors and executive officers cannot vote on any matter in which they have a conflict of interest and such transactions
can only be approved on reasonable and fair terms and under conditions that are no more favorable than the terms and conditions
prevailing in the market or offered by third parties.



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We participate in
the development of real estate ventures with other partners, directly or through related parties, based on the constitutive documents
of condominiums and/or consortia. The management structure of these enterprises and the cash management are centralized in the
lead partner of the enterprise, which manages the construction schedule and budgets. Thus, the lead partner ensures that the investments
of the necessary funds are made and allocated as planned. The sources and uses of resources of the venture are reflected in the
balance sheet of the ventures, reflecting the respective participation percentages of the partners, which are not subject to inflation
adjustments or financial charges and do not have a predetermined maturity date. The average term for the development and completion
of the projects in which the resources are invested is between 24 and 30 months. Please refer to Note 21 to our consolidated financial
statements for further information on balances with related parties.



As of and for the
years ended December 31, 2019, 2018 and 2017, we have not entered into any loan or other type of financing agreement with our directors
or executive officers. In the years ended December 31, 2019, 2018 and 2017, there were no units sold to management members, and
the amount receivable R$0.2 million as of December 31, 2017. There was no amount receivable as of December 31, 2018 and 2019.



C.       Interests of
Experts and Counsel



Not applicable.



ITEM 8. FINANCIAL INFORMATION



A.       Consolidated
Statements and Other Financial Information



For our consolidated
financial statements and notes thereto see “Item 18. Financial Statements.”



Legal Proceedings



We are currently party
to several legal and administrative proceedings arising from the normal course of our business, principally relating to civil,
environmental, tax and labor claims. We establish provisions in our balance sheets relating to potential losses from litigation
based on estimates of probable losses. Brazilian GAAP requires us to establish provisions in connection with probable losses and
we record a provision when, in the opinion of our management, we feel that an adverse outcome in a litigation is probable and a
loss can be estimated. The determination of the amounts provisioned is based on the amounts involved in the claims and the opinion
of external legal counsel.



Civil Claims



As of December 31,
2019, we were a party on 4,420 civil claims, totaling R$685.1 million. Of these claims, we were the plaintiff in 214 actions and
the defendant in 4,206 actions, with aggregate amounts of R$30.8 million and R$654.2 million, respectively. Most of these civil
claims involve ordinary course of business matters relating to the development of our properties, including annulment of contractual
clauses and termination of agreements with the reimbursement of the amounts paid. We have also minority civil claims where we discuss
the resolution of the construction partnership.



As of December 31,
2019, the provisions related to civil claims include R$13.4 million related to lawsuits in which the Company is included as successor
in enforcement actions for judicial and extrajudicial debts, in which the original debtor is a former shareholder of Gafisa, Cimob
Companhia Imobiliária (“Cimob”) or companies that are part of the economic group of Cimob. The plaintiff alleges
that the Company should be liable for the debts of Cimob. We have made judicial deposits amounting to R$26.4 million in connection
with these claims. The Company is filing appeals against all decisions, as it considers that the inclusion of Gafisa in the claims
to be legally unreasonable; these appeals aim at releasing amounts and obtaining the recognition that it cannot be held liable
for the debt of a company that does not have any relationship with Gafisa. The Company has obtained both favorable and unfavorable
decisions on appeal, and the final decision of each pending appeal cannot be predicted at present.



The Company is a plaintiff
in proceedings against Cimob and its former and current controlling shareholders. The Company is seeking (i) restitution of amounts
already paid by the Company in connection with the lawsuits in which the Company is included as successor in enforcement actions
for judicial and extrajudicial debts proceedings in which the original debtor is Cimob and (ii) the recognition of the court that
it does not have any relationship with Cimob and cannot therefore be held liable for the debt of Cimob. The final decision is on
appeal, and cannot be predicted at present.



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As of December 31,
2019, the provision for our civil claims amounted to R$239.5 million.



Environmental Claims



As of December 31,
2019, we were the defendants in certain environmental claims alleging damage to a permanent conservation area and we are currently
not able to estimate the aggregate amount of such claims.



In addition, we are
occasionally party to other administrative environmental inquiries or claims by the Public Prosecution Offices or by other governmental
agencies or third parties. These inquiries may result in public environmental claims against us and the findings in these inquires
may give rise to other administrative and criminal claims. However, based on currently available information, we do not believe
these matters are, or are likely to be in the future, material to our business or financial condition.



In Case No. 0020654-60.2011.4.01.3200,
federal prosecutors (Ministério Público Federal) argue that the company has built one of the towers of “Riviera
da Ponta Building” on Federal Government property, next to a riverbank. The federal prosecutors claimed R$88.3 million in
damages, comprising both environmental liability for construction in an allegedly “protected area” and payoff for the
property. We estimate the probability of the Company to be sentenced to pay R$88.3 million as remote because we believe that the
federal prosecutors’ computations to get this number are unreasonable, since neither the value nor the extension of the area
supposedly invaded are accurate.



As of December 31,
2019, we have made no provisions for environmental claims.



Tax Claims



As of December 31,
2019, we were party to several tax proceedings involving tax liabilities in the aggregate amount of R$142.8 million. As of December
31, 2019, the provision for tax liabilities amounted to R$2.7 million. In addition, we have deposited R$40 million with the court
in connection with some of these proceedings. These amounts take into consideration the tax liabilities of our subsidiaries, in
proportion to our interest in their share capital. The main tax proceedings to which we are a party are described below.



Several municipalities
charge a municipal tax on construction services on an arbitrated basis, which varies depending on the characteristic of the construction.
We have filed lawsuits against the municipalities of São Paulo and São Caetano do Sul to challenge the calculation
of the arbitrated basis on several of our developments under construction. In these proceedings, we deposited R$11 million with
the courts and we are awaiting the final decision.



In 2019, we had favorable
decisions in part of these proceedings, which canceled debts of around R$1.5 million.



In addition, the municipalities
of Rio de Janeiro, Niterói, São Paulo and Santo Andre have issued tax assessments against us. We have filed administrative
defenses and are awaiting the final administrative decisions. The total amount involved in these proceedings is R$11 million.



We filed a lawsuit
against the Brazilian Internal Revenue (Receita Federal) to challenge the increase in the PIS and Cofins rates from 0% to
0.65% and 4%, respectively, on financial income earned by legal entities subject to the non-cumulative regime, on the basis that
in our view, this increase is illegal and unconstitutional. Accordingly, we requested from the Brazilian courts a preliminary injunction
prohibiting the Brazilian Ministry of Finance from collecting the PIS and Cofins contributions on financial revenues. The Brazilian
courts denied our request. We appealed the decision and as of December 31, 2019, we had deposited R$19 million with the court in
connection with the lawsuit, which is pending a final decision.



We are also party
to three proceedings with the Brazilian Internal Revenue (Receita Federal) related to taxes in connection with our stock
options plans, which the Brazilian Internal Revenue (Receita Federal) alleges that we owe. The total amount of the proceedings
is R$38 million, and we have filed our defenses to dismiss these proceedings as we believe we do not owe these taxes. As of the
date of this annual report, the proceedings are still pending and no provisions have been made.



Labor Claims



As of December 31,
2019, we were a defendant in 1,652 labor claims resulting from our ordinary course of business, of which approximately 90% were
filed by outsourced workers and approximately 10% were filed by our



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former employees. The alleged legal bases for these claims mainly
relate to termination benefits, overtime hours, employee relationship and dismissal rights. As of December 31, 2019, the total
value involved in the labor claims filed against us was approximately R$107 million. As of December 31, 2019, the provision for
labor claims amounted to R$34.7 million.



In addition, we are
periodically party to other administrative labor inquiries or claims by the Public Prosecution Offices or by other governmental
agencies or third parties. These inquiries may result in public labor claims against us and the findings in these inquires may
give rise to other claims. However, based on currently available information, we do not believe these matters are, or are likely
to be in the future, material to our business or financial condition.



We have adopted certain
measures to audit third party contractors. The objective of these measures is to evaluate compliance by third party contractors
with labor obligations to their employees. We believe this will help us minimize the risks of potential labor liabilities.



Arbitration



We are also involved
in arbitrations proceedings, commenced by us against a partner seeking to discuss damages suffered in connection with the development
of certain real estate projects, stemming from breach of contract obligations.



In summary the arbitrations
proceedings are:



| | · | Arbitration POLO:
| | - | -----------------



The Company requested
the filing of an Arbitration Procedure before the Mediation and Arbitration Center of the Brazil-Canada Chamber of Commerce, on
July 31, 2018, against Yogo Participações and Empreendimentos Imobiliários S.A. (“Yogo”); Polo
Real Estate Fund of Investments and Holdings and Polo Capital Real Estate Gestão de Recursos Ltda. as Yogo shareholders;
and Comasa - Construtora Almeida de Martins Ltda., in connection with alleged breaches of certain contractual obligations. As of
the date of this annual report, the arbitration is ongoing. The initial provision for this proceeding was R$12,617,783.34. As of
the date of this annual report, Gafisa is seeking the current address of Comasa to notify it of the proceeding in accordance with
the order of the CAM-CCBC President.



| | · | Arbitration BKO:
| | - | ----------------



In October 2013, Gafisa,
SPE 111 and SPE 81 filed an arbitration proceeding against BKO alleging: (i) a default by BKO under the London Ville, Avant Garde
and Vittá construction contracts, due to (i.a.) non-compliance with the physical schedule of the works, and (i.b.) overflow
of the maximum guaranteed price / target cost and / or constructive defects; (ii) unilateral and unjustified termination by BKO
of the Avant Garde and Vittá construction contracts; and (iii) the unenforceability of invoices issued by BKO under the
construction contracts of Avant Garde and Vittá. BKO claims (i) in relation to the London Ville venture, that Gafisa failed
to comply with the MOU signed between the parties to complete the work; (ii) in relation to the Avant Garde project, that Gafisa
never paid the contractual bonus that BKO would be entitled since it has achieved the Target Cost stipulated in the first phase
of the construction contract, which affected the second phase of the contract; (iii) in relation to the Vittá venture, that
Gafisa ceased to pay for the work, which led to the termination of the contract. During the evidence stage of the proceedings,
an accounting and engineering examination was commissioned. The expert examination was completed and, following the hearing of
witnesses that took place on May 9, 2019 and May 10, 2019, the parties presented their final arguments. On November 12, 2019, the
arbitration court ruled partially in favor of Gafisa in order to recognize most of the pleadings. The court also granted part of
BKO’s pleadings. However, the decision needed to be clarified, so Gafisa filed a motion for clarification on November 18,
2019. BKO also filed a motion for clarification on November 20, 2019. Both motions were partially granted and accordingly, Gafisa’s
credit represents R$66.4 million, which is fully recorded in our financial statements, and BKO’s credit represents R$0.9
million.



In parallel, taking
into account possible deviations of capital and assets by BKO, Gafisa requested the seizure of R$59,949,330.66, and the Arbitral
Tribunal granted the seizure of 5% (five percent) of BKO’s net sales and credits arising from a lawsuit filed by BKO (Case
file No. 1068081-53.2015.8.26.0100). The seizure of net sales was later replaced by an attachment over more than 20 real estate
properties belonging to BKO and some affiliated companies. The affiliated companies filed a motion to dismiss the attachment over
their assets. The lower court granted the plaintiffs’ request in limine. In response, Gafisa filed an appeal to the
Court of Appeals in order to reestablish the



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attachment. On February 14, the court of appeals upheld
Gafisa’s appeal, and the attachment was re-established. As of the date of this annual report, the attachment is pending
execution by the respective real estate officer.



As of December 31,
2019, we had not made any provisions for our arbitration claims.



Other Developments



On June 14, 2012,
we received a subpoena from the SEC Division of Enforcement related to the Matter of Certain 20-F Filer Home Builders (HO-11760).
The subpoena requests that we produce all documents from January 1, 2010 to the present related to the preparation of our financial
statements, including, among other things, copies of our financial policies and procedures, board and audit committee and operations
committee minutes, monthly closing reports and financial packages, any documents relating to possible financial or accounting irregularities
or improprieties and internal audit reports. The SEC’s investigation is a non-public, fact-finding inquiry and it is not
clear what action, if any, the SEC intends to take with respect to the information it gathers. The SEC subpoena does not specify
any charges. The Company has already submitted all the information requested by SEC, which as of the publication of these financial
statements has not issued any opinion. We have not received any further notice from the SEC after delivering the requested information
in the first half of 2012.



On July 31, 2012,
we received a letter from the CVM: CVM/SEP/GEA-5/ Letter No. 208/2012, requesting information related to criteria for measurement
and recognition of revenue and enhancement in the disclosure of some notes to our financial information. We have already provided
all the information requested by the CVM. In addition, on February 19, 2013, we received a letter from the CVM: CVM/SEP/GEA-5/
Letter No. 040/2013 recommending enhancements to the notes to our financial statements regarding the percentage of assets by venture
that is included in the structures of equity segregation of the purchase.



On July 11, 2013,
the Company received CVM/SEP/GEA-5 Letter No. 240/2013, which requested information on the criteria for measuring and recognizing
revenues. The Company has already provided all the information requested by CVM. On November 2013, we received a letter from the
CVM: SEP/GEA-5/no 362/2013, requesting information related to some control deficiencies. We have already provided all the information
requested by the CVM.



The CVM letters listed
above led to administrative proceeding “Processo Administrativo Sancionador No RJ2014-9034” involving Wilson Amaral
de Oliveira and Alceu Duilio Calciolari, former executive officers of the Company, and André Bergstein, former chief financial
officer of the Company.



Wilson Amaral de Oliveira,
Alceu Duilio Calciolari and André Bergstein presented their defenses on December 8, 2014, and submitted first proposals
to enter into leniency agreements (termos de compromisso) on January 1, 2015, followed by second proposals in August 2017,
which were approved by the CVM and entered into in September 2017.



Pursuant to the leniency
agreements, Wilson Amaral de Oliveira, Alceu Duilio Calciolari and André Bergstein were required to pay certain administrative
fines, which they duly paid and following which administrative proceeding No RJ2014-9034 with the CVM was closed.



Dividend Policy



The amount of any
of our distributions of dividends and/or interest on shareholders’ equity will depend on a series of factors, such as our
financial conditions, prospects, macroeconomic conditions, tariff adjustments, regulatory changes, growth strategies and other
issues our board of directors and our shareholders may consider relevant, as discussed below.



Amounts Available for Distribution



At each annual general
shareholders’ meeting, our board of directors is required to propose to our shareholders how our earnings of the preceding
fiscal year are to be allocated. For purposes of Brazilian corporate law, a company’s income after federal income tax for
such fiscal year, net of any accumulated losses from prior fiscal years and amounts allocated to debentures, employees’ and
management’s participation in earnings and founders’ shares, represents its “net income” for such fiscal
year. In accordance with Brazilian corporate law, an amount equal to the company’s “net income” may be affected
by the following:



| | · | reduced by amounts allocated to the legal reserve;
| | - | --------------------------------------------------



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| | · | reduced by amounts allocated to any statutory reserve;
| | - | ------------------------------------------------------



| | · | reduced by amounts allocated to the contingency reserve, if any;
| | - | ----------------------------------------------------------------



| | · | reduced by amounts allocated to the tax incentives reserve;
| | - | -----------------------------------------------------------



| | · | reduced by amounts allocated to the investment reserve;
| | - | -------------------------------------------------------



| | · | increased by reversals of contingency reserves recorded in prior years; and
| | - | ---------------------------------------------------------------------------



| | · | increased by amounts allocated to the investment reserve, when realized and if not absorbed by
losses.
| | - | ------------------------------------------------------------------------------------------------------



Our calculation of
net income and allocation of funds to our reserves for any fiscal year are determined on the basis of our audited unconsolidated
financial statements for the immediately preceding fiscal year.



Allocation of Net Income



According to Brazilian
corporate law, we have two types of reserve accounts: (1) profit reserves and (2) capital reserve.



Profit Reserves



Our profit reserves
consist of the following:



| | · | Legal Reserve. Under Brazilian corporate law and our by-laws, we are required to maintain
a legal reserve to which we must allocate 5% of our net income for each fiscal year until the aggregate amount of such reserve
equals 20% of our share capital. However, we are not required to make any allocations to our legal reserve in a fiscal year in
which the legal reserve, when added to our other established capital reserves, exceeds 30% of our total share capital. The portion
of our net income allocated to our legal reserve must be approved by our annual general shareholders’ meeting and the balance
of such reserve may only be used to increase our share capital or to absorb losses, but is unavailable for the payment of dividends.
As of December 31, 2019, there was no amount allocated to our legal reserve.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Statutory Reserve. Under Brazilian corporate law, we are permitted to provide for the allocation
of part of our net income to discretionary reserve accounts that may be established in accordance with our bylaws. The allocation
of our net income to discretionary reserve accounts may not be made if it serves to prevent distribution of the mandatory distributable
amount. According to our bylaws, up to 71.25% of our net income may be allocated to an investment reserve to finance the expansion
of our activities and the activities of our controlled companies by subscribing for capital increases, creating new projects or
participating in consortia or any other type of association to achieve our corporate purpose. The allocation of this reserve cannot
jeopardize the payment of the mandatory dividends. This statutory reserve is established in accordance with our bylaws as an investment
reserve, and such reserve may not exceed 80% of our share capital. As of December 31, 2019, there was no amount allocated to our
statutory reserve.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Contingency Reserve. Under Brazilian corporate law, a percentage of our net income may be
allocated to a contingency reserve for anticipated losses that are deemed probable in future years. Management must indicate the
cause of the anticipated loss and justify the establishment of the reserve for allocation of a percentage of our net income. Any
amount so allocated in a prior year either must be reversed in the year in which the justification for the loss ceases to exist
or charged off in the event that the anticipated loss occurs, whose value can be estimated. The allocations to the contingency
reserve are subject to the approval of our shareholders in a general shareholders’ meeting. As of December 31, 2019, there
was no amount allocated to our contingency reserve.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Non-realized Profit Reserve. Under Brazilian corporate law, the amount by which the mandatory
distributable amount exceeds the “realized” net income in a given fiscal year, as proposed by the board of directors,
the excess may be allocated to the investment reserve. Brazilian corporate law defines “realized” net profits as the
amount by which net profits exceed the sum of (1) the net positive results, if any, from the equity method of accounting and (2)
the net profits, net gains or net returns resulting from transactions or the
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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accounting
of assets and liabilities based on their market value, to be received after the end of the following fiscal year. All amounts allocated
to the non-realized profit reserve must be paid as mandatory dividends when those “non-realized” profits are realized
if they have not been designated to absorb losses in subsequent periods. As of December 31, 2019, there was no amount allocated
to our non-realized profit reserve.



| | · | Retained Earnings Reserve. Under Brazilian corporate law, a portion of our net income may
be reserved for investment projects in an amount based on a capital expenditure budget approved by our shareholders. If such budget
covers more than one fiscal year, it might be reviewed annually at the general shareholders’ meeting. The allocation of this
reserve cannot jeopardize the payment of the mandatory dividends. As of December 31, 2019, there was no amount allocated to our
retained earnings reserve.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Capital Reserves



The capital reserve
is formed by (a) amounts received by shareholders in excess of the par value of shares issued (premium on capital stock), as well
as the part of the issue price of the shares with no par value that exceeds the amount intended to form the capital stock; and
(b) proceeds from the sale of founders’ shares and warrants. Under Brazilian corporate law, capital reserve may only be applied
to: (1) absorb losses that exceed accumulated earnings and revenue reserves; (2) redeem, reimburse or buy our own shares; and (3)
increase our share capital.



Mandatory Distribution of Dividends



Brazilian corporate
law generally requires that the bylaws of each Brazilian company specify a minimum percentage of the amounts available for distribution
by such company for each fiscal year that must be distributed to shareholders as dividends or as interest on shareholders’
equity, also known as the mandatory dividend.



The mandatory dividend
is based on a percentage of adjusted net income, rather than a fixed monetary amount per share. Under our bylaws, at least 25%
of our net income, as calculated under Brazilian GAAP and adjusted under Brazilian corporate law (which differs significantly from
net income as calculated under U.S. GAAP), for the preceding fiscal year must be distributed as a mandatory dividend. Adjusted
net income means the distributable amount before any deductions for profit retention and statutory reserves.



Under Brazilian corporate
law, however, we are allowed to suspend the distribution of the mandatory dividends in any year in which our board of directors
report to our general shareholders’ meeting that the distribution would be inadvisable in view of our financial condition.
Such suspension is subject to the approval at the shareholders’ meeting and review by members of the fiscal council. Our
board of directors must file a justification for such suspension with the CVM within five days of the relevant general shareholders’
meeting. If the mandatory dividend is not paid, the unpaid amount shall be attributed to a special reserve account. If not absorbed
by subsequent losses, those funds shall be paid out as dividends as soon as the financial condition of the company permits.



The mandatory dividend
may also be paid in the form of interest attributable to shareholders’ equity, which is considered to be a deductible financial
expense for purpose of calculating our income and social contribution tax obligations, provided that certain requirements are met.
See “Item 10. Additional Information—E. Taxation” for further information.



Payment of Dividends



We are required by
Brazilian corporate law and our bylaws to hold an annual general shareholders’ meeting within the first four months following
the end of each fiscal year, at which time, among other things, the shareholders have to decide on the allocation of the results
from the preceding year and on the payment of dividends based on our financial results from the previous fiscal year.



Under Brazilian corporate
law, dividends are generally required to be paid to the holder of record on the date of the dividend declaration date within 60
days following the date the dividend was declared, unless a shareholders’ resolution sets forth another date of payment,
which, in either case, must occur within the fiscal year in which such dividend was declared. A shareholder has a three-year period
from the date of the dividend payment to claim dividends, which do not bear interest and are not monetarily restated, after which
the aggregate amount of any unclaimed dividends shall legally revert to us.



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Our board of directors
may declare interim dividends to be deducted from the retained earnings or profit reserves in our semi-annual or annual financial
statements. In addition, our board of directors may pay dividends from our net income based on our net income registered on semi-annual
or quarterly balance sheet. The dividends paid in each semester may not exceed the amounts accounted for in our capital reserve
accounts. Any payment of interim dividends may be set off against the amount of mandatory dividend relating to the net profit earned
in the year in which the interim dividends were paid.



In general, shareholders
who are not residents of Brazil must register their equity investment with the Central Bank to have dividends, sales proceeds or
other amounts with respect to their shares eligible to be remitted outside of Brazil. The common shares underlying the ADSs are
held in Brazil by Banco Itaú S.A., also known as the custodian, as agent for the depositary, who is the registered owner
on the records of the registrar for our shares. The depositary registers the common shares underlying the ADSs with the Central
Bank and, therefore, it is possible to have dividends, sales proceeds or other amounts with respect to the common shares remitted
outside Brazil.



Payments of cash dividends
and distributions, if any, are made in reais to the custodian on behalf of the depositary, which then converts such proceeds
into U.S. dollars and causes such U.S. dollars to be delivered to the depositary for distribution to holders of ADSs. In the event
that the custodian is unable to convert immediately the reais received as dividends into U.S. dollars, the amount of U.S.
dollars payable to holders of ADSs may be adversely affected by any depreciation of the real that occurs before the dividends are
converted. Under current Brazilian tax law, dividends paid to persons who are not Brazilian residents, including holders of ADSs,
will not be subject to Brazilian withholding tax, except for dividends declared based on profits generated prior to December 31,
1995, which will be subject to Brazilian withholding income tax at varying tax rates. See “Item 10. Additional Information—E.
Taxation.”



Holders of ADSs have
the benefit of the electronic registration obtained from the Central Bank, which permits the depositary and the custodian to convert
dividends and other distributions or sales proceeds with respect to the common shares represented by ADSs into foreign currency
and remit the proceeds outside of Brazil. In the event the holder exchanges the ADSs for common shares, the holder will be entitled
to continue to rely on the depositary’s certificate of registration for five business days after the exchange. Thereafter,
in order to convert foreign currency and remit outside of Brazil the sales proceeds or distributions with respect to the common
shares, the holder must obtain a new certificate of registration in its own name that will permit the conversion and remittance
of such payments through the commercial exchange rate market.



Under current Brazilian
legislation, the Brazilian government may impose temporary restrictions of foreign capital abroad in the event of a serious imbalance
or an anticipated serious imbalance of Brazil’s balance of payments. See “Item 3. Key Information—D. Risk Factors—Risks
Relating to Our Common Shares and the ADSs.”



Interest on Equity



Under the Brazilian
tax legislation effective January 1, 1996, Brazilian companies are permitted to pay “interest” to holders of equity
securities and treat such payments as a deductible financial expense for Brazilian income tax purposes and, from 1997, for social
contribution on net profit purposes. The purpose of the tax law change is to encourage the use of equity investment, as opposed
to debt, to finance corporate activities. Payment of such interest may be made at the discretion of our board of directors. The
amount of any such notional “interest” payment to holders of equity securities is generally limited in respect of any
particular year to the greater of:



| | · | 50% of net income (after the deduction of the provisions for social contribution on net profits
but before taking into account the provision for corporate income tax and the interest attributable to shareholders’ equity)
for the period in respect of which the payment is made; or
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | 50% of the sum of retained earnings and profit reserves as of the beginning of the year in respect
to which such payment is made.
| | - | ---------------------------------------------------------------------------------------------------------------------------------



For tax deduction
purposes, the rate applied in calculating interest attributable to shareholders’ equity cannot exceed the pro rata die
variation of the Long Term Interest Rate (Taxa de Juros de Longo Prazo), or TJLP, as determined by the Central Bank from
time to time.



For accounting purposes,
although the interest should be reflected in the statement of operations for tax deduction, the charge is reversed before the calculation
of the net income in the statutory financial statements and deducted from



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the shareholders’ equity in the same way as the dividend.
Please refer to “Item 10. Additional Information—E. Taxation—Brazilian Tax Considerations—Income—Interest
on Shareholders’ Equity” below for a discussion of tax consequences related to the receipt of payments of interest
attributable to shareholders’ equity by a non-resident holder of our common shares or ADSs.



The amount distributed
to shareholders as interest attributable to equity, net of any withholding tax, may be included as part of the minimum mandatory
dividend. In accordance with applicable law, we are required to pay to shareholders an amount sufficient to ensure that the net
amount they receive in respect of interest attributable to shareholders’ equity, after payment of the applicable withholding
tax, plus the amount of declared dividends, is at least equivalent to the amount of the minimum mandatory dividend. A shareholder
has a three-year period from the date of the interest payment to claim interest attributable to equity, after which the aggregate
amount of any unclaimed interest shall legally revert to us.



If a payment of interest
on equity is recorded at net value as part of a mandatory dividend, we will pay the income tax on behalf of our shareholders at
the time the payment is distributed. Otherwise, the income tax will be paid by the shareholders, subject to our obligation to retain
and collect taxes on the payment.



History of Payment of Dividends and Interest on Equity



In 2015, we did not
distribute any dividends related to fiscal year 2014.



On April 25, 2016,
we approved the payment of dividends in the total amount of R$17.7 million, or R$0.048 per share (excluding treasury shares) for
fiscal year 2015. The dividends were distributed on December 22, 2016, as approved by a meeting of the board of directors held
on December 16, 2016.



In 2016, we did not
distribute any dividends related to fiscal year 2015.



In 2017, we did not
distribute any dividends related to fiscal year 2016.



In 2018, we did not
distribute any dividends related to fiscal year 2017.



In 2019, we did not
distribute any dividends related to fiscal year 2018.



B.       Significant
Changes



None.



ITEM 9. THE OFFER AND LISTING



A.       Offer and Listing
Details



Our common shares
started trading on the B3 on February 17, 2006 and the ADSs started trading on the NYSE on March 16, 2007. The last day for trading
of our ADSs on the NYSE was December 14, 2018.



On November 26, 2018,
our Board of Directors approved the voluntary delisting of our ADSs from the NYSE and a proposal to maintain our ADR facility as
a Level 1 ADR program to enable investors to retain their ADSs. On December 7, 2018, we filed a Form 25 with the SEC to effect
the delisting of the ADSs, and sent a copy to the NYSE on the same day. The last day of trading on NYSE for our ADSs was December
14, 2018, and our ADSs were delisted from the NYSE on December 17, 2018. Our ADSs remain eligible for trading in the over-the-counter
markets in the United States, and our common shares will continue to be listed and admitted to trading in the Novo Mercado segment
of the B3. In addition to the information we are required to report under applicable Brazilian regulations, we intend to continue
publishing English translations of our annual report, interim results and communications on our investor relations website at (www.ri.gafisa.com.br),
in accordance with Rule 12g3-2(b) under the Exchange Act.



We are part of the
IbrX-100, an index measuring the total return on a theoretical portfolio composed of 100 stocks selected among B3’s most
actively traded securities. Additionally, we are part of the MSCI Emerging Markets Index, which is a free float-adjusted market
capitalization index that is designed to measure equity market performance in the global emerging markets. Through the inclusion
on these indices, our stock has expanded opportunity for increased liquidity.



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We are part of the
following indices of the Brazilian stock market:



| | · | IBRA: This index comprises all stocks actively traded on the cash market operated by B3 that have
a certain minimum liquidity and active trading criteria;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | IBRX 100: This index measures the average stock performance of the 100 most actively traded stocks
of the Brazilian stock market.
| | - | ---------------------------------------------------------------------------------------------------------------------------------



| | · | ICON: This index measures the average stock performance of the more actively traded cyclical and
non-cyclical consumer stocks.
| | - | ------------------------------------------------------------------------------------------------------------------------------



| | · | IMOB: This index is a real estate sector index covering B3’s most actively traded securities;
| | - | ---------------------------------------------------------------------------------------------



| | · | IGCX: This index comprises all stocks trading on the Novo Mercadoand Levels 1 and 2 of
the B3;
| | - | ----------------------------------------------------------------------------------------------



| | · | IGCT: The stocks that comprise this index are selected as constituents of the Special Corporate
Governance Equity Index (IGC) to the extent they meet certain additional membership criteria;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | IGC-NM: This index comprises stocks listed for trading on the Novo Mercado segment of the B3;
| | - | ---------------------------------------------------------------------------------------------



| | · | ITAG: This index comprises stocks which give minority shareholders enhanced tag-along rights protection
in addition to the protection required by law in the event of a change of control;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | SMLL: This index comprises small capitalization stocks; and
| | - | -----------------------------------------------------------



| | · | INDX: This index was developed to measure the performance of the most representative companies
of the industrial sector, an important segment of the Brazilian economy. Its theoretical portfolio is composed by the industry’s
most representative stocks, which are selected among B3’s most actively traded securities.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



B.       Plan of Distribution



Not applicable.



C.       Markets



Our common shares
are listed on the B3 under the symbol “GFSA3,” and they trade OTC under the symbol “GFSAY.”



Trading on the B3



Trading on the São
Paulo Stock Exchange is conducted every business day, from 10:00 a.m. to 5:00 p.m. or 6:00 p.m. (depending on the time of the year),
on an electronic trading system called the PUMA Trading System (“PUMA”). Trading is also conducted between 5:30 p.m.
(or 6:30 p.m.) and 6:00 p.m. (or 7:00 p.m.), on an online system connected to PUMA and Internet brokers called the “after
market” The “after-market” trading is scheduled after the close of principal trading sessions, when investors
may send purchase and sell orders and trade through the home broker system. This after-market trading is subject to regulatory
limits on price volatility of securities traded by investors operating on the Internet.



The CVM and the B3
have discretionary authority to suspend trading in shares of a particular issuer under certain circumstances. Trading in securities
listed on the B3, including the Novo Mercado, Bovespa Mais, Bovespa Mais Nível 2 and Levels 1 and 2 segments, may
be effected off the exchanges in the unorganized over-the-counter market in certain circumstances.



The shares of all
companies listed on the B3, including the Novo Mercado, Bovespa Mais, Bovespa Mais Nível 2 and Level 1 and Level
2 companies, are traded together.



Settlement of transactions
occurs three business days after the trade date, without adjustments to the purchase price. Delivery of and payment for shares
are made through the facilities of separate clearing houses for each exchange, which maintain accounts for brokerage firms, the
Central Securities Depository of the B3 (Central Depositária de



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Ativos da B3). The seller is ordinarily required to deliver
the shares to the B3 clearing house on the second business day following the trade date.



In order to maintain
control over the fluctuation of the B3 index, the B3 has adopted a “circuit breaker” system pursuant to which trading
sessions may be suspended for a period of 30 minutes or one hour whenever specified indices of the B3 fall below the limits of
approximately 10% and 15%, respectively, in relation to the closing index levels for the previous trading session.



Although the Brazilian
equity market is the largest in Latin America in terms of capitalization, it is smaller and less liquid than the major U.S. and
European securities markets. The B3 is significantly less liquid than other major exchanges in the world. As of December 31, 2019,
the average daily trading for all companies listed on B3, the only Brazilian stock exchange, represented approximately R$4.3 billion,
according to B3 data. Although any of the outstanding shares of a listed company may trade on the B3, in most cases fewer than
half of the listed shares are actually available for trading by the public, the remainder being held by small groups of controlling
persons, by government entities or by one main shareholder. The relative volatility and illiquidity of the Brazilian securities
markets may substantially limit your ability to sell the common shares at the time and price you desire and, as a result, could
negatively impact the market price of these securities.



Trading on Brazilian
stock exchanges by non-residents of Brazil is subject to registration procedures. See “—Investment in Our Common Shares
by Non-Residents of Brazil.”



Regulation of Brazilian Securities Markets



The Brazilian securities
markets are mainly governed by Law No. 6,385, of December 7, 1976, Law No. 4,728, of July 14, 1965 and Brazilian corporate law,
each as amended and supplemented, and by regulations issued by the CVM, which has authority over stock exchanges and the securities
markets generally; the CMN; and the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates
foreign investment and foreign exchange transactions.



These laws and regulations,
among others, provide for licensing and oversight of brokerage firms, governance of the Brazilian stock exchanges, disclosure requirements
applicable to issuers of traded securities, restrictions on price manipulation and protection of minority shareholders. They also
provide for restrictions on insider trading. However, the Brazilian securities markets may not be considered to be as highly regulated
and supervised as the U.S. securities markets or securities markets in some other jurisdictions. Accordingly, any trades or transfers
of our equity securities by our officers and directors, our controlling shareholders or any of the officers and directors of our
controlling shareholders must comply with the regulations issued by the CVM. See “Item 10. Additional Information—B.
Memorandum and Bylaws—Disclosure Requirements.”



We have the option
to ask that trading in our securities on the B3 be suspended in anticipation of a material announcement. Trading may also be suspended
on the initiative of the B3 or the CVM, based on or due to, among other reasons, a belief that a company has provided inadequate
information regarding a material event or has provided inadequate responses to inquiries by the CVM or the B3.



Under Brazilian corporate
law, a corporation is either publicly held, as we are, or closely held. All public companies are registered with the CVM and are
subject to reporting requirements. A company registered with the CVM may trade its securities either on the B3, if it has registered
to have its securities traded at the B3, or on the Brazilian over-the-counter market. The shares of a listed company may also be
traded privately, subject to several limitations. Our common shares are listed on Novo Mercado segment of the B3.



The Brazilian over-the-counter
market consists of direct trades between individuals in which a financial institution registered with the CVM (and in the relevant
over the counter market) serves as intermediary. The Brazilian over-the-counter market is divided into two categories: (i) an organized
over the counter market, in which the transactions are supervised by self-regulating entities authorized by the CVM; and (ii) a
non-organized over the counter market, in which the transactions are not supervised by self-regulating entities authorized by the
CVM. In either case, transactions are directly traded outside of the stock exchange market, through a financial institution authorized
by the CVM. No special application, other than registration with the CVM, is necessary for securities of a public company to be
traded in this market. The CVM requires that it be given notice of all trades carried out in the Brazilian over-the-counter market
by the respective intermediaries.



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Investment in Our Common Shares by Non-Residents of Brazil



Portfolio Investment



Investors residing
outside Brazil are authorized to purchase equity instruments, including our common shares, in the form of foreign portfolio investments
on the B3, provided that they comply with the registration requirements set forth in (i) CVM Instruction No. 560, published on
March 25, 2015, which revoked CVM Instruction No. 325 and (ii) Resolution No. 4,373 of September 29, 2014, issued by CMN (“Resolution
No. 4,373”).



With certain exceptions,
Resolution No. 4,373/14 investors are permitted to carry out any type of transaction in the Brazilian financial capital market
involving a security traded on a stock, futures or organized over-the-counter market authorized by the CVM. Investments and remittances
outside Brazil of gains, dividends, profits or other payments under our common shares are made through the foreign exchange market.
See “Item 10. Additional Information—D. Exchange Controls.”



In order to become
a Resolution No. 4,373/14 investor, an investor residing outside Brazil must:



| | · | appoint a representative in Brazil with powers to take actions relating to the investment (before
CVM, Central Bank and other regulatory entities) and to receive judicial notifications;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | appoint an authorized custodian in Brazil for the investments, which must be a financial institution
duly authorized by the Central Bank and CVM;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



| | · | appoint a tax representative in Brazil;
| | - | ---------------------------------------



| | · | through its representative in Brazil, register itself as a foreign investor with the CVM and the
Central Bank; and
| | - | ------------------------------------------------------------------------------------------------------------------



| | · | through its representative in Brazil, register itself with the Brazilian Internal Revenue (Receita
Federal) pursuant to Regulatory Instruction No. 1,470 of May 30, 2014, and Regulatory Instruction No. 1,548 of February 13,
2015, as the case may be.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Securities and other
financial assets held by foreign investors pursuant to Resolution No. 4,373/14 must be registered or maintained in deposit accounts
or under the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading by foreign investors
is generally restricted to transactions carried out in the Brazilian stock exchanges or in organized over-the-counter markets licensed
by the CVM. Therefore, as a general rule, no private sale of securities and other financial assets held by foreign investors pursuant
to Resolution No. 4,373/14 are permitted.



Foreign Direct Investment



Foreign direct investors
under Law No. 4,131/62 may sell their shares in both private or open market transactions, but these investors will generally be
subject to less favorable tax treatment on gains as compared to foreign portfolio investors.



A foreign direct investor
under Law No. 4,131/62 must:



| | · | register itself as a foreign direct investor and the investment with the Central Bank;
| | - | --------------------------------------------------------------------------------------



| | · | obtain a taxpayer identification number from the Brazilian tax authorities;
| | - | ---------------------------------------------------------------------------



| | · | appoint a tax representative in Brazil; and
| | - | -------------------------------------------



| | · | appoint a representative in Brazil for service of process in respect of suits based on Brazilian
corporate law.
| | - | ---------------------------------------------------------------------------------------------------------------



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Depositary Receipts



Resolution No. 4,373/14,
which revoked Resolutions No. 1,927/92 and 3,845/10 of the CMN, regulates the issuance of depositary receipts in foreign markets
in connection with shares of Brazilian issuers. Our ADSs program was approved by the CVM on March 8, 2007.



If a holder of ADSs
decides to exchange ADSs for the underlying common shares, the holder may (1) sell the common shares on the B3 and rely on the
depositary’s electronic registration for five business days from the date of the exchange to obtain and remit U.S. dollars
abroad upon the holder’s sale of our common shares; (2) convert its investment into a foreign portfolio investment under
Resolution No.4,373/14, subject to simultaneous foreign exchange transactions (without actual inflow or outflow of funds); or (3)
convert its investment into a foreign direct investment under Law No. 4,131/62, subject to simultaneous foreign exchange transactions.



If a holder of ADSs
wishes to convert its investment into either a foreign portfolio investment under Resolution No. 4,373/14 or a foreign direct investment
under Law No. 4,131/62, it should first comply with such regulations, obtaining his own foreign investor registration with the
Central Bank or with the CVM as the case may be, in advance of exchanging the ADSs for common shares and of executing the simultaneous
foreign exchange agreements.



The custodian is permitted
to update the depositary’s electronic registration to reflect conversions of foreign portfolio investments under Resolution
No. 4,373/14 into ADSs. If a foreign direct investor under Law No. 4,131/62 wishes to deposit its shares into the ADR program in
exchange for ADSs, such holder will be required to execute simultaneous foreign exchange transactions and to present to the custodian
evidence of payment of the applicable taxes. Please refer to “Item 10. Additional Information—E. Taxation—Brazilian
Tax Considerations” for a description of the tax consequences to an investor residing outside Brazil of investing in our
common shares in Brazil.



D.       Selling Shareholders



Not applicable.



E.       Dilution



Not applicable.



F.       Expenses of
the Issue



Not applicable.



ITEM 10. ADDITIONAL INFORMATION



A.       Share Capital



Not applicable.



B.       Memorandum
and Bylaws



Registration



We are currently a
publicly-held company incorporated under the Laws of Brazil, registered with the Board of Trade of the State of São Paulo
(JUCESP) under NIRE 35300147952 and with the CVM under No. 01610-1, and enrolled with the Brazilian Taxpayer’s Authorities
under CNPJ/MF No. 01,545,826/0001-07.



Corporate Purposes



Article 3 of our bylaws
provides that our corporate purpose is to: (1) promote and develop any type of real estate project, whether our own or that of
a third party, in the latter case as a contractor and agent; (2) purchase and sell any type of real estate; (3) perform civil construction
and provide civil engineering services; and (4) develop and implement marketing strategies for any type of real estate project,
whether our own or that of a third party. In addition, we may participate in companies that are not affiliated to us in Brazil
and outside of Brazil.



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Issued Share Capital



As of December 31,
2019, our share capital was R$ 2.926.280.318,14, all of which was fully subscribed
and paid-in. Our share capital was comprised of 120,000,000 registered, book-entry common shares, without par value. Under our
bylaws, our board of directors may increase our share capital to the limit of our authorized capital by issuing up to 120,000,000
common shares without the need of specific shareholder approval. Our shareholders must approve any capital increase above that
amount at a shareholders’ general meeting. Pursuant to the agreement entered into with the B3 for the listing of our shares
on the Novo Mercado, we are not permitted to issue preferred shares.



On March 15, 2019
the Company received a letter signed by Planner Corretora de Valores S.A. and Planner Redwood Asset Management Administração
de Recursos Ltda. (both jointly known as “Planner”), in the capacity of administrators of investment funds holding
18.55% of the Company’s capital stock, requesting the Board of Directors of the Company to convene an Extraordinary General
Meeting (“EGM”) pursuant to article 123 of the Brazilian Corporation Law to increase the Company’s authorized
capital, from the then 71,031,876 (seventy-one million, thirty-one thousand, eight hundred and seventy-six) common shares to 120,000,000
(one hundred and twenty million) common shares, with the consequent amendment of article 6 of the Company’s Bylaws. The Meeting
was held on April 15, 2019, and the Shareholders approved the increase in the authorized capital to 120,000,000.



Novo Mercado



Our shares were accepted
for trading on the Novo Mercado on February 17, 2006. A voluntary delisting from the Novo Mercado must be preceded
by a public tender offer, pursuant to the rules applicable to the cancellation of the registration as a public company. See “—Delisting
from the Novo Mercado.” In the Novo Mercado, listed companies are required to, among others, (1) only issue
common shares, (2) maintain a minimum free float equal to at least 25% of the company’s capital stock (or 15% of the company’s
capital stock, provided its Average Daily Trading Volume (ADTV) remains equal to or greater than R$25,000,000.00), (3) detail and
include additional information in the quarterly information and (4) make available the annual financial statements in English and
based on international accounting standards.



The rules imposed
by the Novo Mercado aim at providing transparency in relation to the activities and economic situation of the companies
to the market, as well as more power to the minority shareholders in the management of the companies, among other rights. The main
rules relating to the Novo Mercado, to which the company is subject, are summarized below.



According to CMN Resolution
No. 3,792 of September 24, 2009, which governs the closed complementary social security entities’ investment policy (Entidades
Fechadas de Previdência Complementar — EFPC), such pension funds may invest up to 70% of its variable income investment
portfolio (in which are included corporate stakes) in publicly held companies listed in the Novo Mercado, which may, therefore,
improve the development of this corporate governance segment, benefiting the companies listed therein, taking into account the
immense financial equity held by such pension funds in Brazil.



Authorization for Trading in the Novo Mercado



Firstly, the company
that is authorized to list its securities on the Novo Mercado of B3 shall keep its listed company registry with the CVM
updated, which allows the trading of the company’s common shares at the stock market. The Listing Rules of the Novo Mercado
were revised in 2017 and the rules are in full force and effect since January 2, 2018. We have adapted our bylaws to the new rules
of the Novo Mercado, at the General Shareholders Meeting dated of April 24, 2018.



According to the Listing
Rules of the Novo Mercado, the company willing to negotiate its securities on the Novo Mercado shall, among other
conditions: (1) along with its controlling shareholder (if any), execute a Listing Agreement in the Novo Mercado; (2) adapt
its bylaws to comply with the minimum requirements determined in the Listing Rules of the Novo Mercado; and (3) the capital
of the company shall be exclusively divided into common shares and a minimum free float equal to 25% of the capital stock (or 15%
of the company’s capital stock, provided its Average Daily Trading Volume (ADTV) remains equal to or greater than R$25,000,000.00)
shall be maintained by the company. The existence of founders’ shares by the companies listed on the Novo Mercado
is prohibited.



In addition to the
previous requirements, the company’s bylaws may not (1) establish any provision which restricts the number of votes of any
shareholder or group of shareholders (as defined in the Listing Rules of the Novo Mercado)



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to a percentage inferior to 5% of the company’s corporate
capital, (2) determine qualified quorums for matters submitted for the approval of the shareholders’ general meetings, except
as provided by law, nor (3) restrict or establish any encumbrance to shareholders who vote favorably to the suppression or amendment
of any provision of the company’s bylaws.



Board of Directors



The board of directors
of companies authorized to have their shares traded on the Novo Mercado shall be comprised of at least five members, of
which at least 20% or 2 members, whichever is greater, shall be independent, as defined in the Listing Rules of the Novo Mercado.
The members of the board of directors shall be elected by a shareholders’ general meeting for a maximum two-year term of
office, and are eligible for reelection. All new members of the board of directors, of the board of officers and of the fiscal
council shall, before taking office, undertake to comply with the arbitration clause in the bylaws.



The positions of chairman
of the board of directors and of chief executive officer may not be held by the same person, except in the event of vacancy, for
a maximum period of one year. Any cumulation of positions in this sense, as well as steps being taken to cease such cumulation,
must be disclosed by the company.



The board of directors
shall always disclose to the market an opinion regarding any tender offer of the company’s shares, informing, among others,
their position on the convenience and consequences of such offer in respect to (a) the interests of the company and of the shareholders
regarding the price and the potential impact on the liquidity of such securities held by the shareholders, (b) the strategic plans
disclosed by the offering shareholder with regard to the company and (c) any alternatives to the acceptance of the tender offer
available in the market. Additionally, the board of directors shall always emphasize that each shareholder is responsible for the
final decision regarding the acceptance or not of such tender offer.



Other Novo Mercado Characteristics



Novo Mercado
rules cover other areas designed to foster high levels of corporate governance and market transparency. Companies are required
to keep the minimum stock percentage floating in the market in order to foster dispersion of share ownership. In addition, companies
are obliged to assign tag-along rights to their shareholders in order to ensure equal treatment if a controlling shareholder sells
its controlling stake.



The Novo Mercado
rules require companies to provide information on the number of shares held by the controlling shareholder, if any, in addition
to other information required by the Listing Rules of the Novo Mercado. Companies are also required to give more disclosure
regarding related party transactions in which a company may be involved. The Listing Rules of the Novo Mercado also require
companies to prepare and disclose to B3 and to the market a Securities Negotiation Policy applicable at least to the company, its
controlling shareholders, directors, officers, members of the fiscal council and members of other committees, as well as a Code
of Conduct establishing the company’s principles and values regarding its relationship with its management, employees, service
providers and any person or entity with which the company maintains any relation. Pursuant to Novo Mercado rules, the company
also needs to structure and disclose a process for evaluating the board of directors, its committees and officers.



Finally, the company,
controlling shareholders, other shareholders, directors, officers and members of a company’s fiscal council are required
to submit to arbitration any disputes that may arise relating to their status as issuer, shareholders, management and fiscal council
members, especially in light of the provisions of Law 6,385/76, Law 6,404/76, the company’s bylaws, the rules issued by the
National Monetary Council, the Central Bank of Brazil and CVM, as well as other rules applicable to the securities market in general,
Listing Rules of the Novo Mercado, other rules and regulations established by B3, and the Novo Mercado participation
agreement. The arbitrations shall take place before the Market Arbitration Chamber established by the B3 and shall be conducted
in accordance with the Rules of the Market Arbitration Chamber.



Company Management



We are managed by
a board of directors (Conselho de Administração) and a board of officers (Diretoria). See “Item
6. Directors, Senior Management and Employees—C. Board Practices.”



The members of the
board of directors and of the board of officers must be individuals, provided that the latter must also be Brazilian residents.



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Conflict of Interests



According to Brazilian
corporate law a director or an officer shall not take part in any corporate transaction in which he/she has an interest which conflicts
with the interest of the company. In this case, he/she shall disclose his/her disqualification to the other directors or officers
and shall cause the nature and extent of his/her interest to be recorded in the minutes of the board of directors or board of officers’
meeting, as the case may be.



With due compliance
with the rules above relating to conflict of interests, a director or an officer may only contract with the company under reasonable
and fair conditions, identical to those which prevail in the market or under which the corporation would contract with third parties.
Any business contracted otherwise is voidable and the director or the officer concerned shall be obliged to transfer to the corporation
all benefits which he/she may have obtained in such business.



According to Brazilian
corporate law, a director or officer may not:



| | · | perform any act of generosity to the detriment of the company;
| | - | --------------------------------------------------------------



| | · | without prior approval of the shareholders’ general meeting or the board of directors, borrow
money or property from the company or use its property, services or take advantage of its standing for his/her own benefit, for
the benefit of a company in which he/she has an interest or for the benefit of a third party; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | by virtue of his or her position, receive any type of direct or indirect personal advantage from
third parties, without authorization in the bylaws or from a shareholders’ general meeting.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



According to our bylaws,
any business or agreement between the company and any shareholder, director or officer must be previously approved by the board
of directors, except if specified in our annual budget or business plan.



Rules for Retirement



There is no retirement
age limit relating to directors or officers pursuant to the Brazilian law and our bylaws.



Policy for the Trading of Our Securities



On, March 26, 2020,
our board of directors approved the third amendment of our Conduct Manual on Information Disclosure and Use and Securities Trading
Policy, which was approved on July 15, 2009, and establishes the following procedures regarding the policy for the trading of our
securities:



| | · | any person with knowledge of the material transaction or event involving our company, who have
signed the compliance statement and became aware of the information that has yet to be disclosed to the market, especially those
parties with a commercial, professional or trust-based relationship with the Company, including independent auditors, securities
analysts, consultants and securities brokers or dealers , are restricted from trading in our securities until such material transaction
or event is disclosed to the market as a material fact, except as regards treasury stock transactions, through private trading,
the exercise of options to purchase shares of our capital stock, with stock option plan approved by the shareholders, or trading
performed by Bound Parties when carried out in accordance with an Individual Investment Plan.. This restriction is extended to
periods prior to the announcement of such information or annual or interim financial statements or prior to disclosure of a material
fact in accordance with applicable law;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | trading of our securities or transactions related to our securities carried out by the aforementioned
persons pursuant to an Individual Investment Program, consisting of long-term investments, as defined in the Trading Policy, is
not subject to the aforementioned restrictions;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the restrictions of the Trading Policy also apply to our former directors and executive officers
who resigned prior to the public disclosure of a transaction or fact that began during their administration (a) for the six month
period following the end of their duties with the company, or (b) until the disclosure of the material event or the related financial
statements, whichever occurs first; and
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | · | the abovementioned restrictions also apply to indirect trading carried out by such persons, except
those conducted by investment funds, provided that the investment funds are not exclusive and the transaction decisions taken by
the investment fund officers cannot be influenced by its unit holders.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Rights of Common Shares



Each of our common
shares entitles its holder to one vote at an annual or special shareholders’ general meeting. A holder of ADSs has the right
under the deposit agreement to instruct the depositary to exercise the voting rights for the common shares represented by his/hers
ADSs. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Common Shares and the ADSs.” Pursuant
to our bylaws, Brazilian corporate law and the Novo Mercado rules, owners of common shares are entitled to dividends, or
other distributions made in respect of common shares, in proportion to their ownership of outstanding shares. See “Item 8.
Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy” and “Item
9. The Offer and Listing—C. Markets— Investment in Our Common Shares by Non-Residents of Brazil” for a more complete
description of payment of dividends and other distributions on our common shares. In addition, upon our liquidation, holders of
our shares are entitled to share all our remaining assets, after payment of all our liabilities, ratably in accordance with their
respective participation in the total amount of our issued and outstanding shares. Holders of our common shares are entitled to
participate on a pro rata basis in future capital calls by our company except in some specific circumstances under Brazilian
law, as described in “—Preemptive Rights.” Our common shares have tag along rights, which enable their holders
to, upon the sale of a controlling interest in us, receive 100% of the price paid per common share of the controlling block by
a single or series of transaction.



Options



According to our bylaws,
we may, within our authorized share capital and upon resolution of the shareholders’ general meeting, grant stock options
to (1) our directors, executive officers and employees, or (2) individuals who provide services to us or to companies we control.



Appraisal Rights



Shareholders who are
absent, dissent or abstain from voting on certain actions taken during a shareholders’ general meeting have the right under
Brazilian corporate law to withdraw from our company and to receive the value of their shares.



According to Brazilian
corporate law, shareholder appraisal rights may be exercised in the following circumstances, among others:



| | · | a reduction in the percentage of our mandatory dividends;
| | - | ---------------------------------------------------------



| | · | a change in our corporate purpose;
| | - | ----------------------------------



| | · | an acquisition, by our company, of a controlling stake in another company if the acquisition price
is outside of the limits established by Brazilian corporate law;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | a merger of shares involving our company, a merger of our company into another company, if we are
not the surviving entity, or our consolidation with another company; or
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | an approval of our participation in a group of companies (as defined in Brazilian corporate law).
| | - | -------------------------------------------------------------------------------------------------



Brazilian corporate
law further provides that any resolution regarding a spin-off will also entitle shareholders to withdraw if the spin-off:



| | · | causes a change in our corporate purpose, except if the equity is spun-off to a company whose primary
activities are consistent with our corporate purposes;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | reduces our mandatory dividends; or
| | - | -----------------------------------



| | · | causes us to join a group of companies (as defined in Brazilian corporate law).
| | - | -------------------------------------------------------------------------------



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In cases where (1)
our company merges with another company where we are not the surviving company, or (2) we are consolidated with another company,
or (3) we participate in a group of companies (as defined in Brazilian corporate law), our shareholders will not be entitled to
withdraw from our company if their respective shares are (a) liquid, i.e. part of the B3 index or other stock exchange index in
Brazil or abroad, (as defined by the CVM), and (b) widely held, such that less than 50% of our shares are held by a controlling
shareholder or by companies a controlling shareholder controls. We are currently part of the IBOVESPA (the B3 index) and have no
controlling shareholder. Therefore, our shares are, at present, considered liquid and widely held for the purposes of this paragraph.



The right to withdraw
expires 30 days after publication of the minutes of the relevant shareholders’ general meeting. We are entitled to reconsider
any action giving rise to withdrawal rights for within 10 days after the expiration of the 30-day period if the redemption of shares
of absent, dissenting or non-voting shareholders would jeopardize our financial stability. If shareholders exercise withdrawal
rights, they are entitled to receive the economic value of the company’s shares, as determined by a valuation report issued
by a specialized firm.



Redemption of Shares



According to Brazilian
corporate law, we may redeem our shares by a decision taken in a special shareholders’ general meeting by shareholders representing
at least 50% of our share capital. The share redemption may be paid with our profit, profit reserves or capital reserves. If the
share redemption is not applicable to all shares, the redemption will be made by lottery. If custody shares are picked in the lottery
and there are no rules established in the custody agreement, the financial institution will specify on a pro rata basis,
the shares to be redeemed.



Registration of Shares



Our shares are held
in book-entry form with Itaú Unibanco Corretora S.A., which will act as the custodian agent for our shares. Transfer of
our shares will be carried out by means of book entry by Itaú Unibanco S.A., debiting the share account of the seller and
crediting the share account of the buyer, with the presentation of a written order of the transferor or a judicial authorization
or order to effect such transfers.



Preemptive Rights



Except as provided
below, our shareholders have a general preemptive right to participate in any issuance of new shares, convertible debentures and
warrants, in proportion to their respective shareholding at such time, but the conversion of debentures and subscription warrants
into shares, the granting of options to purchase shares and the issuance of shares as a result of its exercise, are not subject
to preemptive rights. In addition, Brazilian corporate law allows for companies’ bylaws to give the board of directors the
power to exclude preemptive rights or reduce the exercise period of such rights with respect to the issuance of new shares, debentures
convertible into shares and subscription warrants up to the limit of the authorized share capital if the distribution of those
shares, debentures or subscription warrants is effected through a sale on a stock exchange, through a public offering or through
an exchange of shares in a tender offer the purpose of which is to acquire control of another company. Shareholders are allowed
to exercise the preemptive rights for a period of at least 30 days following the publication of notice of the issuance of shares,
convertible debentures and warrants, and the right may be transferred or disposed of for consideration.



Holders of ADSs may
be unable to exercise preemptive rights with respect to our common shares underlying the ADSs. See “Item 3. Key Information—D.
Risk Factors—Risks Relating to Our Common Shares and the ADSs—Holders of ADSs may be unable to exercise preemptive
rights with respect to our common shares underlying the ADSs.”



Shareholders’ General Meetings



Under Brazilian corporate
law, at our shareholders’ meetings, shareholders are empowered to take any action relating to our corporate purpose and to
pass any such resolutions as they deem necessary. The approval of our financial statements and the determination of the allocation
of our net profits with respect to each fiscal year take place at our annual general shareholders’ meeting immediately following
such fiscal year. The election of our directors and, if requested by shareholders, of members of our fiscal council typically takes
place at the annual general shareholders’ meeting, although under Brazilian corporate law it may also occur at a special
shareholders’ general meeting.



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A special shareholders’
general meeting may be held concurrently with the annual general shareholders’ meeting. Pursuant to our bylaws and Brazilian
corporate law, the following actions, among others, may only be taken at a general shareholders’ meeting:



| | · | amendment of our bylaws, including amendment of our corporate purpose;
| | - | ----------------------------------------------------------------------



| | · | election and dismissal, at any time, of our directors and members of our fiscal council;
| | - | ----------------------------------------------------------------------------------------



| | · | determination of the aggregate compensation of our board of directors and board of officers, as
well as the fiscal council’s compensation;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



| | · | approval of stock splits and reverse stock splits;
| | - | --------------------------------------------------



| | · | approval of a stock option plan;
| | - | --------------------------------



| | · | approval of the company’s financial statements;
| | - | -----------------------------------------------



| | · | resolution upon the destination of our net profits and distribution of dividends;
| | - | ---------------------------------------------------------------------------------



| | · | election of the fiscal council to function in the event of our dissolution;
| | - | ---------------------------------------------------------------------------



| | · | cancellation of our registration with the CVM as a publicly-held company;
| | - | -------------------------------------------------------------------------



| | · | suspension of the rights of a shareholder who has violated Brazilian corporate law or our bylaws;
| | - | -------------------------------------------------------------------------------------------------



| | · | acceptance or rejection of the valuation of in-kind contributions offered by a shareholder in consideration
for shares of our capital stock;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | · | approval of our transformation into a limited liability company or any other corporate form;
| | - | --------------------------------------------------------------------------------------------



| | · | delisting of our common shares from the Novo Mercado;
| | - | -----------------------------------------------------



| | · | appointment of a financial institution responsible for our valuation, in the event of a mandatory
tender offer, specifically in the event that a tender offer for our common shares is carried out in connection with the delisting
of our common shares from the Novo Mercado or cancellation of our registration as a publicly-held company;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | reduction in the percentage of mandatory dividends;
| | - | ---------------------------------------------------



| | · | participation in a group of companies (as defined in Brazilian corporate law);
| | - | ------------------------------------------------------------------------------



| | · | approval of any merger, consolidation with another company or spin-off;
| | - | -----------------------------------------------------------------------



| | · | approval of our dissolution or liquidation, the appointment and dismissal of the respective liquidator
and the official review of the reports prepared by him or her; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | authorization to petition for bankruptcy or request for judicial or extrajudicial restructuring.
| | - | ------------------------------------------------------------------------------------------------



According to Brazilian
corporate law, neither a company’s bylaws nor actions taken at a shareholders’ meeting may deprive a shareholder of
specific rights, such as:



| | · | the right to participate in the distribution of profits;
| | - | --------------------------------------------------------



| | · | the right to participate equally and ratably in any remaining residual assets in the event of liquidation
of the company;
| | - | -------------------------------------------------------------------------------------------------------------------------



| | · | preemptive rights in the event of subscription of shares, convertible debentures or subscription
warrants, except in some specific circumstances under Brazilian law described in “—Preemptive Rights;”
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | · | the right to inspect and monitor the management of the company’s business in accordance with
Brazilian corporate law; and
| | - | -------------------------------------------------------------------------------------------------------------------------



| | · | the right to withdraw from the company in the cases specified in Brazilian corporate law, described
in “—Appraisal Rights.”
| | - | ---------------------------------------------------------------------------------------------------------------------------



Quorum for our Shareholders’ General Meetings



As a general rule,
Brazilian corporate law provides that a quorum at a shareholders’ general meeting consists of shareholders representing at
least 25% of a company’s voting capital on the first call and, if that quorum is not reached, any percentage on the second
call. A quorum for the purposes of amending our bylaws consists of shareholders representing at least two-thirds of voting capital
on the first call and any percentage on the second call.



As a general rule,
the affirmative vote of shareholders representing at least the majority of our issued and outstanding common shares present in
person, remotely (as described in “—Remote Voting”) or represented by proxy at a shareholders’ general
meeting is required to ratify any proposed action, with abstentions not taken into account. However, the affirmative vote of shareholders
representing one-half of our issued and outstanding voting capital is required to:



| | · | reduce the percentage of mandatory dividends;
| | - | ---------------------------------------------



| | · | change our corporate purpose;
| | - | -----------------------------



| | · | merge or consolidate our company with another company;
| | - | ------------------------------------------------------



| | · | spin-off a portion of our assets or liabilities;
| | - | ------------------------------------------------



| | · | approve our participation in a group of companies (as defined in Brazilian corporate law);
| | - | ------------------------------------------------------------------------------------------



| | · | apply for cancellation of any voluntary liquidation;
| | - | ----------------------------------------------------



| | · | approve our dissolution; and
| | - | ----------------------------



| | · | approve the merger of all our shares into another company.
| | - | ----------------------------------------------------------



A quorum smaller than
one-half of our issued and outstanding voting capital may be authorized by the CVM for a publicly-held company with widely-traded
and widespread shares that has had less than half of the holders of its voting shares in attendance at its last three shareholders’
meetings. In such case, resolutions may only be taken on a third call.



According to our bylaws
and for so long as we are listed on the Novo Mercado, we may not issue preferred shares or founders’ shares and we
will have to conduct a tender offer in order to delist ourselves from the Novo Mercado.



Notice of our Shareholders’ General Meetings



According to Brazilian
corporate law, notice of our shareholders’ general meetings must be published at least three times in the Diário
Oficial do Estado de São Paulo, the official newspaper of the State of São Paulo, and in another widely circulated
newspaper in the same State, previously chosen at an annual shareholders meeting, which, in our case is O Estado de São
Paulo.



According to CVM Instruction
No. 559 of March 27, 2015 (which deals with the approval of ADR programs), the first notice must be published no later than 15
days before the date of the meeting on the first call, and no later than eight days before the date of the meeting on the second
call.



In addition, the CVM
may suspend for up to 15 days the required prior notice of the special shareholders’ general meeting so that it may further
analyze the proposal to be voted upon at such meeting. Such call notice in all circumstances shall contain the date, time, place
and agenda for the meeting and a list of the documents that will be required from our shareholders to be admitted at the meetings,
and in case of amendments to the bylaws, the indication of the relevant matters. CVM Instruction No. 481 of December 17, 2009 also
requires that additional information be



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disclosed in the call notice for certain matters. For example,
in the event of an election of directors, the call notice shall also disclose the minimum percentage of equity participation required
from a shareholder to request the adoption of cumulative voting procedures. All documents pertaining to the matters to be discussed
at the shareholders’ general meeting shall be made available to the shareholders upon publication of the first call notice,
except if the law or CVM regulations provide otherwise. Pursuant to CVM Instruction No. 418, the company should provide one (1)
month before the date on the general meeting, among others, the following documents (i) copy of the financial statements; (ii)
independent auditors’ report; (iii) opinion of the fiscal council, including dissenting votes, if any; and (iv) remote vote
bulletin.



Location of our Shareholders’ General Meetings



Our shareholders’
meetings shall take place at our head offices at Av. Pres. Juscelino Kubitschek, No. 1830, Block 2, 3rd Floor, 04543-900 –
São Paulo, SP – Brazil. Brazilian corporate law allows our shareholders to hold meetings outside our head offices
in the event of force majeure, provided that the relevant notice contains a clear indication of the place where the meeting will
occur, which, in any case, shall never be held outside the city where the company’s headquarters are located.



Who May Call our Shareholders’ General Meetings



According to Brazilian
corporate law, our board of directors may call a shareholders’ general meeting. Shareholders’ general meetings may
also be called by:



| | · | any shareholder, if our directors fail to call a shareholders’ general meeting within 60
days after the date they were required to do so under applicable laws and our bylaws;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | shareholders holding at least 5% of our share capital if our directors fail to call a meeting within
eight days after receipt of a request to call the meeting by those shareholders, and such request must indicate the proposed agenda;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | shareholders holding at least 5% of voting share capital or 5% of non-voting share capital if our
directors fail to call a meeting within eight days after receipt of a request to call the meeting to convene a fiscal council;
and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | our fiscal council (if installed), in the event our board of directors delays calling an annual
shareholders’ meeting for more than one month. The fiscal council may also call a special general shareholders’ meeting
at any time if it believes that there are significant or urgent matters to be addressed.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



There is an obligation
of the chairman of our board of directors to call a shareholders’ general meeting if: (1) we are not under control of a shareholder
holding more than 50% of our voting capital, and (2) B3 determines that the price of our shares shall be quoted separately or that
the trading of our shares on the Novo Mercado shall be suspended by reason of non-compliance with the listing rules of Novo
Mercado. At such a meeting all members of our board of directors must be replaced. In the event the shareholders’ general
meeting is not called by the chairman of the board of directors within the time period established in our bylaws, the meeting may
be called by any shareholder of the company.



Conditions for Admission at our Shareholders’ General
Meetings



A shareholder may
be represented at a shareholders’ general meeting by a proxy, as long as the proxy is appointed less than a year before such
shareholders’ general meeting. The proxy must be either a shareholder, an executive officer or a director of our company,
a lawyer or a financial institution. An investment fund must be represented by its investment fund officer. A legal entity may
be represented by its legal representative.



Shareholders attending
a shareholders’ general meeting must deliver proof of their status as shareholders and proof that they hold the shares they
intend to vote by delivery of proper identification and a receipt issued by the custodian agent of our shares.



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Remote Voting



Participation and
remote voting at the general shareholders’ meetings of publicly-held companies is regulated by CVM Instruction No. 481 of
December 2009, as amended from time to time, which aims to facilitate the participation of shareholders in general meetings either
through voting or through the submission of proposals. This rule provides the following:



| | · | the creation of a remote voting ballot through which shareholders may exercise their right to vote
prior to the date the general meeting is held;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the possibility to include in the voting bulletin a list of candidates and submit minority shareholders ́
proposals for deliberation at the general meeting, with due observance of certain deadlines and percentages of equity interest,
in order to facilitate shareholders’ participation in general meetings; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the deadlines, procedures and means of transmitting the bulletin, which may be transmitted by the
shareholder: (a) to the custodian (if the shares held by the shareholder are kept at a centralized deposit), (b) to the book-entry
agent of the shares issued by the company (if such shares are not kept at a centralized deposit) or (c) directly to the company.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, publicly-held
companies are required to adopt certain measures in connection with the voting process. Publicly-held companies are required to:
(1) inform the market of the adoption of the cumulative voting process in annual meetings immediately upon receipt of the first
valid requirement, (2) disclose the final voting summary statements, the final voting detailed statements, as well as any voting
statement presented by a shareholder at the general meetings and (3) register in the minutes of the general meeting the number
of approving, rejecting or abstaining votes for each item on the agenda, including the votes received by each member of the Board
of Directors and/or Fiscal Council elected in such annual shareholders’ meeting.



The application of
CVM Rule No. 561 became mandatory on January 1, 2017 for companies that on April 9, 2015 had at least one share class listed either
on the Index Brasil 100 or the IBOVESPA index of the B3, such as Gafisa.



Arbitration



Any disputes or controversies
involving our company, our shareholders, members of our management or our fiscal council that may arise relating to their status
as issuer, shareholders, management and fiscal council members, especially in light of the provisions of Law 6,385/76, Law 6,404/76,
the company’s bylaws, the rules issued by the National Monetary Council, the Central Bank and CVM, as well as other rules
applicable to the securities market in general, Listing Rules of the Novo Mercado, other rules and regulations established
by B3 and the Novo Mercado participation agreement, must be submitted to arbitration conducted in accordance with the Rules
of the Market Arbitration Chamber established by the B3.



Going Private Process



We may become a private
company by the decision of our shareholders only if we conduct a public tender offer to acquire all of our outstanding shares in
accordance with the rules and regulations of Brazilian corporate law, the CVM and the Novo Mercado regulations which requires:



| | · | a fair bid price at least equal to the value estimated of the company; and
| | - | --------------------------------------------------------------------------



| | · | shareholders holding more than two thirds of the outstanding shares have specifically approved
the process or accepted the offer.
| | - | ---------------------------------------------------------------------------------------------------------------------------------



The minimum price
offered for the shares in the public tender offer will correspond to the economic value of such shares, as determined by a valuation
report issued by a specialized firm, and we may only purchase shares from shareholders that have voted in favor of us becoming
a private company after purchasing all shares from the other shareholders that did not vote in favor of such deliberation and that
have accepted the public tender offer.



The valuation report
must be prepared by a specialized and independent firm of recognized experience chosen by the shareholders representing the majority
of the outstanding shares present at the relevant shareholders’ meeting (excluding, for such purposes, treasury shares, shares
held by our affiliates and by other companies that are a part of



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our economic group, as well as blank votes) from a list of three
institutions presented by our board of directors. All the expenses and costs incurred in connection with the preparation of the
valuation report must be paid for by the person making the tender offer.



Shareholders holding
at least 10% of our outstanding shares may require our management to call a special shareholders’ general meeting to determine
whether to perform another valuation using the same or a different valuation method. This request must be made within 15 days following
the disclosure of the price to be paid for the shares in the public offering. The shareholders who make such request as well as
those who vote in its favor must reimburse us for any costs involved in preparing the new valuation, if the new valuation price
is not higher than the original valuation price. If the new valuation price is higher than the original valuation price, the public
offering must be made at the higher price.



Delisting from the Novo Mercado



We may, at any time,
delist our common shares from the Novo Mercado, provided that shareholders approve the decision. Delisting of shares from
the Novo Mercado does not require delisting from the B3.



For our common shares
to be delisted from the Novo Mercado, it must be preceded by a public tender offer pursuant to the rules applicable to the
going private process. Such tender offer may be dismissed if a waiver is approved by a general shareholders meeting.



If our delisting from
the Novo Mercado occurs due to the cancellation of our registration as a publicly held company, all the other requirements
established by such delisting shall be followed. See “—Going Private Process.”



If the reorganization
involves resulting companies that do not intend to apply for listing on Novo Mercado, this structure must be approved by
a majority of the company’s shareholders holding free float shares and present at the general shareholders meeting.



If our share control
is sold within twelve months of our delisting from the Novo Mercado, the selling controlling shareholder and the acquirer
shall offer (i) to acquire the shares of all other shareholders under the same conditions offered to the selling controlling shareholder
or (ii) to pay the difference between the tender offer price accepted by former shareholders, duly updated, and the price obtained
by the controlling shareholder in selling its own shares.



Sale of a Controlling Stake in our Company



Under the Listing
Rules of the Novo Mercado, the sale of a controlling interest in our company, either through a single transaction or through
successive transactions, takes place under a suspension or resolution condition, where the acquirer agrees to, within the time
and pursuant to the conditions specified under Brazilian corporate law and the Listing Rules of the Novo Mercado, make a
tender offer of the remaining shares of the other shareholders under the same terms and conditions granted to the selling controlling
shareholder.



A tender offer is
also required under the following conditions:



| | · | when rights are assigned for a subscription of shares and other securities or rights related to
securities convertible into shares that results in the sale of the company’s controlling stake;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | when, if the controlling shareholder is an entity, the control of such controlling entity is transferred;
and
| | - | -------------------------------------------------------------------------------------------------------------



| | · | when a controlling stake is acquired through an agreement for the purchase of shares. In this case,
the acquirer is obligated to make a tender offer under the same terms and conditions granted to the selling shareholders and reimburse
the shareholders from whom he/she had purchased the shares traded on stock exchanges within the six months before the sale date
of the company’s share control. The reimbursement value is the difference between the price paid to the selling controlling
shareholder and the amount traded on stock exchanges per share, during this period, adjusted by the inflation in the period. Such
amount shall be distributed among all persons who sold shares issued by the company in the stock market trading session in which
the acquirer made its acquisitions, proportionally to the daily net selling balance of each acquisition, being B3 responsible for
processing such distribution according to its regulations.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The buyer, when necessary,
must take the necessary measures to recompose the minimum 25% of outstanding shares in the market within the subsequent six months.



Mandatory Tender Offer in Case of Acquisition of a Relevant
Equity Stake



Under the rules of
our bylaws, if any person acquires our shares directly or indirectly, or any securities or rights related to such shares, in an
amount representing 50% or more of our corporate capital, such acquirer has to carry out a mandatory tender offer for the acquisition
of all shares issued by the Company. The minimum price offered for the shares in the public tender offer will correspond to the
economic value of such shares, as determined by a valuation report issued by a specialized firm.



The valuation report
must be prepared by a specialized and independent firm of recognized experience chosen by the shareholders representing the majority
of the outstanding shares present at the relevant shareholders’ meeting (excluding, for such purposes, shares held by the
controlling shareholder, if any, by the members of the board of directors and officers appointed, directly or indirectly, by the
controlling shareholder, if any, treasury shares, as well as abstentions) from a list of three institutions presented by our board
of directors. All the expenses and costs incurred in connection with the preparation of the valuation report must be paid for by
the person making the tender offer.



Shareholders holding
at least 10% of our outstanding shares may require our management to call a special shareholders’ general meeting to determine
whether to perform another valuation using the same or a different valuation method. This request must be made within 15 days following
the disclosure of the price to be paid for the shares in the public offering. The shareholders who make such request as well as
those who vote in its favor must reimburse us for any costs involved in preparing the new valuation, if the new valuation price
is not higher than the original valuation price. If the new valuation price is higher than the original valuation price, the acquirer
may either increase the offer price or withdraw the tender offer, in the latter case provided that it shall dispose of the shares
in excess of 50% of our corporate capital within 3 months counted from the special general meeting mentioned in this paragraph.



A tender offer as
a result of an acquisition of a relevant equity stake, in accordance to our bylaws, is not mandatory in any of the following cases:
(1) if the same shareholder remains as controlling shareholder; (2) if the relevant equity stake is obtained as a result of purchases
made under another public tender offer for the acquisition of our shares, made in accordance with the Novo Mercado Listing
Rules or with the applicable law; provided that the offer was made for all shares of the company and at least the minimum price,
equivalent to the price of the mandatory tender offer, has been paid; (3) if a relevant equity stake is obtained involuntarily
as a result of a corporate reorganizations, cancellation of shares in treasury, share redemption, capital reduction, or of a subscription
of shares made under a primary public offer for distribution of our shares where the preemptive rights were not exercised by all
shareholders who had it or which did not have as subscribers as expected; or (4) in the case of a sale of a controlling stake,
which is subject to the rules described above for such case.



Purchases by us of our own Shares



Purchases by us of
our own shares are regulated by CVM Rule No. 567 of September, 2015. The rule requires us to obtain the prior approval of our shareholders
in connection with a purchase by us of our own shares if such purchase:



| | · | is conducted outside an organized securities markets and results, whether in a single transaction
or by a series of transactions, in us acquiring more than 5% of the type or class of shares in circulation over a period of 18
months;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | is conducted outside an organized securities markets and is for a price that is, (i) in the case
of an acquisition of shares, more than 10% greater than the market quotation for such shares, or (ii) in the case of a disposal
of shares, more than 10% lower than the market quotation for such shares;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | aims to change or preserve the composition of the controlling stock or the administrative structure
of the company; or
| | - | ----------------------------------------------------------------------------------------------------------------------



| | · | is conducted outside an organized securities markets with a related party.
| | - | --------------------------------------------------------------------------



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Our board of directors
may approve the acquisition of our own shares in other circumstances. The decision to acquire our shares for purposes of maintaining
the acquired shares in treasury or of cancelling them may not, among other things:



| | · | result in the reduction of our share capital;
| | - | ---------------------------------------------



| | · | require the use of resources greater than our profit reserves and other available reserves, as
provided in our financial statements;
| | - | ------------------------------------------------------------------------------------------------------------------------------------



| | · | create, as a result of any action or inaction, directly or indirectly, any artificial demand, supply
or condition relating to share price;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



| | · | involve any unfair practice;
| | - | ----------------------------



| | · | be used for the acquisition of unpaid shares or shares held by our controlling shareholders; or
| | - | -----------------------------------------------------------------------------------------------



| | · | when a public offer for acquisition of the shares of the company is being made.
| | - | -------------------------------------------------------------------------------



We may not keep in
treasury more than 10% of our outstanding common shares, including the shares held by our subsidiaries and affiliates.



On February 2, 2015,
our Board of Directors approved the closing of a repurchase of shares program as approved on December 3, 2014. During the course
of this program, we purchased 30,207,130 of Gafisa’s common shares to be kept in treasury and future disposal.



On the same date,
the Board of Directors of Gafisa approved the repurchase of its common shares to be kept in treasury and future cancellation or
disposal up to 27,000,000, which corresponded to 10% of the then outstanding common shares.



On March 3, 2016,
the Board of Directors of Gafisa approved the closing of the repurchase of shares program as approved on February 2, 2015. During
the course of this program, we purchased 1,000,000 of Gafisa’s common shares to be kept in treasury and future disposal.



On the same date,
the Board of Directors of Gafisa approved the creation of a repurchase program of its common shares to be kept in treasury and
future cancellation or disposal up to 8,198,565 common shares, which corresponded to 5% of the then outstanding common shares.
The objective of this program is to acquire shares in order to effectively use the Company’s available funds, aiming at medium-term
and long-term profitability. Additionally, a portion of the shares to be acquired might be reserved for the exercise of options
and/or shares to be granted in the Stock Option Plan previously approved by the Company’s shareholders at the Company’s
general meeting. The purchase of shares by Gafisa under this program was conditioned on the maintenance of Gafisa’s consolidated
net debt to equity ratio at or below 60%. This program ended on September 2, 2017.



On September 28, 2018,
our Board of Directors approved the opening of the Company’s share buyback program with the objective of generating value
for the Company’s shareholders. Shares purchased by the Company as part of the buyback program will be held in treasury,
and may subsequently be canceled, sold and/or used in connection with the exercise of stock options granted by the Company. The
maximum number of shares the Company may acquire under this program is 3,516,970 common shares, pursuant to Article 8 of CVM Instruction
No. 567/15. This buyback program ended on October 1, 2019.



On March 27, 2020,
our Board of Directors approved the establishment of the Company’s share buyback program with the objective of generating
value for the Company’s shareholders, that was confirmed by the General Shareholders Meeting held on April 30, 2020. Shares
purchased by the Company as part of the buyback program will be held in treasury, and may subsequently be canceled, sold and/or
used in connection with the exercise of stock options granted by the Company. The maximum number of shares the Company may acquire
under this program is 10,327,558 common shares, pursuant to Article 8 of CVM Instruction No. 567/15. This buyback program ends
on May 4, 2021. Under our current shares repurchase program, any acquisition by us of our own shares must be made on a stock exchange
and cannot be made by means of a private transaction. See “Item 10. Additional Information—B. Memorandum and Bylaws—Purchases
by us of our own Shares,” for further information.



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Disclosure Requirements



We are subject to
the reporting requirements established by Brazilian corporate law and the CVM. Furthermore, because we are listed with the Novo
Mercado, we must also follow the disclosure requirements provided for in the Listing Rules of the Novo Mercado.



Disclosure of Information



The Brazilian securities
regulations require that a publicly-held corporation provide the CVM and the relevant stock exchanges with periodic information
that includes annual information statements, quarterly financial statements, quarterly management reports, independent auditor
reports, notices and minutes of shareholders’ meetings, among others. In addition, we also must disclose any material development
related to our business to the CVM and the B3.



We observe the Novo
Mercado disclosure standards and are required to, among other things:



| | · | present the company’s financial statements, standard financial statements form (DFP), quarterly
information form (ITR) and Reference Form (Formulário de Referência);
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | material events;
| | - | ----------------



| | · | information about dividends and other distributions in notices to shareholders or market notices;
| | - | -------------------------------------------------------------------------------------------------



| | · | earnings releases;
| | - | ------------------



| | · | include a note in the quarterly information form (ITR) regarding all operations with related parties;
| | - | -----------------------------------------------------------------------------------------------------



| | · | disclose and maintain updated the information presented in the Reference Form regarding any shareholder
holding, directly or indirectly, at least 5% of the company’s capital stock, considering the information received by company
from the relevant shareholders;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | disclose, monthly, the individual and consolidated amount and characteristics of our securities
held directly or indirectly by controlling shareholders (if this is the case), as well as persons related to the controlling shareholder;
and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | disclose, monthly, the individual and consolidated changes in the amount of securities held by
controlling shareholders (if this is the case), as well as persons related to the controlling shareholder.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Disclosure of Trading by Insiders



Pursuant to the rules
of the Novo Mercado, each of our possible controlling shareholders must disclose to the B3 information in connection with
the total amount and characteristics of securities owned, directly or indirectly, by them and issued by us, or any derivatives
referenced in such securities, as well as any subsequent trading of such securities and derivatives. In the case of individuals,
such information shall also include securities held by the spouse, companion or dependents of such persons, included in the annual
income tax statement of such controlling shareholder. This information must be communicated to the B3 within 10 days following
the end of each month.



CVM regulations require
our directors, executive officers, members of the fiscal council, and members of any other technical or advisory body to disclose
to us, to the CVM and to the B3, the total amount, the characteristics and form of acquisition of securities issued by us, listed
companies under our control or the control of our listed controlling shareholders, including derivatives referenced in such securities
that are held by each of them, as well as any change in such investments within 10 days after the end of the month when the securities
were traded, any change in information related to the tax-payer registry number (CNPJ or CPF) must be communicated to the company
within 15 days after the change. In the case of individuals, such information shall also include securities held by the spouse,
companion or dependents of such persons, included in the annual income tax statement and companies controlled directly or indirectly
by such person.



As of September 2015,
pursuant to changes introduced by CVM Rule No. 568/15 to CVM Rule No. 358/02, we are required to disclose to the CVM and to the
B3 the total amount and the characteristics of securities issued by us,



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which are held by us or any of our affiliates, as well as any
change in such investments, within 10 days after the end of the month in which the relevant securities were traded.



In addition, CVM Rule
No. 568/15 also amended CVM Rule No. 358/02 regarding, among other things, (1) the change in the form of calculation of trades
of relevant equity interests to determine when a disclosure obligation of those trades is triggered, and (2) the regulation of
individual investment plans, as described below.



In addition, our controlling
shareholders, our shareholders who have caused the election of members of our board of directors or fiscal council, as well as
any individual, legal entity or group of persons acting jointly whose direct or indirect participation reaches 5%, 10%, 15% and
so on, of our shares, must provide to us, and we shall transmit to the CVM and the B3, the following information:



| | · | the name and qualification of the person providing the information;
| | - | -------------------------------------------------------------------



| | · | reason and purpose for the acquisition and amount of securities to be acquired, including, as the
case may be, a representation of the acquirer stating that the acquisition does not aim at modifying the management or the controlling
structure of the company;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | amount of shares, as well as other securities and related derivatives, by type and/or class, already
owned, directly or indirectly, by the acquirer or any person related with the acquirer; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | information on any agreement regarding the exercise of voting rights or the purchase and sale of
our securities.
| | - | ----------------------------------------------------------------------------------------------------------------



The disclosure requirement
referred to above will also apply to any person or group acting jointly, holding participation equal to or in excess of 5%, each
time such person increases or decreases its participation in our shares by an amount equal to 5% of our shares.



Finally, pursuant
to the individual investment plans introduced by CVM Rule No. 568/15, direct or indirect controlling shareholders, members of any
statutory governing bodies of a publicly-held corporation, as well as any persons who, due to their responsibility, function or
position in a listed company, its controlling company, subsidiaries or affiliates have potential access to insider information,
are now allowed, subject to certain requirements, to trade in the company’s shares in certain periods during which such trading
would otherwise be prohibited.



Disclosure of Material Developments



According to Law No.
6,385 of December 7, 1976, and subsequent amendments, and CVM Instruction No. 358 of January 3, 2002, and subsequent amendments,
we must, by deliberation of the board of directors, adopt a policy of disclosure of a material act or fact. Therefore, we must
disclose any material development related to our business to the CVM and to the B3 and must publish a notice of the material development.
A development is deemed to be material if it has a material impact on the price of our securities, on the decision of investors
to trade in our securities or on the decision of investors to exercise any rights as holders of any of our securities. CVM Instruction
No. 358 lists some examples of material developments, including, among others: (i) a decision to promote the cancellation of registration
of the publicly-held company; (ii) an incorporation, merger or spin-off involving the company or related companies; (iii) a change
in the composition of the company’s equity; and (iv) a transformation or dissolution of the company.



Pursuant to CVM regulations,
the Investor Relations Director is the primary responsible party for a company’s disclosure involving material developments,
notwithstanding co-liability of other administrators in certain cases.



Under special circumstances,
we may request confidential treatment of certain material developments from the CVM, when our management believes that public disclosure
could result in adverse consequences to us.



C.       Material Contracts



On December 30, 2009,
the shareholders of Gafisa and Tenda approved a corporate restructuring to consolidate Gafisa’s non-controlling share ownership
in Tenda. The restructuring was accomplished by exchanging all of the remaining Tenda shares not held by Gafisa into Gafisa shares.
As a result of the restructuring, Tenda became a wholly-owned subsidiary of Gafisa.



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On May 27, 2010, the
shareholders of Gafisa approved the acquisition of 20% of Alphaville’s shares, by means of a merger of the totality of shares
issued by Shertis Empreendimentos e Participações S.A. or “Shertis”, which main asset are shares representing
20% of Alphaville’s shares, in the total amount of R$126.5 million. As a consequence of such merger, Gafisa issued 9,797,792
common shares, paid to the former shareholders of Shertis. On July 3, 2013, we acquired the remaining shares of Alphaville, corresponding
to 20% of its capital stock, by means of the acquisition by Tenda of all the shares of EVP Participações SA, a holding
company that had Renato de Albuquerque and Nuno Luís de Carvalho Lopes Alves as shareholders and the holder of the remaining
shares of Alphaville. Gafisa paid R$366,661,985.11 in Brazilian national currency to the former owners of the shares.



On December 9, 2013,
we completed the sale of a majority stake in Alphaville to Private Equity AE Investimentos e Participações (“Fundo
AE”), a company controlled by Pátria Investimentos Ltda. and Blackstone Real Estate Advisor L.P., which was previously
announced on June 7, 2013. All precedent conditions were met including governmental approval, to the completion of the transaction.
The transaction was concluded with a sale of 50% stake by Gafisa and 20% stake by Tenda, with Gafisa retaining the remaining 30%
of Alphaville capital stock. The proceeds from the transaction, post adjustments agreed to in the Share and Purchase Agreement,
were R$1.54 billion, consisting of R$1.25 billion from Fundo AE for the acquisition of Alphaville shares, and an R$290 million
dividend distribution by Alphaville.



On December 14, 2016,
we entered into an SPA with Jaguar pursuant to which we will sell Tenda shares representing up to 30% of the total capital stock
of Tenda, at a price equal to R$8.13 per share, after offering 50% of the total capital stock of Tenda for the exercise of preemptive
rights of Gafisa’s shareholders.



The spin-off of the
Tenda business unit was consummated on May 4, 2017, following: (i) a reduction of the capital stock of Tenda (without the cancellation
of shares), pursuant to which Gafisa, as sole shareholder at that time, received R$100 million (adjusted by the SELIC); (ii) a
reduction of the capital stock of Gafisa, resulting in the distribution to Gafisa shareholders of shares corresponding to 50% of
the capital stock of Tenda; (iii) the conclusion of the preemptive rights exercise pursuant to which Gafisa shareholders acquired
up to 50% of the total share capital of Tenda, at the price per share set forth in the SPA with Jaguar and for a total amount of
R$219.5 million, with no shares being acquired by Jaguar; and (iv) the satisfaction of other conditions precedent for the consummation
of the spin-off. In addition, on May 4, 2017, the Tenda shares were listed on the B3 and began to publicly trade.



In 2018 the Company
did not sign any new material contracts.



On October 21, 2019,
we informed our shareholders and the market that we entered into a Purchase and Sale, Stock Redemption, Corporate Restructuring
Agreement with Alphaville Urbanismo S.A., Private Equity AE Investimentos e Participações S.A. and affiliates of
PEAE, setting forth the terms and conditions for the divestment of our shares in Alphaville. On December 27, 2019, we concluded
the divestment sale of our remaining 21.20% stake in Alphaville for R$100 million, which was settled by offsetting certain credits
and the receipt of the investee shares against assets, measured at fair value. This transaction is in line with the Company’s
strategy to optimize and improve the Company’s portfolio and capital allocation, aiming at creating value for our shareholders.



On April 30, 2020,
at our Annual and Extraordinary Shareholders’ Meeting, the following matters were approved in relation to the purchase and
sale of UPCON Incorporadora S.A.’s shares: (i) the acquisition by Gafisa of the entire share capital of UPCON; (ii) an increase
in the Company’s share capital of R$310.0 million; (iii) the issuance of two series of debentures convertible into common
shares to cover the transaction with UPCON, in the total amount of R$150.0 million; (iv) changes in the composition of the Board
of Directors, which will have seven to nine members; (v) the election of members to the Board of Directors; and (vi) approval of
a plan to repurchase the Company’s shares, up to a limit of 10,327,558 shares to be acquired by the Company.



D.       Exchange Controls



There are no restrictions
on ownership of our common shares by individual or legal entities domiciled outside Brazil. However, the right to convert dividend
payments and proceeds from the sale of our shares into foreign currency and to remit such amounts abroad is subject to requirements
under foreign investment legislation which generally establish that the relevant investment be registered with the Central Bank
and/or the CVM. Subject to certain procedures and specific regulatory provisions, the purchase and sale of foreign currency and
the international transfer of reais by a person or legal entity resident, domiciled or headquartered in Brazil, as the case
may be, is allowed, without limitation as to amount, provided that the underlying transaction is legal, legitimate and has economic



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substance, as evidenced by the applicable supporting documentation
submitted to the financial institution in charge of the foreign exchange transaction. In addition, foreign currencies may only
be purchased through duly authorized financial institutions headquartered in Brazil. See “Item 3. Key Information—D.
Risk Factors—Risks Relating to Brazil—Restrictions on the movement of capital out of Brazil may adversely affect your
ability to receive dividends and distributions on the ADSs and on our common shares, or the proceeds of any sale of our common
shares” and “Item 9. The Offer and Listing—C. Markets—Investment in Our Common Shares by Non-Residents
of Brazil.”



In the past, the Brazilian
Central Bank has intervened occasionally to control unstable movements in foreign exchange rates. We cannot predict whether the
Brazilian Central Bank or the Brazilian government will continue to let the realfloat freely or will intervene in the exchange
rate market through the return of a currency band system or otherwise. The realmay depreciate or appreciate against the
U.S. dollar substantially.



Brazilian law provides
that, whenever there is a serious imbalance in Brazil’s balance of payments or there are serious reasons to foresee a serious
imbalance, temporary restrictions may be imposed on remittances of funds abroad. We cannot assure you that such measures will not
be taken by the Brazilian government in the future. See “Item 3. Key Information—D. Risk Factors—Risks Relating
to Brazil—Restrictions on the movement of capital out of Brazil may adversely affect your ability to receive dividends and
distributions on the ADSs and on our common shares, or the proceeds of any sale of our common shares” and “Item 9.
The Offer and Listing—C. Markets—Investment in Our Common Shares by Non-Residents of Brazil.”



E.       Taxation



The following discussion
contains a description of material Brazilian and U.S. federal income tax consequences of the acquisition, ownership and disposition
of common shares or ADSs. The discussion is based upon the tax laws of Brazil and regulations thereunder and on the tax laws of
the United States and regulations thereunder as of the date hereof, which are subject to change.



Although there is
at present no income tax treaty between Brazil and the United States, the tax authorities of the two countries have entered into
a Tax Information Exchange Agreement and have had discussions that may culminate in an income tax treaty. No assurance can be given,
however, as to whether or when an income tax treaty will enter into force or how it will affect the U.S. Holders (as defined below)
of common shares or ADSs. Prospective holders of common shares or ADSs should consult their own tax advisers as to the tax consequences
of the acquisition, ownership and disposition of common shares or ADSs in their particular circumstances.



Brazilian Tax Considerations



The following discussion
summarizes the principal Brazilian tax consequences of the acquisition, ownership and disposition of our common shares or ADSs
by a holder that is not domiciled in Brazil for purposes of Brazilian taxation (a “Non-Resident Holder”). This discussion
is based on Brazilian law as currently in effect, which is subject to change, possibly with retroactive effect, and subject to
different interpretations. Any change in that law may change the consequences described below.



The tax consequences
described below do not take into account the effects of any tax treaties or reciprocity agreements for tax treatment entered into
by Brazil and other countries. The discussion also does not address any tax consequences under the tax laws of any state or municipality
of Brazil. The description below is not intended to constitute a complete analysis of all tax consequences relating to the acquisition,
exchange, ownership and disposition of our common shares or ADSs. Each Non-Resident Holder should consult his or her own tax adviser
concerning the Brazilian tax consequences of an investment in our common shares or ADSs.



Income tax



Dividends.
Dividends paid by a Brazilian corporation, such as ourselves, including stock dividends and other dividends paid to a Non-Resident
Holder of common shares or ADSs, are currently not subject to income withholding tax in Brazil to the extent that such amounts
are related to profits generated after January 1, 1996. Dividends paid from profits generated before January 1, 1996 may be subject
to Brazilian income withholding tax at varying rates depending on the year the profits were generated, according to the tax legislation
applicable to each corresponding year. There is uncertainty regarding the taxation of dividends supported by profits earned in
the 2014 calendar year, due to the new rules introduced in Brazil in order to align the Brazilian tax system with the International
Financial



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Reporting Standards, or “IFRS”, as of January 1,
2015. As we did not earn profits in that year, this issue should not apply to us.



Interest on Shareholders’
Equity. Law No. 9,249, dated December 26, 1995, as amended, permits a Brazilian corporation, such as ourselves, to make distributions
to shareholders of interest on shareholders’ equity as an alternative to making dividend distributions and to treat such
payments as a deductible expense for purposes of calculating Brazilian corporate income tax and social contribution on net profits,
to the extent the limits described below are observed. These distributions may be paid in cash. For tax purposes, this interest
is limited to the daily pro rata variation of the Brazilian long-term interest rate, or TJLP, as determined by the Central Bank
from time to time, and the amount of the deduction may not exceed the greater of:



| | · | 50% of net income (after the deduction of social contribution on net profits but before taking
into account the provision for corporate income tax and the interest on shareholders’ equity) for the period in respect of
which the payment is made; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | 50% of the sum of retained profits and profit reserves as of the date of the beginning of the period
in respect of which the payment is made.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------



Payment of interest
on shareholders’ equity to a Non-Resident Holder is subject to income withholding tax at the rate of 15%, or 25% if the Non-Resident
Holder is domiciled in a Tax Favorable Jurisdiction, as defined below.



These payments of
interest on shareholders’ equity may be included, at their net value, as part of any mandatory dividend. To the extent payment
of interest on shareholders’ equity is so included, the Company is required to distribute to shareholders an additional amount
to ensure that the net amount received by them, after payment of the applicable withholding income tax, plus the amount of declared
dividends is at least equal to the mandatory dividend.



Gains



According to Law No.
10,833/03, enacted on December 29, 2003, the disposition or sale of assets located in Brazil by a Non-Resident Holder, whether
to another non-Brazilian resident or to a Brazilian resident, may be subject to capital gain taxes in Brazil.



Therefore, with respect
to the disposition of our common shares, which are treated as assets located in Brazil, a non-Brazilian resident will be subject
to income tax on the gains assessed according to the rules described below, regardless of whether the transactions are conducted
in Brazil or with a Brazilian resident.



With respect to the
ADSs, although the matter is not entirely clear, it is reasonable to take the position that ADSs do not constitute assets located
in Brazil for the purposes of Law No. 10,833/03 and, therefore, that the gains realized by a Non-Resident Holder on the disposition
of our ADSs to another Non-Resident Holder should not be taxed in Brazil. We cannot assure you, however, that the Brazilian tax
authorities or the Brazilian courts will agree with this interpretation. Accordingly, gains on a disposition of ADSs by a Non-Resident
Holder may be subject to income tax in Brazil in the event that courts determine that ADSs constitute assets located in Brazil.
For more information, please refer to “Item 3. Key Information—D. Risks Factors—Risks Relating to Our Common
Shares and the ADSs—Changes in Brazilian tax laws may have an adverse impact on the taxes applicable to a disposition of
the ADSs.”



As a general rule,
gain realized as a result of a disposition or sale of common shares (or ADSs should they be deemed to be “assets located
in Brazil”) is the positive difference between the amount realized on the sale or other disposition of the securities and
their acquisition cost.



Under Brazilian law,
however, income tax rules on such gains can vary, depending on the domicile of the Non-Resident Holder, the type of registration
of the investment by the Non-Resident Holder with the Central Bank and how the disposition is carried out, as described below.



Gains assessed on
a disposition of common shares carried out on a Brazilian stock exchange (which includes the transactions carried out on the organized
over-the-counter market) are:



| | · | exempt from income tax when the gain is earned by a Non-Resident Holder that (1) has registered
its investment in Brazil with the Central Bank under the rules of Resolution No. 4,373, dated September 14, 2014, which replaced
Resolution 2,689, dated January 26, 2000 (a “4,373 Holder”) and (2) is not a resident
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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or domiciled
in a country or location that does not tax income, or that taxes it at a maximum rate lower than 20%; or



| | · | in all other cases, subject to income tax at a rate of up to 25%. In these cases, a withholding
income tax of 0.005% of the sale value will be applicable and can be later offset against any income tax due on the capital gain.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Any other gains recognized
on a sale or disposition of the common shares that is not carried out on a Brazilian stock exchange are subject to (1) income tax
at a progressive rate from 15% up to 22.5%, when realized by a Non-Resident Holder that is not resident or domiciled in a Tax Favorable
Jurisdiction; and (2) income tax up to a rate of 25% when realized by a Non-Brazilian Holder that is resident or domiciled in a
Tax Favorable Jurisdiction. In the event that these gains are related to transactions conducted on the Brazilian non-organized
over-the-counter market with intermediation, the withholding income tax of 0.005% shall also be applicable and can be offset against
the eventual income tax due on the capital gain.



In the case of a redemption
of common shares (or ADSs, should they be deemed to be “assets located in Brazil”) or a capital reduction by a Brazilian
corporation, such as ourselves, the positive difference between the amount received by the Non-Resident Holder and the acquisition
cost of the common shares or ADSs redeemed is treated as capital gain derived from the sale or exchange of shares not carried out
on a Brazilian stock exchange and is therefore subject to income tax at a rate from 15% to 22.5%, or up to 25%, as described above.



Any exercise of preemptive
rights relating to the common shares or ADSs will not be subject to Brazilian income tax. Gains realized by a Non-Resident Holder
on the disposition of preemptive rights relating to the common shares (or ADSs, should they be deemed to be “assets located
in Brazil”) will be subject to Brazilian income tax according to the same rules applicable to the sale or disposition of
common shares.



As a Non-Resident
Holder of ADSs, you may cancel your ADSs and exchange them for the underlying common shares and no income tax may be levied on
such exchange, as long as the appropriate rules are complied with in connection with the registration of the investment with the
Central Bank and as long as ADSs are not deemed to be “assets located in Brazil.” See “Item 9 The Offering and
Listing—C. Markets—Investment in Our Common Shares by Non-Residents of Brazil—Depositary Receipts” for
a discussion of the rules related to exchanging ADS for common shares.



The deposit of common
shares by Non-Resident Holders in exchange for ADSs may be subject to Brazilian income tax if the acquisition cost of the common
shares is lower than (a) the average price per common share on a Brazilian stock exchange on which the greatest number of such
common shares were sold on the day of deposit; or (b) if no common shares were sold on that day, the average price on a Brazilian
stock exchange on which the greatest number of common shares were sold in the 15 trading sessions immediately preceding such deposit.
The difference between the acquisition cost and the average price of the common shares will be considered to be a capital gain
subject to income tax at a rate from 15% up to 22.5% or 25%, as described above. In some circumstances, it could be reasonable
to take the position that this tax is not applicable in the case of a Non-Resident Holder that is a 4,373 Holder and is not a resident
in a Tax Favorable Jurisdiction.



There can be no assurance
that the current favorable treatment of 4,373 Holders will continue in the future.



Law 13,259/16, dated
March 16, 2016, increased tax rates on capital gains earned by Brazilian individuals and certain legal entities. The new rates
should apply as from 2017 as follows: (i) 15% on the capital gain not exceeding R$5,000,000; (ii) 17.5% on the capital gain amount
which varies from R$5,000,000 and R$10,000,000; (iii) 20% on the capital gain amount which varies from R$10,000,000 and R$30,000,000;
and (iv) 22.5% on the capital gain which exceeds R$ 30,000,000. The new rates should also apply to Non-Resident Holders depending
on their type of investment, jurisdiction and the sale transaction, to be determined on a case by case basis.



Discussion on Tax Favorable Jurisdictions
and Privileged Tax Regimes



A “Tax Favorable
Jurisdiction” is a country or location that (1) does not impose taxation on income or imposes the income tax at a rate lower
than 20% or (2) imposes restrictions on the disclosure of shareholding composition or the ownership of the investment. A regulation
issued by the Ministry of Treasury on November 28, 2014 decreased from 20% to 17% this minimum threshold for certain specific cases.
The 17% threshold applies only to countries and



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regimes aligned with international standards of fiscal transparency
in accordance with rules to be established by the Brazilian tax authorities.



Law No. 11,727/08
created the concept of “Privileged Tax Regimes”, which encompasses the countries and jurisdictions that: (1) do not
tax income or tax it at a maximum rate lower than 20%, or 17%, as applicable; (2) grant tax advantages to a non-resident entity
or individual (i) without the need to carry out a substantial economic activity in the country or territory or (ii) conditioned
to the non-exercise of a substantial economic activity in the country or territory; (3) do not tax or taxes proceeds generated
abroad at a maximum rate lower than 20%, or 17%, as applicable; or (4) restricts the ownership disclosure of assets and ownership
rights or restricts disclosure about economic transactions carried out.



Normative Ruling 1,037
provides a list of Tax Favorable Jurisdictions and Privileged Tax Regimes. Normative Ruling No. 1,037 is periodically updated to
include and exclude countries, locations and tax regimes from the lists of Tax Favorable Jurisdictions and Privileged Tax Regimes.



In principle, the
best interpretation of Law No. 11,727/08 leads us to conclude that the concept of Privileged Tax Regimes should be applied solely
for purposes of transfer pricing rules in export and import transactions, for the definition of the applicable rate of withholding
income tax on the remittance of specific items of income and for certain other Brazilian tax purposes that are not relevant to
an investment by a Non-Resident Holder in our common shares or ADSs. Although we are of the opinion that the concept of Privileged
Tax Regimes should not affect the tax treatment of a Non-Resident Holder described above, we cannot assure you that subsequent
legislation or interpretations by the Brazilian tax authorities regarding the definition of “privileged tax regimes”
will not apply such regime to Non-Resident Holders. Investors should consult with their own tax advisors regarding the consequences
of the implementation of Law No. 11,727, Normative Ruling No. 1,037 and of any related Brazilian tax laws or regulations concerning
Tax Favorable Jurisdictions and Privileged Tax Regimes.



Tax on Foreign Exchange and Financial
Transactions



Foreign Exchange
Transactions. Brazilian law imposes a Tax on Foreign Exchange Transactions, or IOF/Exchange Tax, on the conversion of reais
into foreign currency and on the conversion of foreign currency into reais. Any inflow of funds related to investments carried
out on the Brazilian financial and capital markets by 4,373 Holders is currently subject to the IOF/Exchange Tax at a rate of zero
percent. Foreign exchange transactions related to outflows of funds in connection with investments carried out on the Brazilian
financial and capital markets are subject to the IOF/Exchange Tax at a rate of zero percent, which also applies to payments of
dividends and interest on shareholders’ equity to 4,373 Holders with respect to investments on the Brazilian financial and
capital markets.



Nevertheless, the
rate applicable to most foreign exchange transactions is 0.38%. In any case, the Brazilian government may increase the rate at
any time by up to 25% on the foreign exchange transaction amount. However, any increase in rates will only apply to future transactions.



The purchase of ADSs
by a Non-Resident Holder outside Brazil generally does not require the execution of a foreign exchange agreement with the Brazilian
Central Bank. If this is the case, the IOF/Exchange Tax is not due. The IOF/Exchange Tax is levied at a zero percent rate in connection
with foreign exchange agreements, without any actual flows of funds, that are required for a cancellation of ADSs and exchange
for shares traded on a Brazilian stock exchange.



Tax on Transactions
Involving Bonds and Securities. Brazilian law imposes a Tax on Transactions Involving Bonds and Securities, or IOF/Bonds Tax,
due on transactions involving bonds and securities, including those carried out on a Brazilian stock exchange. The rate of IOF/Bonds
Tax applicable to transactions involving common shares is currently zero percent. The rate of the IOF/Bonds Tax applicable to the
transfer of shares with the sole purpose of enabling the issuance of ADSs is currently also zero percent. However, the Brazilian
government may increase the rate of the IOF/Bonds Tax at any time by up to 1.5% per day on the transaction amount, but only in
respect of future transactions.



Other Brazilian Taxes



There are no Brazilian
inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of common shares or ADSs, except for
gift and inheritance taxes that may be imposed by some Brazilian states. There are no Brazilian stamp, issue, registration, or
similar taxes or duties payable by holders of common shares or ADSs.



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U.S. Federal Income Tax Considerations



The following discussion
is a summary of material U.S. federal income tax consequences to U.S. Holders described herein of owning and disposing of common
shares or ADSs, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant
to a particular person’s decision to hold such securities. The discussion applies only to the U.S. Holders described below
that hold common shares or ADSs as capital assets for U.S. federal income tax purposes. This discussion does not address any alternative
minimum tax or Medicare contribution tax considerations, nor does it address all of the tax consequences applicable to all categories
of investors that may be subject to special rules, such as:



| | · | certain financial institutions;
| | - | -------------------------------



| | · | dealers or traders in securities who use a mark-to-market method of tax accounting;
| | - | -----------------------------------------------------------------------------------



| | · | persons holding common shares or ADSs as part of a hedging transaction, straddle, wash sale, conversion
transaction or integrated transaction or persons entering into a constructive sale with respect to the common shares or ADSs;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;
| | - | ----------------------------------------------------------------------------------------------



| | · | entities classified as partnerships for U.S. federal income tax purposes;
| | - | -------------------------------------------------------------------------



| | · | tax-exempt entities, including “individual retirement accounts” or “Roth IRAs;”
| | - | -------------------------------------------------------------------------------



| | · | persons that own or are deemed to own ten percent or more of our stock (by vote or value);
| | - | ------------------------------------------------------------------------------------------



| | · | persons who acquired our ADSs or common shares pursuant to the exercise of any employee stock option
or otherwise as compensation; or
| | - | -------------------------------------------------------------------------------------------------------------------------------------



| | · | persons holding our ADSs or common shares in connection with a trade or business conducted outside
of the United States.
| | - | ------------------------------------------------------------------------------------------------------------------------



If an entity that
is classified as a partnership for U.S. federal income tax purposes holds common shares or ADSs, the U.S. federal income tax treatment
of a partner will generally depend on the status of the partner and upon the activities of the partnership. Partnerships holding
common shares or ADSs and partners in such partnerships should consult their tax advisers as to the particular U.S. federal income
tax consequences of holding and disposing of common shares or ADSs.



This discussion is
based on the Internal Revenue Code of 1986, as amended, or the Code, administrative pronouncements, judicial decisions and final,
temporary and proposed Treasury regulations, all as of the date hereof, any of which is subject to change, possibly with retroactive
effect. It is also based in part on representations by the depositary and assumes that each obligation under the deposit agreement
and any related agreement will be performed in accordance with its terms.



You are a “U.S.
Holder” if you are a beneficial owner of our common shares or ADSs and if you are, for U.S. federal income tax purposes:



| | · | a citizen or individual resident of the United States;
| | - | ------------------------------------------------------



| | · | a corporation, or other entity taxable as a corporation, created or organized in or under the laws
of the United States, any state therein or the District of Columbia; or
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | an estate or trust the income of which is subject to U.S. federal income taxation regardless of
its source.
| | - | -----------------------------------------------------------------------------------------------------------



In general, if you
own ADSs, you will be treated as the owner of the underlying shares represented by those ADSs for U.S. federal income tax purposes.
Accordingly, no gain or loss will be recognized if you exchange ADSs for the underlying shares represented by those ADSs.



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The summary of U.S.
federal income tax consequences set out below is intended for general informational purposes only. You should consult your advisers
with respect to the particular tax consequences to you of owning or disposing of common shares or ADSs, including the applicability
and effect of state, local, non-U.S. and other tax laws and the possibility of changes in tax laws.



Except as discussed
below under “—Passive Foreign Investment Company Rules,” this discussion assumes that the Company will not be
a passive foreign investment company, or “PFIC,” for U.S. federal income tax purposes for any taxable year.



Taxation of Distributions



Distributions, if
any, paid on ADSs or common shares (including any amounts that are treated as interest on shareholders’ equity for Brazilian
tax purposes and any Brazilian withholding taxes deducted from distributions), other than certain pro rata distributions
of ordinary shares, will generally be treated as dividends to the extent paid out of the Company’s current or accumulated
earnings and profits as determined under U.S. federal income tax principles. Because the Company does not maintain calculations
of its earnings and profits under U.S. federal income tax principles, it is expected that distributions will generally be reported
to you as dividends.



In general, dividends
paid by certain “qualified foreign corporations” to non-corporate persons may be taxed at a preferential rate, subject
to applicable limitations. However, if a non-U.S. corporation is not entitled to the benefits of a comprehensive income tax treaty
with the United States, dividends paid by such corporation will qualify for the preferential rate only with respect to stock that
are “readily tradable on an established securities market in the United States.” In 2003 the Internal Revenue Service
(“IRS”) issued a notice, according to which common stock, or American depositary shares in respect of such stock, are
considered as readily tradable on a U.S. established securities market if they are listed on certain national U.S. securities exchanges
specified in the notice, such as the NYSE or NASDAQ. The IRS notice indicates that the IRS continues to consider whether, and under
what conditions, the preferential rate may apply also to securities readily tradable on other securities trading platforms, such
as trading over the counter. However, to date no additional trading markets have been identified by the Treasury or the IRS as
qualifying markets for these purposes. Therefore, because our ADSs were delisted from the NYSE on December 17, 2018, non-corporate
U.S. Holders should expect that for as long as our ADSs continue to be delisted from a qualified national U.S. exchange, dividends
will be reported to them by withholding agents as not qualifying for the preferential rates.



The amount of a dividend
will include any amounts withheld by the Company in respect of Brazilian taxes on the distribution. The amount of the dividend
will be treated as foreign-source dividend income to you and will not be eligible for the dividends-received deduction generally
available to U.S. corporations under the Code. Dividends will be included in your income on the date of your, or in the case of
ADSs, the depositary’s, receipt of the dividend. The amount of any dividend income paid in reais will be the U.S.
dollar amount calculated by reference to the exchange rate in effect on the date of such receipt, regardless of whether the payment
is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, you should not be
required to recognize foreign currency gain or loss in respect of the dividend income. You may have foreign currency gain or loss
if the amount of such dividend is converted into U.S. dollars after the date of such receipt. See also “—Brazilian
Tax Considerations—Tax on Foreign Exchange and Financial Transactions” for a discussion of the Brazilian tax consequences
of a conversion of reais into U.S. dollars.



Subject to applicable
limitations that may vary depending upon your circumstances, Brazilian income taxes withheld from dividends on common shares or
ADSs will be creditable against your U.S. federal income tax liability. The rules governing foreign tax credits are complex, and
you should consult your tax adviser regarding the availability of foreign tax credits in your particular circumstances. Instead
of claiming a credit, you may, at your election, deduct foreign taxes, including Brazilian taxes in computing your taxable income,
subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax
credits applies to all foreign taxes paid or accrued in the relevant taxable year.



Sale or Other Disposition of Common Shares
or ADSs



For U.S. federal income
tax purposes, gain or loss you realize on the sale or other disposition of common shares or ADSs will be capital gain or loss,
and will be long-term capital gain or loss if you have held the common shares or ADSs for more than one year. Long-term capital
gains of non-corporate U.S. Holders (including individuals) are eligible for reduced rates of taxation. The deductibility of capital
losses is subject to limitations.



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The amount of your
gain or loss will equal the difference between the amount realized on the disposition and your tax basis in the common shares or
ADSs disposed of, in each case as determined in U.S. dollars. If a Brazilian tax is withheld on the sale or disposition of common
shares or ADSs, your amount realized will include the gross amount of the proceeds of such sale or disposition before deduction
of the Brazilian tax. See “—Brazilian Tax Considerations—Gains” for a description of when a disposition
may be subject to taxation by Brazil. Such gain or loss will generally be U.S.-source gain or loss for foreign tax credit purposes.
Consequently, you will not be able to credit any Brazilian income tax imposed on such gains against your U.S. federal income tax
liability unless you have other creditable taxable income from foreign sources in the appropriate foreign tax credit basket. You
should consult your tax adviser as to whether any Brazilian tax on gains would be creditable against your U.S. federal income tax
on foreign-source income from other sources.



Other Brazilian Taxes



Any Brazilian IOF/Bond
Tax and the IOF/Exchange Tax imposed on the deposit of common shares in exchange for ADSs and the cancellation of ADSs in exchange
for common shares (as discussed above under “—Brazilian Tax Considerations—Tax on Foreign Exchange and Financial
Transactions”) will not be treated as creditable foreign taxes for U.S. federal income tax purposes. U.S. Holders should
consult their tax advisers regarding the treatment of these taxes for U.S. federal income tax purposes.



Passive Foreign Investment Company Rules



In general, a non-U.S.
corporation is a PFIC for any taxable year if: (1) 75% or more of its gross income consists of passive income (the “income
test”) or (2) 50% or more of the average value of its assets (generally determined on a quarterly basis) consists of assets
that produce, or are held for the production of, passive income (including cash and cash equivalents). Generally, “passive
income” includes interest, dividends, rents, royalties and certain gains. For purposes of the above calculations, a non-U.S.
corporation that directly or indirectly owns at least 25% by value of the shares of another corporation is treated as if it held
its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the
other corporation. The Company believes that it was not a PFIC for U.S. federal income tax purposes for its 2019 taxable year.
However, because the Company’s PFIC status is an annual determination that can be made only after the end of each taxable
year and will depend on the composition of its income and assets and the value of its assets for each such year, there can be no
assurance that the Company will not be a PFIC for the current or any other taxable year.



If the Company were
a PFIC for any taxable year during which a U.S. Holder held common shares or ADSs, gain recognized by a U.S. Holder on a sale or
other disposition (including, under certain circumstances, a pledge) of the common shares or ADSs would be allocated ratably over
the U.S. Holder’s holding period for the common shares or ADSs. The amounts allocated to the taxable year of the sale or
other disposition and to any year before the Company became a PFIC would be taxed as ordinary income. The amount allocated to each
other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, for that
taxable year, and an interest charge would be imposed on the tax on the amount allocated to that taxable year. Further, to the
extent that any distribution received by a U.S. Holder on its common shares or ADSs exceeds 125% of the average of the annual distributions
on common shares or ADSs received during the preceding three years or the U.S. Holder’s holding period, whichever is shorter,
that distribution would be subject to taxation in the same manner as gain, described immediately above. Certain elections may be
available that would result in alternative treatments (such as mark-to-market treatment of the common shares). If we are a PFIC
for any taxable year during which a U.S. Holder owned our shares, the U.S. Holder will generally be required to file Internal Revenue
Service Form 8621 with their annual U.S. federal income tax returns, subject to certain exceptions. You should consult your tax
adviser to determine whether any of these elections would be available and, if so, what the consequences of the alternative treatments
would be in your particular circumstances.



Information Reporting and Backup Withholding



Payments of dividends
and sales proceeds that are made within the United States or through certain U.S.-related financial intermediaries generally are
subject to information reporting and may be subject to backup withholding unless (1) you are a corporation or other exempt recipient
or (2) in the case of backup withholding, you provide a correct taxpayer identification number and certify that you are not subject
to backup withholding.



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The amount of any
backup withholding from a payment to you will be allowed as a credit against your U.S. federal income tax liability and may entitle
you to a refund, provided that the required information is timely furnished to the IRS.



Certain U.S. Holders
who are individuals (and certain specified entities) may be required, subject to certain exceptions, to report information relating
to their ownership of securities of a non-U.S. person, or non-U.S. accounts through which the securities are held. You should consult
your tax adviser regarding the effect, if any, of these rules on your ownership and disposition of common shares or ADSs.



U.S. HOLDERS OF OUR
COMMON SHARES OR ADSs SHOULD CONSULT THEIR OWN TAX ADVISERS AS TO THE BRAZILIAN, U.S. FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES
OF THE OWNERSHIP AND DISPOSITION OF OUR COMMON SHARES OR ADSs BASED UPON THEIR PARTICULAR CIRCUMSTANCES.



F.       Dividends and
Paying Agents



Not applicable.



G.       Statement by
Experts



Not applicable.



H.       Documents on
Display



Statements contained
in this annual report as to the contents of any contract or other document referred to are not necessarily complete, and each
of these statements is qualified in all respects by reference to the full text of such contract or other document filed as an
exhibit hereto. A copy of the complete annual report including the exhibits and schedules filed herewith may be inspected without
charge at the public reference facilities maintained by the SEC at Room 1024, 100 F Street, N.E., Washington, D.C. 20549. Copies
of such materials may be obtained by mail from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549,
at prescribed rates. In addition the SEC maintains a website that contains information filed electronically with the SEC, which
can be accessed over the Internet at http://www.sec.gov.



We are subject to
the information and periodic reporting requirements of the Securities Exchange Act and, in accordance therewith, file periodic
reports and other information with the SEC. However, as a foreign private issuer, we are exempt from the rules under the Securities
Exchange Act relating to the furnishing and content of proxy statements and relating to short-swing profits reporting and liability.



We furnish to Citibank,
N.A., as depositary, copies of all reports we are required to file with the SEC under the Securities Exchange Act, including our
annual reports in English, containing a brief description of our operations and our audited annual consolidated financial statements
which are prepared in accordance with Brazilian GAAP and include a reconciliation to U.S. GAAP. In addition, we are required under
the deposit agreement to furnish the depositary with copies of English translations to the extent required under the rules of the
SEC of all notices of meetings of shareholders and other reports and communications that are generally made available to shareholders.
Under certain circumstances, the depositary will arrange for the mailing, at our expense, of these notices, other reports and communications
to all ADS holders.



We also file financial
statements and other periodic reports with the CVM, which are available to the public from CVM’s website at http://www.cvm.gov.br.



I.       Subsidiary
Information



Not applicable.



ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK



We are exposed to
market risks arising from the normal course of our business. These market risks mainly involve the possibility that changes in
interest rates may impact the value of our financial liabilities. See “Item 3. Key Information—D. Risk Factors—Risks
Relating to Brazil.”



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Interest rates



Our results of operations
and profitability are affected by changes in interest rates due to the impact that these changes have on our interest expenses
relating to our variable interest rate debt instruments and on our purchase and sale contracts and on our interest income generated
from our financial investments.



The table below provides
information about our significant interest rate-sensitive instruments (fixed and variable) as of December 31, 2019:



|                                                |  | As of December 31, 2019                           
|----------------------------------------------- |  | --------------------------------------------------
|                                                |  | Expected Maturity Date                            
|                                                |  | Total                                             
|                                                |  | (in millions of reais, unless otherwise indicated)
|Liabilities:                                    |  |                                                   
|Loans, financing and debentures:                |  |                                                   
|Debentures                                      |  |                                                   
|Average interest rate                           |  |                                                   
|Loans and financing (working capital)           |  |                                                   
|Average interest rate                           |  |                                                   
|Loans and financing — SFH                       |  |                                                   
|Average interest rate                           |  |                                                   
|Total loans, financing and debentures           |  |                                                   
|Real estate development obligations(2)          |  |                                                   
|Obligations for purchase of land                |  |                                                   
|Total                                           |  |                                                   
|Assets:                                         |  |                                                   
|Cash and cash equivalent                        |  |                                                   
|Marketable securities (current and non-current) |  |                                                   
|Receivables from clients                        |  |                                                   
|Receivables from clients(2)                     |  |                                                   
|Total client receivables                        |  |                                                   
|Total                                           |  |                                                   

_________________

| | (1) | See Notes 12 and 13 to our consolidated financial statements for information about the interest rates on our loans, financing
and debentures. As of December 31, 2019, the annualized index was 5.96% for CDI, 0% for TR, 4.15% for INCC, 4.31% for IPCA and
7.32% for IGPM.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Includes commitments and receivables arising from units sold after January 1, 2004 for which balances have not been recorded
in our balance sheet—CFC Resolution No. 963.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We borrow funds at
different rates and linked to different indices in order to try to match the financing that we provide to some of our clients.
The mismatch between rates and terms on our funds borrowed and the financing we provide may adversely affect our cash flow. We
constantly monitor and evaluate the impact of indexation on our assets and liabilities. If we anticipate the possibility of an
interest rate mismatch between our assets and obligations, we may use derivative financial instruments in order to hedge against
the risk that arises from interest rate variations.



Foreign Exchange Rate



During 2019, we had
no derivative financial instruments with the objective of hedging against fluctuations in foreign exchange rates. As of December
31, 2019, we had no debt in foreign currency.



ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES



D.       American Depositary
Shares



Depositary Fees



We and the holders
and beneficial owners of our ADSs and the person depositing our common shares or surrendering ADSs for cancellation are responsible
for the following fees of the depositary:



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|Service                                                                                                                                         | Rate                                                     | Paid
By                                                                                                                                                                                       
|----------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Issuance of ADSs upon deposit of Shares (excluding issuances as a result of distributions described in paragraph (4) below).                    | Up to US$5.00 per 100 ADSs (or fraction thereof) issued. | Person depositing our common shares or person receiving ADSs.                                                                                                                                 
|Delivery of common shares deposited under our deposit agreement against surrender of ADSs.                                                      | Up to US$5.00 per 100 ADSs (or fraction thereof) issued. | Person surrendering ADSs for purpose of withdrawal of common shares deposited under our deposit agreement or person to whom common shares deposited under our deposit agreement are delivered.
|Distribution of cash dividends or other cash distributions (i.e., sale of rights and other entitlements).                                       | Up to US$2.00 per 100 ADSs (or fraction thereof) held.   | Person to whom distribution is made.                                                                                                                                                          
|Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs. | Up to US$2.00 per 100 ADSs (or fraction thereof) held.   | Person to whom distribution is made.                                                                                                                                                          
|Distribution of securities other than ADSs or rights to purchase additional ADSs (i.e., spin-off shares).                                       | Up to US$2.00 per 100 ADSs (or fraction thereof) held.   | Person to whom distribution is made.                                                                                                                                                          
|Depositary services                                                                                                                             | Up to US$4.00 per 100 ADSs (or fraction thereof) held.   | Person holding ADSs on applicable record date(s) established by the depositary.                                                                                                               
|Transfer of ADRs                                                                                                                                | US$1.50 per certificate presented for transfer.          | Person presenting certificate for transfer.                                                                                                                                                   



The depositary may
deduct applicable depositary fees from the funds being distributed in the case of cash distributions. For distributions other than
cash, the depositary will invoice the amount of the applicable depositary fees to the applicable holders.



Additional Charges



Holders and beneficial
owners of our ADSs and person depositing our common shares for deposit and person surrendering ADSs for cancellation and withdrawal
of our common shares will be required to pay the following charges:



| | · | taxes (including applicable interest and penalties) and other governmental charges;
| | - | -----------------------------------------------------------------------------------



| | · | such registration fees as may from time to time be in effect for the registration of our common
shares or other common shares deposited under our deposit agreement on the share register and applicable to transfers of our common
shares or other common shares deposited under our deposit agreement to or from the name of the custodian, the depositary or any
nominees upon the making of deposits and withdrawals, respectively;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | such cable, telex and facsimile transmission and delivery expenses as are expressly provided in
the deposit agreement to be at the expense of the person depositing or withdrawing our common shares or holders and beneficial
owners of ADSs;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the expenses and charges incurred by the depositary in the conversion of foreign currency;
| | - | ------------------------------------------------------------------------------------------



| | · | such fees and expenses as are incurred by the depositary in connection with compliance with exchange
control regulations and other regulatory requirements applicable to our common shares, common shares deposited under our deposit
agreement, ADSs and ADRs; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the fees and expenses incurred by the depositary, the custodian or any nominee in connection with
the servicing or delivery of common shares deposited under our deposit agreement.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Direct and Indirect Payments



Citibank N.A., located
at 388 Greenwich Ave., New York, NY 10013, as depositary, has agreed to reimburse certain of our reasonable expenses related to
our ADR program and incurred by us in connection with the program. As of December 31, 2019, we received from the depositary of
our ADSs approximately US$96,000, which was used for general corporate purposes such as the payment of costs and expenses associated
with (1) the preparation and distribution of proxy materials, (2) the preparation and distribution of marketing materials and (3)
consulting and other services related to investor relations.



PART II



ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES



None.



ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY
HOLDERS AND USE OF PROCEEDS



None.



ITEM 15. CONTROLS AND PROCEDURES



Our management has
identified material weaknesses in our internal control over financial reporting, which we describe in the “Management’s
Annual Report on Internal Control over Financial Reporting”. In addition, our management has analyzed these material weaknesses
and concluded that our consolidated financial statements fairly present, in all material respects, our financial condition, results
of operations and cash flows at and for the periods presented, and the impact of all facts known to our management to date has
been reflected in the consolidated financial statements.



(a) Evaluation of Disclosure Controls
and Procedures



Our management, including
our Principal Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures
as of December 31, 2019. Based upon our evaluation, our Principal Executive Officer and our Chief Financial Officer concluded that
as a result of the material weaknesses in our internal control over financial reporting described below, as of December 31, 2019
our disclosure controls and procedures were not effective to provide reasonable assurance that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the
time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including
our Principal Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.



(b) Management’s Annual Report
on Internal Control over Financial Reporting



The management of
the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule
13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as a process designed by, or under the supervision
of, the Company’s Chief Executive Officer and Chief Financial Officer and effected by the Company’s Board of Directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting, and the preparation
of financial statements for external purposes in conformity with Brazilian GAAP, including the reconciliation to U.S. GAAP in accordance
with Item 18 of Form 20-F.



Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluations
of effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.



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Material Weaknesses in Internal Control over Financial
Reporting



Management, including
our Principal Executive Officer and CFO, assessed the Company’s internal control over financial reporting using the criteria
set forth by the COSO (2013) framework. Based on the evaluation under these criteria, management determined, based upon the existence
of the material weaknesses described below, that we did not maintain effective internal control over financial reporting as of
the Evaluation Date.



A material weakness is a deficiency, or a combination of deficiencies,
in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s
annual or interim consolidated financial statements will not be prevented or detected on a timely basis. During our assessment
of internal control over financial reporting as of December 31, 2019, we identified the material weaknesses described below.



The accuracy and completeness of
information about contingent liabilities: Monitoring controls. The failure to maintain effective controls designed to ensure
the accuracy and completeness of information about contingent liabilities. This deficiency did not result in a misstatement of
the 2019 financial statements but resulted in controls relating to compliance with Company policies and procedures for evaluating
the measure provisions related with the existent claims against the Company that were not fully effective.



Information Technology (“IT”):
Monitoring controls. The controls related to operation of information technology (“IT”) general controls in the areas
of access security, program change management and computer operations (“IT General Controls”) have developed, but haven't
reach a sufficient standard. This deficiency did not result in a misstatement of the 2019 financial statements, but showed that
manual controls that rely on data produced by and maintained within these IT system applications and automated controls within
these IT system applications were not fully effective. COAUD has requested the administration a fast implementation of the information
technology ("IT") development plan, which it committed to it throughout 2020.



The material weaknesses did not result in any identified misstatements
in the current period consolidated financial statements, nor in any restatements of consolidated financial statements previously
reported by the Company, and there were no changes in previously released financial results. We have begun to develop remediation
plans for these material weaknesses which are described below under “Remediation Efforts”.



Remediation of Prior Material Weaknesses



During our management’s assessment
of internal control over financial reporting as of December 31, 2018, our management identified 4 (four) material weaknesses,
2 (two) of which were remediated. The material weaknesses were that we did not design, establish or maintain effective controls
over Loan and Financing agreements, which affected certain contractual terms in loan and financing agreements resulting in the
possibility of acceleration of some debts and the Internal Audit function as the Company did not maintain at year-end an internal
audit function enough to monitor control activities and to execute timely the management’s self-assessment over
internal control.



During 2019, we implemented and reinforced
controls to ensure procedures over:



| | · | Loan and Financing agreements: Restrictive clauses in financing contracts and on mitigating similar situations are now
analyzed in a regular basis, where the management informs that reinforced several procedures, such as: (i) Directives stipulated
in the contract are regularly monitored and checked with control reports by the manager of structured operations
– a new executive hired by Gafisa on August 2019 (ii) The position of the financing agreements are presented in an internal
committee in order to evaluate their position and define strategies for future action
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Internal Audit area: The maintenance of an internal audit area by contracting a new manager for the area in February
2019, and in parallel a number of steps have been taken in order to restructure the area, increasing governance staffing for Internal
Controls, Risks Management,
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



130


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and Internal Audit. The
Internal Audit area remains as responsible for an independent and objective evaluation of processes, risks management, check compliance
with policies and procedures and verification of controls effectiveness and efficiency.



Therefore, based upon the measures
adopted, our management concluded that the actions implemented represented an improvement in the mitigation of risks in the control
environment over this process and concluded that this deficiency was remediated as of December 31, 2019.



Remediation Efforts



Our management has been actively engaged in the design and implementation
of remediation efforts to address the identified material weakness, as well as other identified areas of risk.



The remediation efforts outlined below, which are in the process
of implementation, are intended to address both the identified material weakness and related areas. The design and implementation
of these and other remedial efforts are the responsibility of our management.



The accuracy and completeness of
information about contingent liabilities: The management reinforces its commitment to maintain controls to ensure the accuracy
and completeness of information about contingent liabilities by contracting a new manager for the area in February 2020, and in
parallel a number of steps have been taken in order to restructure the area, increasing governance staffing for the management
of its legal processes to reconcile any discrepant information. This movement also includes a new version of its legal management
software, orientation of all service provider offices, including new ones that have assumed substantial portfolios, in order to
reinforce the need for all actions accompanied by them to be evaluated in a timely manner in order to corroborate the integrity
of the data used for the evaluation of their contingencies.



Information Technology (“IT”): Our Management
is concentrating efforts on readjusting the design of controls in the information technology environment, updating policies and
monitoring and reviewing operational controls.
We are implementing the following corrective measures in response to the deficiency related to the management of users and access
rights:
• Review and improvement of automated rules related to access management;
• Map and review all critical functions, as well as access to transactions and permissions for users.
 
Improvement of our compensatory controls, related to the segregation of functions in ERP transactions and the expansion of the
set of monitors and their respective automated reports already developed and used to identify, monitor and treat any conflict that
materializes, expanding them where there is a risk and occurrence of technically justified conflicts.



(c) Attestation
Report of Independent Registered Public Accounting Firm



The effectiveness
of internal control over financial reporting as of December 31, 2019, has been audited by BDO Auditores Independentes an independent
registered public accounting firm, as stated in its report which is included under Item 18 in this annual report on Form 20-F on
pages F-2 and F-3.



(d) Changes in Internal
Control over Financial Reporting



There was no change
in our internal control over financial reporting that occurred during the period covered by this annual report that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.



ITEM 16. RESERVED



ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT



For the purposes of
the Sarbanes-Oxley Act of 2002, our directors established an Audit Committee that convenes as often as it determines is appropriate
to carry out its responsibilities, but at least quarterly. This committee has responsibility for planning and reviewing our annual
and quarterly reports and accounts with the involvement of our auditors in that process, focusing particularly on compliance with
legal requirements and accounting standards, and



131


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ensuring that an effective system of internal financial controls
is maintained. The ultimate responsibility for reviewing and approving our annual and quarterly reports and accounts remains with
our directors.



The Audit Committee
convened 7 times in 2019. The Audit Committee currently comprises Thomas Cornelius Azevedo Reichenheim, Gilberto Braga and Pedro
Carvalho de Mello. Our board of directors has determined that Thomas Cornelius Azevedo Reichenheim, Gilberto Braga and Pedro Carvalho
de Mello are each independent for the purpose of Rule 10A-3 of the Securities Exchange Act. Our board of directors has determined
that Gilberto Braga is an audit committee financial expert within the meaning of the regulations promulgated by the Securities
and Exchange Commission.



ITEM 16B. CODE OF BUSINESS CONDUCT AND ETHICS



On July 10, 2007,
we adopted a Code of Business Conduct and Ethics (The Code) that applies to our chief executive officer, chief financial officer,
principal accounting officer and persons performing similar functions, as well as to our directors, other officers and employees.
The objective of this code is (1) to reduce the subjectivity of personal interpretations of ethical principles; (2) to be a formal
and institutional benchmark for the professional conduct of the employees, including the ethical handling of actual or apparent
conflicts of interests, becoming a standard for the internal and external relationship of the Company with its shareholders, clients,
employees, partners, suppliers, service providers, labor unions, competitors, society, government and the communities in which
we operate; and (3) to ensure that the daily concerns with efficiency, competitiveness and profitability do not override ethical
behavior.



The Code is regularly
reviewed and updated, in order to address international and local requirements regarding ethics on business, conflict of interests,
disclosure of information and anti-corruption procedures.



The Code can be obtained
from our website (www.gafisa.com.br) or free of charge by requesting a copy from our Investor
Relations Department at the following address: Av. Pres. Juscelino Kubitschek, No. 1830, Block 2, 3rd Floor, 04543-900 –
São Paulo, SP – Brazil, telephone 55-11-3025-9242, fax 55-11-3025-9348 and e-mail ri@gafisa.com.br.



In July 2007, we established
a “whistleblower channel” in order to receive “complaints,” by any person regarding any “unethical
conduct” and “accounting, internal accounting controls, or auditing matters”. The complaints can be submitted
confidentially and anonymously at the whistleblower’s discretion. The “whistleblower channel” can be accessed
through our intranet, website, specific phone number or a letter that may be forwarded to our headquarters to the attention of
our Ethics Committee and/or Audit Committee. Since its establishment, 950 issues were reported through our “whistleblower
channel”, all of which related to personal conduct and information leaks and, therefore, without any financial impact on
our results of operations.



In January 2014, we
established a compliance and ethics program in order to help prevent, detect, rectify and report potential misconduct, including
violations of the Foreign Corrupt Practices Act and Brazilian anti-corruption legislation (pursuant to Brazilian Law No. 12,846).
This program comprises extensive risk assessment of our operations, ongoing training and advice to employees, incentives and disciplinary
measures, and third party due diligence.



ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES



The relationship with
our independent auditors in respect to the contracting of services unrelated to the external audit is based on principles that
preserve the independence of the auditor. Our board of directors approves our financial statements, the performance by our auditors
of audit and permissible non-audit services, and associated fees, supported by our Audit Committee.



The following table
describes the total amount billed to us by BDO RCS Auditores Independentes SS (“BDO”), PricewaterhouseCoopers (“PwC”)
and KPMG Auditores Independentes (“KPMG”) for services performed in 2019 and 2018, and the remuneration for these services
in each year.



|                      |  | 2019                    |       | 2018
|--------------------- |  | ----------------------- | ----- | ----
|                      |  | (in thousands of reais)
|Audit fees(1)         |  |                         | 1,725 |     
|Audit related fees(2) |  |                         | —     |     
|Tax fees(3)           |  |                         | —     |     
|Total                 |  |                         | 1,725 |     







132


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_________________

| | (1) | “Audit fees” are the aggregate fees billed by BDO, PwC and KPMG for the audit of our
consolidated and annual financial statements including the audit of internal control over financial reporting, reviews of interim
financial statements and attestation services that are provided in connection with statutory and regulatory filings or engagements.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | There were no “audit related fees” billed by BDO, PwC and KPMG during 2019 or 2018.
| | --- | -----------------------------------------------------------------------------------



| | (3) | There were no “Tax fees” billed by BDO, PwC and KPMG during 2019 or 2018.
| | --- | -------------------------------------------------------------------------



Audit Committee Pre-Approval Policies
and Procedures



Our board of directors
has established pre-approval policies and procedures for the engagement of registered public accounting firm for audit and non-audit
services. Under such pre-approval policies and procedures, our board of directors reviews the scope of the services to be provided
by each registered public accounting firm to be engaged in order to ensure that there are no independence issues and the services
are not prohibited services as defined by Sarbanes-Oxley Act of 2002.



ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES



None.



ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER
AND AFFILIATED PURCHASERS



None.



ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT



None.



ITEM 16G. CORPORATE GOVERNANCE



See “Item 6.
Directors, Senior Management and Employees—C. Board Practices.”



ITEM 16H. MINE SAFETY DISCLOSURE



Not applicable.



PART III



ITEM 17. FINANCIAL STATEMENTS



We have responded
to Item 18, in lieu of reporting to this Item.



ITEM 18. FINANCIAL STATEMENTS



See our audited consolidated
financial statements beginning on page F-1.



ITEM 19. EXHIBITS



We are filing the
following documents as part of this Annual Report Form 20-F:



1.1.       Bylaws of Gafisa S.A., as amended (English), which is incorporated by reference to Exhibit 1.1 to our annual report on Form 20-F for the year ended December 31, 2010, filed with the Securities and Exchange Commission on July 5, 2012.



133


Table of Contents


2.1.       Deposit Agreement dated March 21, 2007, among Gafisa S.A., Citibank, N.A., as depositary, and the Holders and Beneficial Owners from time to time of American Depositary Shares issued thereunder, which is incorporated by reference to Exhibit 99(a) to our registration statement on Form F-6 filed with the Securities and Exchange Commission on February 22, 2007.



2.2.       Description of Securities registered under Section 12 of the Exchange Act*



4.1.       Merger of shares agreement dated November 9, 2009 between Gafisa S.A. and Construtora Tenda S.A., which is incorporated by reference to Exhibit 2.1 to our registration statement on Form F-4 filed with the Securities and Exchange Commission on November 13, 2009.



8.1.       List of Subsidiaries*



11.1.       Code of Business Conduct and Ethics (English), which is incorporated by reference to Exhibit 11.1 to our annual report on Form 20-F for the year ended December 31, 2007 filed with the Securities and Exchange Commission on June 18, 2008.



12.1.       Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 of the Chief Executive Officer*



12.2.       Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002 of the Chief Financial Officer*



13.1.       Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer*



13.2.       Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer*



15.1       Letter from KPMG*



* Filed herewith.



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SIGNATURES



Pursuant to the requirements
of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all requirements for filing on Form
20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.



|GAFISA S.A.
|-----------
|By:        
|           
|           



|
|







|By: | /s/ Ian Andrade
|--- | ---------------
|    | Name:          
|    | Title:         



|
|



Date: June 22, 2020















































Gafisa S.A.



Consolidated Financial Statements



December 31, 2019 and report of independent
registered public accounting firm




























Table of Contents




Gafisa S.A.



Financial Statements



December 31, 2019



Table of contents



|Management’s
    Annual Report on Internal Controls over Financial Reporting | F-1 
|---------------------------------------------------------------------------- | ----
|Report of Independent
    Registered Public Accounting Firm (BDO)            | F-3 
|Report of Independent Registered Public Accounting Firm (KPMG)               | F-7 
|Consolidated balance sheets                                                  | F-8 
|Consolidated
    statements of profit or loss                                | F-10
|Consolidated
    statements of comprehensive income (loss)                   | F-11
|Consolidated
    statements of changes in equity                             | F-12
|Consolidated statements
    of cash flows                                    | F-13
|Consolidated
    statements of value added                                   | F-14
|Notes
    to the consolidated financial statements                           | F-15








Table of Contents




Management’s Annual Report on Internal Controls over
Financial Reporting



The management of the
Company is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule
13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as a process designed by, or under the supervision
of, the Company’s Chief Executive Officer and Chief Financial Officer and effected by the Company’s Board of Directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting, and the preparation
of financial statements for external purposes in conformity with Brazilian GAAP, including the reconciliation to U.S. GAAP in accordance
with Item 18 of Form 20-F.



Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluations
of effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.



Material Weaknesses in Internal Control over Financial Reporting



A material weakness is a deficiency, or a combination of deficiencies,
in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s
annual or interim consolidated financial statements will not be prevented or detected on a timely basis. During our assessment
of internal control over financial reporting as of December 31, 2019, we identified the material weaknesses described below.



The accuracy and completeness of
information about contingent liabilities:Monitoring controls. The failure to maintain effective controls designed to ensure
the accuracy and completeness of information about contingent liabilities. This deficiency did not result in a misstatement of
the 2019 financial statements but resulted in controls relating to compliance with Company policies and procedures for evaluating
the measure provisions related with the existent claims against the Company that were not fully effective.



Information Technology (“IT”):
Monitoring controls. The controls related to operation of information technology (“IT”) general controls in the areas
of access security, program change management and computer operations (“IT General Controls”) have developed, but haven't
reach a sufficient standard. This deficiency did not result in a misstatement of the 2019 financial statements, but showed that
manual controls that rely on data produced by and maintained within these IT system applications and automated controls within
these IT system applications were not fully effective. COAUD has requested the administration a fast implementation of the information
technology ("IT") development plan, which it committed to it throughout 2020.



The material weaknesses did not result in any identified misstatements
in the current period consolidated financial statements, nor in any restatements of consolidated financial statements previously
reported by the Company, and there were no changes in previously released financial results. We have begun to develop remediation
plans for these material weaknesses which are described below under “Remediation Efforts”.





F-1


Table of Contents




Remediation of Prior Material Weaknesses



During our management’s assessment
of internal control over financial reporting as of December 31, 2018, our management identified 2 (two) material weaknesses.
The material weaknesses were that we did not design, establish or maintain effective controls over Loan and Financing agreements,
which affected certain contractual terms in loan and financing agreements resulting in the possibility of acceleration of some
debts and the Internal Audit function as the Company did not maintain at year-end an internal audit function enough to
monitor control activities and to execute timely the management’s self-assessment over internal control.



During 2019, we
implemented and reinforced controls to ensure procedures over:



| | · | Loan and Financing agreements: Restrictive clauses in financing
contracts and on mitigating similar situations are now analysed in a regular basis, where the management informs that reinforced
several procedures, such as: (i) Directives stipulated in the contrac are regularly monitored and checked with control
reports by the manager of structured operations – a new executive hired by Gafisa on August 2019 (ii) The position of
the financing agreements are presented in an internal committee in order to evaluate their position and define strategies for future
action
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Internal Audit area: The maintenance of an internal audit area
by contracting a new manager for the area in February 2019, and in parallel a number of steps have been taken in order to restructure
the area, increasing governance staffing for Internal Controls, Risks Management, and Internal Audit. The Internal Audit area remains
as responsible for an independent and objective evaluation of processes, risks management, check compliance with policies and procedures
and verification of controls effectiveness and efficiency.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Therefore, based upon the measures adopted, our management concluded
that the actions implemented represented an improvement in the mitigation of risks in the control environment over this process
and concluded that this deficiency was remediated as of December 31, 2019.



Remediation Efforts



Our management has been actively engaged in the design and implementation
of remediation efforts to address the identified material weakness, as well as other identified areas of risk.



The remediation efforts outlined below, which are in the process
of implementation, are intended to address both the identified material weakness and related areas. The design and implementation
of these and other remedial efforts are the responsibility of our management.



The accuracy and completeness of
information about contingent liabilities: The management reinforces its commitment to maintain controls to ensure the accuracy
and completeness of information about contingent liabilities by contracting a new manager for the area in February 2020, and in
parallel a number of steps have been taken in order to restructure the area, increasing governance staffing for the management
of its legal processes to reconcile any discrepant information. This movement also includes a new version of it ́s legal management
software, orientation of all service provider offices, including new ones that have assumed substantial portfolios, in order to
reinforce the need for all actions accompanied by them to be evaluated in a timely manner in order to corroborate the integrity
of the data used for the evaluation of their contingencies.



Information Technology (“IT”): Our Management
is concentrating efforts on readjusting the design of controls in the information technology environment, updating policies and
monitoring and reviewing operational controls.

We are implementing the following corrective measures in response to the deficiency related to the management of users and access
rights:

• Review and improvement of automated rules related to access management;
• Map and review all critical functions, as well as access to transactions and permissions for users.
 
Improvement of our compensatory controls, related to the segregation of functions in ERP transactions and the expansion of the
set of monitors and their respective automated reports already developed and used to identify, monitor and treat any conflict
that materializes, expanding them where there is a risk and occurrence of technically justified conflicts.



São Paulo, Brazil



June 22, 2020



|By: | /s/ Guilherme Augusto Soares Benevides |                                               
|--- | -------------------------------------- | ----------------------------------------------
|    | Name:                                  | Guilherme Augusto Soares Benevides            
|    | Title:                                 | Chief Operational Officer                     
|    |                                        |                                               
|By: | /s/ Ian Monteiro de Andrade            |                                               
|    | Name:                                  | Ian Monteiro de Andrade                       
|    | Title:                                 | Investor Relations and Chief Financial Officer



F-2


Table of Contents








Report
of Independent Registered Public Accounting Firm



To
Stockholders and Board of Directors of Gafisa S.A.



Opinion
on Internal Control over Financial Reporting



We
have audited Gafisa S.A. and subsidiaries (the “Company”) internal control over financial reporting as of December
31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not
maintain, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the
COSO criteria.



We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),
the consolidated balance sheet of the Company and subsidiaries as of December 31, 2019 and 2018, the related consolidated statements
of profit and loss and comprehensive income (loss), changes in equity, and cash flows for each of the two years in the period
ended December 31, 2019, and the related notes (collectively referred to as “the financial statements”) and our report
dated June 22, 2020 expressed an unqualified opinion on those consolidated financial statements.



Basis
for Opinion



The Company’s
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness
of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting
based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect
to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.



We
conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.



A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not
be prevented or detected on a timely basis. The material weaknesses described below have been identified and included in management
assessment:





F-3


Table of Contents






| | · | Failure
                                         to maintain controls to ensure the accuracy and completeness of information about contingent
                                         liabilities. Specifically, the Company did not design or implement controls to monitor
                                         compliance with Company policies and procedures for evaluating provisions related to
                                         existent claims against the Company.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Failure
                                         to maintain controls related to operation of information technology (“IT”)
                                         general controls in the areas of access security, program change management and computer
                                         operations (“IT General Controls”). The deficiencies in IT General Controls
                                         also resulted in a conclusion that manual controls that rely on data produced by and
                                         maintained within these affected IT system applications and automated controls within
                                         these affected IT system applications were ineffective.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



These
material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2019
financial statements, and this report does not affect our report on those financial statements.



Definition
and Limitations of Internal Control over Financial Reporting



A
company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.



Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.







São
Paulo, Brazil



June
22, 2020

/s/
BDO RCS Auditores Independentes SS



F-4


Table of Contents


Report
of Independent Registered Public Accounting Firm



To
Stockholders and Board of Directors of Gafisa S.A.





Opinion
on the Consolidated Financial Statements



We
have audited the accompanying consolidated balance sheet of Gafisa S.A. (the “Company”) and subsidiaries as of December
31, 2019 and 2018, the related consolidated statements of profit and loss and comprehensive income (loss), changes in equity,
and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to
as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly,
in all material respects, the financial position of the Company and subsidiaries at December 31, 2019 and 2018, and the results
of their operations and their cash flows for each of the two years in the period ended December 31, 2019, in conformity with Brazilian
accounting practices, applicable to Brazilian real estate development entities, registered with the Brazilian Securities Commission
(“CVM”).



We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),
the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal
Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”),
and our report dated June 22, 2020 expressed an adverse opinion on the effectiveness of the Company’s internal control over
financial reporting.



Change in Accounting
Principle



As
discussed in Note 3.1 to the consolidated financial statements, the Company changed its method for accounting for leases using
the modified retrospective method in 2019.



Differences from
U.S. Generally Accepted Accounting Principles



Brazilian
accounting practices, applicable to Brazilian real estate development entities, registered with the Brazilian Securities Commission
(CVM), vary in certain significant respects from U.S. generally accepted accounting principles. Information relating to the nature
and effect of such differences is presented in Note 32 to the consolidated financial statements.





F-5


Table of Contents




Basis
for Opinion



These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.



We conducted
our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining,
on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.











We have served
as the Company's auditor since 2018.





São
Paulo, Brazil



June
22, 2020

/s/
BDO RCS Auditores Independentes SS











F-6


Table of Contents




Report of Independent Registered Public Accounting Firm



To the Stockholders and Board of Directors Gafisa S.A.:



Opinion on the Consolidated Financial Statements



We have audited,
before the effects of the adjustments to retrospectively apply the change in accounting effective as of January 1, 2018 as issued
by the Brazilian Accounting Standards Committee, Comitê de Pronunciamentos Contábeis (CPC), CPC 48 - Financial Instruments
and CPC 47 - Revenue from Contracts with Customers, the consolidated statements of profit or loss, comprehensive income (loss),
cash flows, changes in equity and value added for the year ended December 31, 2017 and the related notes, collectively, the consolidated
financial statements. The 2017 consolidated financial statements before the effects of the adjustments to retrospectively apply
the aforementioned change in accounting are not presented herein. In our opinion, the consolidated financial statements, before
the effects of the adjustments to retrospectively apply the aforementioned change in accounting, present fairly, in all material
respects, the results of its operations and its cash flows for the years ended December 31, 2017, in conformity with accounting
practices adopted in Brazil applicable to Real Estate entities.



We were not engaged to audit, review, or apply any procedures
to the adjustments to retrospectively apply the change in accounting effective as of January 1, 2018 as issued by the Brazilian
Accounting Standards Committee, Comitê de Pronunciamentos Contábeis (CPC), CPC 48 - Financial Instruments and CPC
47 - Revenue from Contracts with Customers and, accordingly, we do not express an opinion or any other form of assurance about
whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by other auditors.



Basis for Opinion



These consolidated financial statements are
the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.



We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. Our audits of the consolidated financial
statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements. We believe that our audits provides a reasonable basis for our opinion.



We have served as the Company’s auditor from 2013 to 2017.



São Paulo, Brazil

April 27, 2018



/s/ KPMG Auditores Independentes





F-7


Table of Contents






Gafisa S.A.



Consolidated balance sheets

As of December 31, 2019 and 2018

(In thousand of Brazilian Reais)



|                                   |  | Notes |  |  | 2019 |           |  | 2018 | 
|---------------------------------- |  | ----- |  |  | ---- | --------- |  | ---- | 
|                                   |  |       |  |  |      |           |  |      | 
|Current assets                     |  |       |  |  |      |           |  |      | 
|Cash and cash equivalents          |  | 4.1   |  |  |      | 12,435    |  |      | 
|Short-term investments             |  | 4.2   |  |  |      | 401,895   |  |      | 
|Trade accounts receivable          |  | 5     |  |  |      | 442,542   |  |      | 
|Properties for sale                |  | 6     |  |  |      | 799,099   |  |      | 
|Receivables from related parties   |  | 21.1  |  |  |      | 77,606    |  |      | 
|Prepaid expenses                   |  | —     |  |  |      | 1,860     |  |      | 
|Non-current assets held for sale   |  | 8.1   |  |  |      | 7,014     |  |      | 
|Other assets                       |  | 7     |  |  |      | 67,395    |  |      | 
|Total current assets               |  |       |  |  |      | 1,809,846 |  |      | 
|                                   |  |       |  |  |      |           |  |      | 
|Non-current assets                 |  |       |  |  |      |           |  |      | 
|Trade accounts receivable          |  | 5     |  |  |      | 103,058   |  |      | 
|Properties for sale                |  | 6     |  |  |      | 279,207   |  |      | 
|Receivables from related parties   |  | 21.1  |  |  |      | 33,416    |  |      | 
|Other assets                       |  | 7     |  |  |      | 166,916   |  |      | 
|                                   |  |       |  |  |      | 582,597   |  |      | 
|                                   |  |       |  |  |      |           |  |      | 
|Investments in ownership interests |  | 9     |  |  |      | 126,363   |  |      | 
|Property and equipment             |  | 10    |  |  |      | 14,159    |  |      | 
|Intangible assets                  |  | 11    |  |  |      | 7,084     |  |      | 
|                                   |  |       |  |  |      | 147,606   |  |      | 
|                                   |  |       |  |  |      |           |  |      | 
|Total non-current assets           |  |       |  |  |      | 730,203   |  |      | 
|                                   |  |       |  |  |      |           |  |      | 
|                                   |  |       |  |  |      |           |  |      | 
|                                   |  |       |  |  |      |           |  |      | 
|                                   |  |       |  |  |      |           |  |      | 
|Total assets                       |  |       |  |  |      | 2,540,049 |  |      | 



The accompanying notes are an integral part of these financial
statements.



F-8


Table of Contents




Gafisa S.A.



Consolidated balance sheets

As of December 31, 2019 and 2018

(In thousand of Brazilian Reais)



|                                                               |  | Notes |  |  | 2019 |            |   | 2018 | 
|-------------------------------------------------------------- |  | ----- |  |  | ---- | ---------- | - | ---- | 
|                                                               |  |       |  |  |      |            |   |      | 
|Current liabilities                                            |  |       |  |  |      |            |   |      | 
|Loans and financing                                            |  | 12    |  |  |      | 426,124    |   |      | 
|Debentures                                                     |  | 13    |  |  |      | 158,179    |   |      | 
|Payable for purchase of properties and advances from customers |  | 17    |  |  |      | 117,515    |   |      | 
|Payables for goods and service suppliers                       |  | —     |  |  |      | 95,450     |   |      | 
|Taxes and contributions                                        |  | —     |  |  |      | 69,868     |   |      | 
|Salaries, payroll charges and profit sharing                   |  | —     |  |  |      | 12,291     |   |      | 
|Provision for legal claims and commitments                     |  | 16    |  |  |      | 153,033    |   |      | 
|Obligations assumed on the assignment of receivables           |  | 14    |  |  |      | 20,526     |   |      | 
|Payables to related parties                                    |  | 21.1  |  |  |      | 64,384     |   |      | 
|Other payables                                                 |  | 15    |  |  |      | 135,492    |   |      | 
|Total current liabilities                                      |  |       |  |  |      | 1,252,862  |   |      | 
|                                                               |  |       |  |  |      |            |   |      | 
|Non-current liabilities                                        |  |       |  |  |      |            |   |      | 
|Loans and financing                                            |  | 12    |  |  |      | 107,029    |   |      | 
|Debentures                                                     |  | 13    |  |  |      | 39,346     |   |      | 
|Payable for purchase of properties and advances from customers |  | 17    |  |  |      | 93,075     |   |      | 
|Deferred income tax and social contributions                   |  | 19    |  |  |      | 12,114     |   |      | 
|Provision for legal claims and commitments                     |  | 16    |  |  |      | 123,878    |   |      | 
|Obligations assumed on the assignment of receivables           |  | 14    |  |  |      | 19,835     |   |      | 
|Other payables                                                 |  | 15    |  |  |      | 9,065      |   |      | 
|Total non-current liabilities                                  |  |       |  |  |      | 404,342    |   |      | 
|                                                               |  |       |  |  |      |            |   |      | 
|Equity                                                         |  |       |  |  |      |            |   |      | 
|Capital                                                        |  | 18.1  |  |  |      | 2,926,280  |   |      | 
|Treasury shares                                                |  | 18.1  |  |  |      | (43,517    | ) |      | 
|Capital reserves and reserve for granting stock options        |  | —     |  |  |      | 337,611    |   |      | 
|Accumulated losses                                             |  | 18.2  |  |  |      | (2,338,964 | ) |      | 
|                                                               |  |       |  |  |      | 881,410    |   |      | 
|Non-controlling interests                                      |  |       |  |  |      | 1,435      |   |      | 
|Total equity                                                   |  |       |  |  |      | 882,465    |   |      | 
|Total liabilities and equity                                   |  |       |  |  |      | 2,540,049  |   |      | 



The accompanying notes are an integral part of these financial
statements.



F-9


Table of Contents




Gafisa S.A.



Consolidated statement of profit or loss

Years ended December 31, 2019, 2018 and 2017

(In thousand of Brazilian Reais, except if stated otherwise)



|                                                                                         |  | Notes |  |  | 2019 |          |   | 2018 |  |          | 2017 | 
|---------------------------------------------------------------------------------------- |  | ----- |  |  | ---- | -------- | - | ---- |  | -------- | ---- | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Continuing operations                                                                    |  |       |  |  |      |          |   |      |  |          |      | 
|Net operating revenue                                                                    |  | 22    |  |  |      | 400,465  |   |      |  | 960,891  |      | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Operating costs                                                                          |  |       |  |  |      |          |   |      |  |          |      | 
|Real estate development and sales of properties                                          |  | 23    |  |  |      | (282,684 | ) |      |  | (846,169 | )    | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Gross profit                                                                             |  |       |  |  |      | 117,781  |   |      |  | 114,722  |      | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Operating (expenses) income                                                              |  |       |  |  |      |          |   |      |  |          |      | 
|Selling expenses                                                                         |  | 23    |  |  |      | (14,889  | ) |      |  | (84,431  | )    | 
|General and administrative expenses                                                      |  | 23    |  |  |      | (68,314  | ) |      |  | (78,379  | )    | 
|Income from equity method investments                                                    |  | 9     |  |  |      | (5,003   | ) |      |  | (15,483  | )    | 
|Other income (expenses), net                                                             |  | 23    |  |  |      | (31,627  | ) |      |  | (298,935 | )    | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Profit (loss)  before finance income and expenses and income tax and social contribution |  |       |  |  |      | (2,052   | ) |      |  | (362,506 | )    | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Finance expenses                                                                         |  | 24    |  |  |      | (76,830  | ) |      |  | (100,074 | )    | 
|Finance income                                                                           |  | 24    |  |  |      | 17,206   |   |      |  | 19,553   |      | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Loss before income tax and social contribution                                           |  |       |  |  |      | (61,676  | ) |      |  | (443,027 | )    | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Current income tax and social contribution                                               |  |       |  |  |      | (1,984   | ) |      |  | (3,349   | )    | 
|Deferred income tax and social contribution                                              |  |       |  |  |      | 37,259   |   |      |  | 25,100   |      | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Total Income tax and social contribution                                                 |  | 19.i  |  |  |      | 35,275   |   |      |  | 21,751   |      | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Net income (loss) from continuing operations                                             |  |       |  |  |      | (26,401  | ) |      |  | (421,276 | )    | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Net income (loss) from discontinued operations                                           |  |       |  |  |      | —        |   |      |  | —        |      | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Loss for the year                                                                        |  |       |  |  |      | (26,401  | ) |      |  | (421,276 | )    | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|(-)Attributable to:                                                                      |  |       |  |  |      |          |   |      |  |          |      | 
|Noncontrolling interests                                                                 |  |       |  |  |      | (361     | ) |      |  | (1,750   | )    | 
|Owners of the parent                                                                     |  |       |  |  |      | (26,040  | ) |      |  | (419,526 | )    | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Weighted average number of shares (in thousands)                                         |  | 27    |  |  |      | 68,584   |   |      |  | 41,147   |      | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Basic earnings (loss) per thousand shares - In Reais                                     |  | 27    |  |  |      | (0.380   | ) |      |  | (10.196  | )    | 
|From continuing operations                                                               |  |       |  |  |      | (0.380   | ) |      |  | (10.196  | )    | 
|From discontinued operations                                                             |  |       |  |  |      | —        |   |      |  | —        |      | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 
|Diluted earnings (loss) per thousand shares - In Reais                                   |  | 27    |  |  |      | (0.380   | ) |      |  | (10.196  | )    | 
|From continuing operations                                                               |  |       |  |  |      | (0.380   | ) |      |  | (10.196  | )    | 
|From discontinued operations                                                             |  |       |  |  |      | —        |   |      |  | —        |      | 
|                                                                                         |  |       |  |  |      |          |   |      |  |          |      | 



The accompanying notes are
an integral part of these financial statements.





F-10


Table of Contents




Gafisa S.A.



Consolidated statement of comprehensive income (loss)

Years ended December 31, 2019, 2018 and 2017

(In thousand of Brazilian Reais, except if stated otherwise)



|                                                      |  | 2019 |         |   | 2018 |  |          | 2017 | 
|----------------------------------------------------- |  | ---- | ------- | - | ---- |  | -------- | ---- | 
|                                                      |  |      |         |   |      |  |          |      | 
|Loss for the year                                     |  |      | (26,401 | ) |      |  | (421,276 | )    | 
|                                                      |  |      |         |   |      |  |          |      | 
|Total comprehensive income for the year, net of taxes |  |      | (26,401 | ) |      |  | (421,276 | )    | 
|                                                      |  |      |         |   |      |  |          |      | 
|Attributable to:                                      |  |      |         |   |      |  |          |      | 
|Owners of the parent                                  |  |      | (26,040 | ) |      |  | (419,526 | )    | 
|Non-controlling interests                             |  |      | (361    | ) |      |  | (1,750   | )    | 
|                                                      |  |      |         |   |      |  |          |      | 



The accompanying notes are an integral part
of these financial statements.



F-11


Table of Contents




Gafisa S.A.



Consolidated statement of changes in equity

Years ended December 31, 2019, 2018 and 2017

(In thousands of Brazilian Reais)



|                                      |  |       |  |  | Attributed to Owners of the Parent |           |   |                 |  |         |                                         | 
|------------------------------------- |  | ----- |  |  | ---------------------------------- | --------- | - | --------------- |  | ------- | --------------------------------------- | 
|                                      |  | Notes |  |  | Capital                            |           |   | Treasury shares |  |         | Reserve for capital and granting shares | 
|Balances at December 31, 2016         |  |       |  |  |                                    | 2,740,662 |   |                 |  | (32,524 | )                                       | 
|                                      |  |       |  |  |                                    |           |   |                 |  |         |                                         | 
|Capital decrease                      |  | 18.1  |  |  |                                    | (219,510  | ) |                 |  | —       |                                         | 
|Stock option plan                     |  | 18.3  |  |  |                                    | —         |   |                 |  | —       |                                         | 
|Treasury shares sold                  |  | 18.1  |  |  |                                    | —         |   |                 |  | 3,435   |                                         | 
|Write-off discontinued operations (a) |  | —     |  |  |                                    | —         |   |                 |  | —       |                                         | 
|Net loss for the year                 |  | —     |  |  |                                    | —         |   |                 |  | —       |                                         | 
|                                      |  |       |  |  |                                    |           |   |                 |  |         |                                         | 
|Balances as of December 31, 2017      |  |       |  |  |                                    | 2,521,152 |   |                 |  | (29,089 | )                                       | 
|                                      |  |       |  |  |                                    |           |   |                 |  |         |                                         | 
|Capital increase                      |  | 18.1  |  |  |                                    | 167       |   |                 |  | —       |                                         | 
|Stock option plan                     |  | 18.3  |  |  |                                    | —         |   |                 |  | —       |                                         | 
|Treasury shares sold                  |  | 18.1  |  |  |                                    | —         |   |                 |  | 2,351   |                                         | 
|Share repurchase program              |  | 18.1  |  |  |                                    | —         |   |                 |  | (32,212 | )                                       | 
|Recognition of reserves               |  | —     |  |  |                                    | —         |   |                 |  | —       |                                         | 
|Loss for the year                     |  | —     |  |  |                                    | —         |   |                 |  | —       |                                         | 
|                                      |  |       |  |  |                                    |           |   |                 |  |         |                                         | 
|Balances as of December 31, 2018      |  |       |  |  |                                    | 2,521,319 |   |                 |  | (58,950 | )                                       | 
|                                      |  |       |  |  |                                    |           |   |                 |  |         |                                         | 
|Capital increase                      |  | 18.1  |  |  |                                    | 404,961   |   |                 |  | —       |                                         | 
|Stock option plan                     |  | 18.3  |  |  |                                    | —         |   |                 |  | —       |                                         | 
|Treasury shares sold                  |  | 18.1  |  |  |                                    | —         |   |                 |  | 141     |                                         | 
|Treasury shares cancelled             |  | 18.1  |  |  |                                    | —         |   |                 |  | 5,747   |                                         | 
|Treasury shares reissued              |  | 18.1  |  |  |                                    | —         |   |                 |  | (20,671 | )                                       | 
|Share repurchase program              |  | 18.1  |  |  |                                    | —         |   |                 |  | 30,216  |                                         | 
|Recognition of reserves               |  | —     |  |  |                                    | —         |   |                 |  | —       |                                         | 
|Loss for the year                     |  | —     |  |  |                                    | —         |   |                 |  | —       |                                         | 
|                                      |  |       |  |  |                                    |           |   |                 |  |         |                                         | 
|Balances as of December 31, 2019      |  |       |  |  |                                    | 2,926,280 |   |                 |  | (43,517 | )                                       | 





| | (a) | Amount regarding the write-off of the debt balance of
non-controlling interests related to Construtora Tenda S.A, in view of the spin-off of the Companies (Note 8.2),
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



The accompanying notes are
an integral part of these financial statements.



F-12


Table of Contents




Gafisa S.A.



Consolidated cash flow statement

Years ended December 31, 2019, 2018 and 2017

(In thousands of Brazilian Reais)



|                                                                                        |  | 2019 |          |   | 2018 |  |            | 2017 | 
|--------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- |  | ---------- | ---- | 
|Operating activities                                                                    |  |      |          |   |      | 
|Profit (loss) before income tax and social contribution                                 |  |      | (61,676  | ) |      |  | (443,027   | )    | 
|Expenses/(income) not affecting cash and cash equivalents:                              |  |      |          |   |      |  |            |      | 
|Depreciation and amortization (Notes 10 and 11)                                         |  |      | 14,181   |   |      |  | 21,290     |      | 
|Stock option plan expense (Note 18.3)                                                   |  |      | (2,366   | ) |      |  | 1,927      |      | 
|Unrealized interests and charges, net                                                   |  |      | 5,448    |   |      |  | 11,156     |      | 
|Warranty provision (Note 15)                                                            |  |      | (7,521   | ) |      |  | (4,130     | )    | 
|Provision for legal claims and commitments (Note 16)                                    |  |      | 20,598   |   |      |  | 172,432    |      | 
|Provision for profit sharing (Note 25 (iii))                                            |  |      | 5,000    |   |      |  | (14,750    | )    | 
|Allowance for expected credit losses and cancelled contracts (Note 5)                   |  |      | (47,257  | ) |      |  | (41,827    | )    | 
|Provision for realization of non-financial assets:                                      |  |      |          |   |      |  |            |      | 
|Properties and land for sale (Note 6 and 8)                                             |  |      | (37,446  | ) |      |  | (74,689    | )    | 
|Provision for penalties due to delay in construction works (Note 15)                    |  |      | 5,283    |   |      |  | —          |      | 
|Income from equity method investments (Note 9)                                          |  |      | 5,003    |   |      |  | 15,483     |      | 
|Financial instruments (Note 20)                                                         |  |      | —        |   |      |  | (763       | )    | 
|Derecognition of goodwill from remeasurement of investment in associate (Note 9)        |  |      | —        |   |      |  | 112,800    |      | 
|Result of divestment in associate (Note 9)                                              |  |      | 78,008   |   |      |  | —          |      | 
|(Record)/Write-off of goodwill on acquisition of subsidiary (Note 9)                    |  |      | —        |   |      |  | —          |      | 
|                                                                                        |  |      |          |   |      |  |            |      | 
|Decrease/(increase) in operating assets                                                 |  |      |          |   |      |  |            |      | 
|Trade accounts receivable                                                               |  |      | 115,003  |   |      |  | (95,740    | )    | 
|Properties for sale and land available for sale                                         |  |      | 151,465  |   |      |  | 367,864    |      | 
|Other assets                                                                            |  |      | (32,044  | ) |      |  | (15,880    | )    | 
|Prepaid expenses                                                                        |  |      | 808      |   |      |  | 2,867      |      | 
|                                                                                        |  |      |          |   |      |  |            |      | 
|Increase/(decrease) in operating liabilities                                            |  |      |          |   |      |  |            |      | 
|Payable for purchase of properties and advances from customers                          |  |      | (87,003  | ) |      |  | 597        |      | 
|Taxes and contributions                                                                 |  |      | 12,592   |   |      |  | 10,846     |      | 
|Payables for goods and service suppliers                                                |  |      | (37,750  | ) |      |  | 32,732     |      | 
|Salaries, payroll charges and profit sharing                                            |  |      | 511      |   |      |  | (6,459     | )    | 
|Other payables                                                                          |  |      | (76,443  | ) |      |  | (3,434     | )    | 
|Transactions with related parties                                                       |  |      | 21,608   |   |      |  | (14,497    | )    | 
|Paid taxes                                                                              |  |      | (1,983   | ) |      |  | (3,348     | )    | 
|Cash from (used) in operating activities related to discontinued operations             |  |      | —        |   |      |  | —          |      | 
|Cash and cash equivalents from operating activities                                     |  |      | 44,019   |   |      |  | 31,450     |      | 
|                                                                                        |  |      |          |   |      |  |            |      | 
|Investing activities                                                                    |  |      |          |   |      |  |            |      | 
|Acquisition of property and equipment and intangible assets (Notes 10 and 11)           |  |      | (3,581   | ) |      |  | (12,511    | )    | 
|Increase in short-term investments                                                      |  |      | (387,319 | ) |      |  | (1,090,796 | )    | 
|Redemption of short-term investments                                                    |  |      | 90,280   |   |      |  | 1,104,875  |      | 
|Investments                                                                             |  |      | —        |   |      |  | (4,629     | )    | 
|Transaction costs related to the transaction of spin-off of Gafisa and Tenda (Note 8.2) |  |      | —        |   |      |  | —          |      | 
|Proceeds from the exercise of preemptive rights                                         |  |      | —        |   |      |  | —          |      | 
|Proceeds from the refund for Tenda’s capital                                            |  |      | —        |   |      |  | —          |      | 
|Cash from investing activities related to discontinued operations                       |  |      | —        |   |      |  | —          |      | 
|Cash from (used in) investing activities                                                |  |      | (300,620 | ) |      |  | (3,061     | )    | 
|                                                                                        |  |      |          |   |      |  |            |      | 
|Financing activities                                                                    |  |      |          |   |      |  |            |      | 
|Increase in loans, financing and debentures                                             |  |      | 122,639  |   |      |  | 412,768    |      | 
|Payment of loans, financing and debentures - principal                                  |  |      | (229,846 | ) |      |  | (528,252   | )    | 
|Payment of loans, financing and debentures - interest                                   |  |      | (56,976  | ) |      |  | (111,157   | )    | 
|Assignment of receivables                                                               |  |      | —        |   |      |  | —          |      | 
|Payables to venture partners                                                            |  |      | —        |   |      |  | —          |      | 
|Loan transactions with related parties                                                  |  |      | (11,179  | ) |      |  | (1,289     | )    | 
|Repurchase of and proceeds from treasury shares (Note 18.1)                             |  |      | 7,132    |   |      |  | (47,448    | )    | 
|Capital increase                                                                        |  |      | 404,962  |   |      |  | 167        |      | 
|Subscription and payment of common shares                                               |  |      | —        |   |      |  | 250,599    |      | 
|Cash from (used in) the financing activities related to discontinued operations         |  |      | —        |   |      |  | —          |      | 
|Cash and cash equivalents from (used in) financing activities                           |  |      | 236,732  |   |      |  | (24,612    | )    | 
|                                                                                        |  |      |          |   |      |  |            |      | 
|(-) Net change in cash and cash equivalents related to discontinued operations          |  |      | —        |   |      |  | —          |      | 
|                                                                                        |  |      |          |   |      |  |            |      | 
|Net increase/(decrease) in cash and cash equivalents                                    |  |      | (19,869  | ) |      |  | 3,777      |      | 
|                                                                                        |  |      |          |   |      |  |            |      | 
|Cash and cash equivalents                                                               |  |      |          |   |      |  |            |      | 
|At the beginning of the year                                                            |  |      | 32,304   |   |      |  | 28,527     |      | 
|At the end of the year                                                                  |  |      | 12,435   |   |      |  | 32,304     |      | 
|                                                                                        |  |      |          |   |      |  |            |      | 
|Net increase (decrease) in cash and cash equivalents                                    |  |      | (19,869  | ) |      |  | 3,777      |      | 



The accompanying notes are
an integral part of these financial statements.





F-13


Table of Contents




Gafisa S.A.



Consolidated added value statement

Years ended December 31, 2019, 2018 and 2017

(In thousands of Brazilian Reais)



|                                                                                  |  | 2019 |          |   | 2018 |  |            | 2017 | 
|--------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- |  | ---------- | ---- | 
|                                                                                  |  |      |          |   |      |  |            |      | 
|                                                                                  |  |      |          |   |      |  |            |      | 
|Revenues                                                                          |  |      | 437,289  |   |      |  | 1,048,145  |      | 
|Real estate development and sales of properties                                   |  |      | 390,032  |   |      |  | 1,006,317  |      | 
|Reversal (recognition) of allowance for doubtful accounts and cancelled contracts |  |      | 47,257   |   |      |  | 41,828     |      | 
|Inputs acquired from third parties (including taxes on purchases)                 |  |      | (306,908 | ) |      |  | (1,075,054 | )    | 
|Operating costs- Real estate development and sales                                |  |      | (244,409 | ) |      |  | (733,265   | )    | 
|Materials, energy, outsourced labor and other                                     |  |      | 82,009   |   |      |  | (228,989   | )    | 
|Profit or loss of discontinued operations                                         |  |      | —        |   |      |  | —          |      | 
|Gain from bargain purchase                                                        |  |      | 16,592   |   |      |  | —          |      | 
|Loss on realization of investment measured at fair value                          |  |      | (161,100 | ) |      |  | (112,800   | )    | 
|                                                                                  |  |      |          |   |      |  |            |      | 
|Gross value added                                                                 |  |      | 130,381  |   |      |  | (26,909    | )    | 
|                                                                                  |  |      |          |   |      |  |            |      | 
|Depreciation and amortization                                                     |  |      | (14,181  | ) |      |  | (21,290    | )    | 
|                                                                                  |  |      |          |   |      |  |            |      | 
|Net value added produced by the entity                                            |  |      | 116,200  |   |      |  | (48,199    | )    | 
|                                                                                  |  |      |          |   |      |  |            |      | 
|Value added received on transfer                                                  |  |      | 12,203   |   |      |  | 4,070      |      | 
|Income from equity method investments                                             |  |      | (5,003   | ) |      |  | (15,483    | )    | 
|Finance income                                                                    |  |      | 17,206   |   |      |  | 19,553     |      | 
|                                                                                  |  |      |          |   |      |  |            |      | 
|Total value added to be distributed                                               |  |      | 128,403  |   |      |  | (44,129    | )    | 
|                                                                                  |  |      |          |   |      |  |            |      | 
|Value added distribution                                                          |  |      | 128,403  |   |      |  | (44,129    | )    | 
|Personnel and payroll charges                                                     |  |      | 28,429   |   |      |  | 75,300     |      | 
|Taxes and contributions                                                           |  |      | 7,106    |   |      |  | 81,339     |      | 
|Interest and rents                                                                |  |      | 118,908  |   |      |  | 218,758    |      | 
|Retained earnings attributable to noncontrolling interests                        |  |      | 361      |   |      |  | 1,750      |      | 
|Incurred losses                                                                   |  |      | (26,401  | ) |      |  | (421,276   | )    | 



The accompanying notes are
an integral part of these financial statements.



F-14


Table of Contents




Gafisa S.A.



Notes to the consolidated financiaol statements

December 31, 2019

(Amounts in thousands of Brazilian Reais, except as
otherwise stated)



| | 1. | Operations
| | -- | ----------



Gafisa S.A. ("Gafisa"
or "Company") is a publicly traded company with registered office at Avenida Presidente Juscelino Kubitschek, no
1.830, conjunto comercial no32, 3o andar, Bloco 2, in the city and state of São Paulo, Brazil, and began its operations
in 1997 with the objectives of: (i) promoting and managing all forms of real estate ventures on its own behalf or for third parties
(in the latter case, as construction company or proxy); (ii) selling and purchasing real estate properties; (iii) providing civil
construction and civil engineering services; (iv) developing and implementing marketing strategies related to its own and third
party real estate ventures; and (v) investing in other companies who share similar objectives.



The Company has stocks traded
at B3 S.A. – Brasil, Bolsa, Balcão (former BM&FBovespa), reporting its information to the Brazilian Securities
and Exchange Commission (CVM) and the U.S. Securities and Exchange Commission (SEC). The ADSs were delisted on the NYSE on December
17, 2018, and are currently traded over the counter (OTC).



The Company enters into real
estate development projects with third parties through specific purpose partnerships (“Sociedades de Propósito Específico”
or “SPEs”) or through the formation of consortia and condominiums. Subsidiaries significantly share the managerial
and operating structures, and corporate, managerial and operating costs with the Company. The SPEs, condominiums and consortia
operate solely in the real estate industry and are linked to specific ventures.



| | 1.1 | Change in Shareholding
| | --- | ----------------------



On February 14, 2019, 14,600,000
shares held by the group GWI Asset Management S.A., corresponding to 33.67% stake in the Company, were auctioned. As a result of
this auction, Planner Corretora de Valores S.A., by means of the investment funds it manages, started to hold 8,000,000 common
shares, corresponding to 18.45% of total common shares issued by the Company.



| | 1.2 | Capital increase
| | --- | ----------------



On June 24, 2019, the Board
of Directors ratified the increase in capital approved in its meeting held on April 15, 2019, by subscription and payment of 26,273,962
new common shares, of which 12,170,035 are new shares subscribed and paid-in by the shareholders who exercised their preemptive
rights at the price of R$5.12, and 14,103,927 are new shares subscribed and paid-in by the shareholders who subscribed the remaining
shares of the capital increase at the price of R$4.96, totaling R$62,310 and R$69,954, respectively.



On October 23, 2019, the Board
of Directors ratified the capital increase approved in its meeting held on August 15, 2019, by subscription and payment of 48,968,124
new common shares, of which 45,554,148 are new shares, subscribed and paid-in by the shareholders who exercised their preemptive
rights at the price of R$5.58, and 3,413,976 new shares, subscribed and paid-in by the shareholders who subscribed the remaining
shares of capital increase at the price of R$5.42, totaling R$254,195 and R$18,504, respectively.





F-15


Table of Contents




Gafisa S.A.



Notes to the consolidated financiaol statements

December 31, 2019

(Amounts in thousands of Brazilian Reais, except as
otherwise stated)



| | 1. | Operations --Continued
| | -- | ----------------------



| | 1.3 | Divestment of associate
| | --- | -----------------------



On October 21, 2019, the Company
disclosed a Material Fact whereby it informed about the Contract for Purchase, Sale and Redemption of Shares, Corporate Restructuring
and Other Covenants, entered into with Alphaville Urbanismo S.A. (“Alphaville”), Private Equity AE Investimentos e
Participações S.A. (“PEAE”) and PEAE affiliated companies, aimed at establishing the terms and conditions
under which it is implementing the divestment of Gafisa’s 21.20% ownership interest in Alphaville. The reduction in the former
interest of 30% is a result of an increase in capital made by PEAE’s affiliated companies. The total amount of the transaction
is equivalent to R$100,000, settled by offsetting receivables and receipt of the investee shares against assets, measured at fair
value. On December 27, 2019, the Company disclosed a Material Fact informing about the completion of this transaction (Note 9.1).



| | 1.4 | Letter of Intent - UPCON Acquisition
| | --- | ------------------------------------



On December 16, 2019, the Company
disclosed a Material Fact whereby it informed that it entered into a non-binding Letter of Intent with UPCON Incorporadora S.A.
(“UPCON”), concerning the acquisition by the Company of the totality of shares issued by UPCON. On March 2, 2020, the
Company informed that the Administrative Council for Economic Defense (CADE) approved, without restriction, the merger of the totality
of shares of UPCON into the Company. Once the required approval stages are completed, UPCON will become a wholly-owned subsidiary
of Gafisa. (Note 31.(i)).





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies
| | -- | -----------------------------------------------------------------------------------



| | 2.1. | Basis of presentation and preparation of individual and consolidated financial statements
| | ---- | -----------------------------------------------------------------------------------------



On June 22, 2020, the Company’s
Board of Directors approved these individual and consolidated financial statements of the Company and authorized their disclosure.



The consolidated financial statements
of the Company have been prepared and are being presented according to the accounting practices adopted in Brazil, including the
pronouncements issued by the CPC, approved by the Brazilian Securities and Exchange Commission (CVM) (“Brazilian GAAP”
or “BR GAAP”).



Brazilian GAAP, differs from
International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”)
in certain respects, including the fact that under Brazilian GAAP the application of percentage of completion accounting by real
estate companies is applied under more circumstances than are permitted by IFRS, including interpretations on the accounting treatment
for cancelations. This application of Brazilian GAAP is commonly referred to in Brazil as IFRS applicable to real estate development
entities in Brazil, registered with the CVM. The aspects related to the transfer of control in the sale of real estate units follow
the understanding expressed by the CVM in Circular Letter/CVM/SNC/SEP 02/2018 about the application of Technical Pronouncement
CPC 47 – Revenue from contracts with customers (IFRS 15), regarding revenue recognition, and the respective costs and expenses
arising from real estate development operations by reference to the stage of completion (percentage of completion method), including
the accounting treatment for cancelations. Accordingly, for the purpose of its annual filing with the United States Securities
and Exchange Commission, the accompanying consolidated financial statements prepared in accordance with BR GAAP have been reconciled
to US GAAP as presented in Note 32 to these financial statements. US GAAP condensed consolidated balance sheets have been included
in Note 32 (d)(i) for 2019, 2018 and 2017 US GAAP consolidated statement of profit or loss and comprehensive income (loss) for
the years ended December 31, 2019, 2018 and 2017 have been included in Note 32 (d)(ii) and Note 32 (d)(iii), respectively.



F-17


Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant
accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.1. | Basis of presentation and preparation of individual and consolidated
financial statements--Continued
| | ---- | ----------------------------------------------------------------------------------------------------



The consolidated financial statements
have been prepared on historical cost, except for those measured at fair value, when indicated, and on a going concern basis. Management
makes an assessment of the Company’s ability to continue as going concern when preparing the consolidated financial statements.



| | 2.1.1. | Consolidated financial statements
| | ------ | ---------------------------------



The consolidated financial statements of the Company
include the financial statements of Gafisa and its direct and indirect subsidiaries. The Company controls an entity when it is
exposed to, or has right to variable returns arising from its involvement with the entity and has the ability to affect those returns
through the power that it exerts over the entity. The existence and the potential effects of voting rights, which are currently
exercisable or convertible, are taken into account when evaluating whether the Company controls another entity. The financial statements
of subsidiaries are included in the consolidated financial statements from the date the control on which the control commences
until the date on which control ceases.



The accounting practices have
been applied consistently by all subsidiaries in the consolidated financial statements. The subsidiaries have the same fiscal year
as the Company.



| | 2.1.2. | Functional and presentation currency
| | ------ | ------------------------------------



The functional and presentation
currency of the Company is Brazilian Real.



| | 2.1.3. | Statement of Cash Flows
| | ------ | -----------------------



In view of the disclosure of the discontinued operations
related to Tenda, and in line with CPC 03 (R-2) – Statement of Cash Flows (IAS 7) and CPC 31 - Non-current Assets Held for
Sale and Discontinued Operations (IFRS 5), the information on operating, financing and investing activities related to discontinued
operations are presented in separated lines in the Statement of Cash Flows of the Company for the year ended December 31, 2017.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant
accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies
| | ---- | ------------------------------------------



| | 2.2.1. | Accounting judgments, estimates and assumptions
| | ------ | -----------------------------------------------



Accounting estimates and judgments
are evaluated on an ongoing basis based on historical experience and other factors, including expectations on future events, considered
reasonable under the circumstances.



The preparation of the consolidated financial statements
of the Company requires Management to make judgments, estimates and assumptions that affect the reported amounts of revenue, expenses,
assets and liabilities, as well as the disclosure of contingent liabilities, at the reporting date.



Assets and liabilities subject to estimates and assumptions
include the provision for impairment of asset, transactions with share-based payment, provision for legal claims, fair value of
financial instruments, measurement of the estimated cost of construction, deferred tax assets, among others.



The main assumptions related
to sources of uncertainty over future estimates and other important sources of uncertainty over estimates at the reporting date,
which may result in different amounts upon settlement are discussed below:



| | a) | Impairment loss of non-financial assets
| | -- | ---------------------------------------



An impairment loss exists when
the asset’s carrying amount exceeds its recoverable amount, which is the higher of an asset’s fair value less costs
to sell and its value in use.



The calculation of the fair
value less cost to sell is based on available information on sale transactions of similar assets or market prices less additional
costs of disposal. The calculation of the value in use is based on the discounted cash flow model.



Cash flows are derived on the
budget for the following five years, and do not include uncommitted restructuring activities or future significant investments
that will improve the asset basis of the cash-generating unit being tested. The recoverable amount is sensitive to the discount
rate used under the discounted cash flow method, the estimated future cash inflows, and to the growth rate used for purposes of
extrapolation.



Indefinite life intangible assets
and goodwill attributable to future economic benefit are tested at least annually, and/or when circumstances indicate a decrease
in the carrying value. The main assumptions used for determining the recoverable amount of cash-generating units are detailed in
Note 9.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.1. | Accounting judgments, estimates and assumptions --Continued
| | ------ | -----------------------------------------------------------



| | b) | Share-based payment transactions
| | -- | --------------------------------



The Company measures the cost
of transactions with employees to be settled with shares based on the fair value of equity instruments on the grant date. For cash-settled
share-based transactions, the liability is required to be remeasured at the end of each reporting period through the settlement
date, recognizing in profit or loss possible changes in fair value, which requires revaluation of the estimates used at the end
of each reporting period. The estimate of the fair value of share-based payments requires the determination of the most adequate
pricing model to grant equity instruments, which depends on the grant terms and conditions.



It also requires the determination
of the most adequate data for the pricing model, including the expected option life, volatility and dividend income, and the corresponding
assumptions. The assumptions and models used for estimating the fair value of share-based payments are disclosed in Note 18.3.



| | c) | Provision for legal claims
| | -- | --------------------------



The Company is party to many
lawsuits and administrative proceedings and recognizes a provision for tax, labor and civil claims (Note 16). Provisions are recognized
for all claims related to lawsuits which likelihoods of losses are considered probable. Provisions are reviewed and adjusted to
take into account the changes in circumstances, such as applicable statutes of limitations, findings of tax inspections, or additional
exposures found based on new court issues or decisions.



Contingent liabilities for which
losses are considered possible are only disclosed in a note to financial statements, and those for which losses are considered
remote are neither accrued nor disclosed.



Contingent assets are recognized
only when there are secured guarantees or final and unappealable favorable court decisions. Contingent assets with probable favorable
decision are only disclosed in explanatory note.



There are uncertainties inherent
in the interpretation of complex tax rules and in the value and timing of future taxable income. In the ordinary course of business,
the Company and its subsidiaries are subject to assessments, audits, legal claims and administrative proceedings in civil, tax
and labor matters.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.1. | Accounting judgments, estimates and assumptions--Continued
| | ------ | ----------------------------------------------------------



| | d) | Allowance for expected credit losses
| | -- | ------------------------------------



The Company recognizes an allowance
for expected credit losses for all sale contracts of real estate units, and the amounts are accrued as contra-entry to the recognition
of the respective development revenue, based on data history of its current operations and estimates. This allowance is calculated
based on the percentage of completion of the construction work, the methodology used for recognizing profit or loss (Note 2.2.2).
Such analysis is individually made by sale contract, in line with CPC 48 – Financial Instruments, item 5.5.17 (c).



Such estimates are annually
reviewed to consider any changes in circumstances and histories.



| | e) | Warranty provision
| | -- | ------------------



The measurement of the warranty
provision, to cover expenditures for repairing construction defects covered during the warranty period, is based on the estimate
that considers the history of incurred expenditures adjusted by the future expectation, which is regularly reviewed, except for
the subsidiaries that operate with third-party companies, which are the own guarantors of the provided construction services. The
warranty term provided is five years from the delivery of the venture.



| | f) | Estimated cost of construction
| | -- | ------------------------------



Estimated costs, mainly comprising
the incurred and estimated costs for completing the construction works, are regularly reviewed, based on the progress of construction,
and any resulting adjustments are recognized in profit or loss of the Company.



| | g) | Realization of deferred income tax
| | -- | ----------------------------------



A deferred tax asset is recognized
when it is probable that a taxable profit will be available in subsequent years to offset the deferred tax asset, based on projections
of results, and based on internal assumptions and future economic scenarios that enable its total or partial use.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.1. | Accounting judgments, estimates and assumptions--Continued
| | ------ | ----------------------------------------------------------



| | h) | Allowance for contract cancellation
| | -- | -----------------------------------



The Company recognizes an allowance
for contract cancellation when a cash inflow risk is identified. Contracts are monitored to identify the moment when these conditions
are mitigated.



While there is such risk, no
revenue or cost is recognized in profit or loss, and the amounts are only recorded in asset and liability accounts.



The other
provisions recognized in the Company are described in Note 2.2.22.



| | 2.2.2. | Recognition of revenue and expenses
| | ------ | -----------------------------------



The Company applied CPC 47 –
Revenue from Contracts with Customers from January 1, 2018, including the guidance contained in Circular Letter CVM/SNC/SEP 02/2018,
of December 12, 2018, which establishes the accounting procedures for recognition, measurement and disclosure of certain types
of transactions arising from contracts for purchase and sale of real estate unit not yet completed in real estate development entities.



According to CPC 47, the recognition
of revenue from contracts with customers is based on transfer of control over promised goods or service, which can be at a point
in time or over time, according to the satisfaction or not of the “contractual performance obligations”. Revenue
is measured in an amount that reflects the consideration the entity expects to be entitled and is based on a five-step model detailed
as follows: 1) identification of contract; 2) identification of performance obligations; 3) determination of transaction price;
4) allocation of transaction price to performance obligations; 5) revenue recognition.



The Company records the accounting
effects of contracts only when: (i) the parties have approved the contract; (ii) it can identify each party’s rights and
the established payment terms; (iii) the contract has commercial substance; and (iv) is probable that it will collect the consideration
to which the Company is entitled.



| | (i) | Real estate development and sales
| | --- | ---------------------------------



| | (a) | For the sales of completed units, revenues are recognized upon completion of the sale with transfer
of control, regardless of the timing of cash receipt from the customer.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.2. | Recognition of revenue and expenses--Continued
| | ------ | ----------------------------------------------



| | (i) | Real estate development and sales --Continued
| | --- | ---------------------------------------------



| | (b) | For the construction phase of units sold, but not yet completed:
| | --- | ----------------------------------------------------------------



| | · | The incurred cost (including cost of land,
and other directly related expenditures) that corresponds to the units sold is included in profit or loss. For the units not yet
sold, the incurred cost is included in properties for sale (Note 2.2.7);
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Sales revenues are appropriated to profit
or loss, using the percentage-of-completion method for each project, this percentage being measured in view of the incurred cost
in relation to the total estimated cost of the respective project;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Revenue recognized in excess of actual
payments received from customers is recorded as either a current or non-current asset in “Trade accounts receivable”.
Any payment received in connection with the sales of units that exceeds the amount of revenues recognized is recorded as “Payables
for purchase of properties and advances from customers";
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Interest and inflation-indexation charges
on accounts receivable from the time the units are sold and delivered, as well as the adjustment to present value of account receivable,
are included in “Real estate development, sale, barter transactions and construction services” when incurred, on a
pro rata basis using the accrual basis of accounting;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Financial charges on account payable for
acquisition of land and those directly associated with the financing of construction are capitalized and recorded in properties
for sale and included in the incurred cost of units under construction until their completion, and follow the same recognition
criteria as the cost of real estate development for units sold while under construction;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The taxes levied and deferred on the difference
between real estate development revenues and the cumulative revenue subject to tax are calculated and recognized when this difference
in revenue is recognized;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Other expenses, including advertising and
publicity, are recognized in profit or loss when incurred.
| | - | ----------------------------------------------------------------------------------------------------





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.2. | Recognition of revenue and expenses--Continued
| | ------ | ----------------------------------------------



| | (ii) | Construction services
| | ---- | ---------------------



Revenues
from real estate services are recognized as services are rendered and tied to the construction management activities for third
parties and technical advisory services.



| | (iii) | Barter transactions
| | ----- | -------------------



Barter transactions
have the objective of receiving land from third parties that are settled with the delivery of real estate units or transfer of
portions of the revenue from the sale of real estate units of ventures. The value of land acquired is determined on fair value
of the units to be delivered, as a component of “properties for sale”, with a corresponding entry to “payables
for purchase of properties and advances from customers”. Revenues and costs incurred from barter transactions are included
in profit or loss over the course of construction period of ventures, as previously described in item (i)(b).



| | 2.2.3. | Financial instruments
| | ------ | ---------------------



Financial instruments are recognized
from the date the Company becomes a party to the contractual provisions of financial instruments.



| | (a) | Financial assets
| | --- | ----------------



The Company determines the
classification of its financial assets upon initial recognition, when it becomes a party to the contractual provisions of the instrument,
based on the instrument model in which the asset is managed and its contractual cash flow characteristics.



Financial assets are initially
recognized at fair value, plus, in the case of investments not measured at fair value through profit or loss, directly attributable
transaction costs.



After initial recognition,
the Company’s financial intruments are measured as described below:



| | (i) | Financial instruments at fair value through profit or loss
| | --- | ----------------------------------------------------------



A financial instrument is classified
at fair value through profit or loss when it is held for trading, or designated as such upon initial recognition.



Financial instruments are designated
at fair value through profit or loss if the Company manages these investments and makes purchase and sale decisions based on their
fair value in accordance with the documented investment strategy and risk management. After initial recognition, related transaction
costs are recognized in profit or loss when incurred.



Financial instruments at fair
value through profit or loss are measured at fair value, and their changes therein are recognized in profit or loss.



In the year ended December
31, 2019, the Company did not have derivative financial instruments with the objective of mitigating the risk of its exposure to
the volatility of indices and interest rates, recognized at fair value directly in profit or loss for the year. In accordance with
its treasury policies, the Company does not have or issue derivative financial instruments for purposes other than for hedging.



The Company does not adopt
the hedge accounting practice.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.3. | Financial instruments--Continued
| | ------ | --------------------------------



| | (a) | Financial assets –Continued
| | --- | ---------------------------



| | (ii) | Financial instruments at amortized cost
| | ---- | ---------------------------------------



The
Company classifies financial assets as measured at amortized cost only if both criteria are met, the asset is held within a business
model whose objective is to collet the contractual cash flows and the contractual terms give rise to cash flows, at specific dates,
which relate only to the payments of principal and interest.



Financial
assets measured as at amortized cost by the Company includes: cash and cash equivalents, certain short-term financial investments,
accounts receivable, and other receivables.



Derecognition
(write-off)



A
financial asset (or, as the case may be, a portion of a financial asset or portion of a group of similar financial assets) is derecognized
when:



| | · | The rights to receive
cash inflows of an asset expire;
| | - | ------------------------------------------------------



| | · | The Company transfers
its rights to receive cash inflows of an asset or assume an obligation to fully pay the cash inflows received, without significant
delay, to a third party because of a “transfer” agreement; and (a) the Company substantially transfers the risks and
rewards of the asset, or (b) the Company does not substantially transfer or retain all risks and rewards related to the asset,
but transfers the control over the asset.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



When
the Company has transferred its rights to receive cash inflows of an asset, or signed an agreement to transfer it, and has not
substantially transferred or has retained all risks and rewards related to the asset, an asset is recognized to the extent of the
continuous involvement of the Company with the asset. In this case, the Company also recognizes a related liability. The transferred
asset and related liability are measured based on the rights and obligations that the Company has maintained.



The
continuous involvement by means of a guarantee on the transferred asset is measured at the lower of the original carrying value
of the asset and the highest consideration that may be required from the Company.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.3. | Financial instruments--Continued
| | ------ | --------------------------------



| | (a) | Financial assets--Continued
| | --- | ---------------------------



Impairment
of Financial assets:



Financial
assets, except for those designated at fair value through profit or loss, are tested for indication of impairment at the end of
each reporting period. The impairment losses are recognized if, and only if, there is objective evidence of impairment of the financial
asset as a result of one or more events that have occurred after its initial recognition, with impact on the estimated future cash
flows of such asset.



For
financial assets recorded at cost, the impairment loss corresponds to the difference between the asset’s carrying amount
and the present value of the estimated future cash flows, discounted at the current return rate of a similar asset. This impairment
loss will not be reversed in subsequent periods.



The
carrying amount of the financial asset is directly reduced by the impairment loss for all financial assets, except for accounts
receivable, in which the carrying amount is reduced by allowance. Subsequent recoveries of previously derecognized amounts are
credited to the allowance. The changes in the carrying amount of the allowance are recognized in profit or loss.



| | (b) | Financial liabilities
| | --- | ---------------------



Financial
liabilities are classified at initial recognition at amortized cost or measured at fair value through profit or loss.



Financial
liabilities at fair value through profit or loss include financial liabilities for trading and financial liabilities designated
at initial recognition as fair value through profit or loss.



Loans
and financing



Subsequent
to initial recognition, loans and financing accruing interest are measured at amortized cost, using the effective interest rate
method. Gains and losses are recognized in statement of profit or loss, at the time liabilities are derecognized, as well as during
the amortization process using the effective interest rate method.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.3. | Financial instruments--Continued
| | ------ | --------------------------------



| | (b) | Financial liabilities --Continued
| | --- | ---------------------------------



Derecognition
(write-off)



A
financial liability is derecognized when its contractual obligations are discharged, cancelled or expire.



When
an existing financial liability is substituted for another from the same creditor, under substantially different terms, or when
the terms of an existing liability are significantly modified, this substitution or change is treated as a derecognition of the
original liability and recognition of a new liability, the difference in between the carrying amount and the fair value of the
new liability is recognized in profit or loss.



| | 2.2.4. | Cash and cash equivalents and short-term investments
| | ------ | ----------------------------------------------------



Cash and cash equivalents substantially
comprise demand deposits and bank certificates of deposit held under repurchase agreements, denominated in Reais, with high market
liquidity and contractual maturities of 90 days or less, and for which there are no penalties or other restrictions for the immediate
redemption thereof.



Cash equivalents are classified
as financial assets at fair value through profit or loss and are recorded at the original amounts plus income earned, calculated
on a “pro rata basis", which are equivalent to their market values, not having any impact to be accounted for in the
Company’s equity.



Short-term investments include
bank deposit certificates, federal government bonds, exclusive investment funds that have their underlying assets fully consolidated
and also restricted cash in guarantee to loans, which are classified at fair value through profit or loss (Note 4.2).



| | 2.2.5. | Trade accounts receivable
| | ------ | -------------------------



These are presented at present
and net realizable values. The classification between current and non-current is made based on the expected maturity of contract
installments.



The installments due are indexed
based on the National Civil Construction Index (INCC) during the period of construction, and based on the General Market Price
Index (IGP-M) and interest at 12% p.a., after the delivery of the units.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.5. | Trade accounts receivable--Continued
| | ------ | ------------------------------------



The adjustment to present value
is calculated between the contract signature date and the estimated date to transfer the completed property keys to the buyer,
using a discount rate represented by the average rate of the financing obtained by the Company, net of inflation, as mentioned
in Note 2.2.19.



Considering that financing its
customers is an important part of the Company operations, the reversal of the present value adjustment was carried out as contra-entry
to the group “Real estate development, sale, barter transactions and construction services” revenue, consistently with
interest incurred on the portion of receivables balance related to the period subsequent to the handover of keys.



| | 2.2.6. | Mortgage-backed Securities (CRIs) and Housing Loan Certificate
(CCI)
| | ------ | --------------------------------------------------------------------



The Company and its subsidiaries
carry out the assignment and/or securitization of receivables related to completed projects and those still under construction.
This securitization is carried out through the issuance of the Housing Loan Certificate (“Cédula de Crédito
Imobiliário” or CCI), which is assigned to financial institutions. When there is no right of recourse, this assignment
is recorded as reduction of accounts receivable. When there is right of recourse against the Company, the assigned receivable is
maintained in the balance sheet and the funds from assignment are classified into the account “Obligations assumed on assignment
of receivable”, until receivables are settled by customers.



In this situation, the transaction
cost is recorded in “finance expenses” in the statement of profit or loss for the year in which it is made.



When there are financial guarantees,
represented by the acquisition of subordinated CRI, they are recorded on the statement of financial position as “short-term
investments” at the realizable value, which is equivalent to fair value.



| | 2.2.7. | Properties for sale
| | ------ | -------------------



The Company and its subsidiaries
acquire land for future real estate developments, on payment conditions in current currency or through barter transactions. Land
acquired through barter transaction is stated at fair value of the units to be delivered, and the revenue and cost are recognized
according to the criteria described in Note 2.2.2 (iii).



Properties are measured at the
lower of construction cost and net realizable value. In the case of real estate under construction, the portion in inventories
corresponds to the cost incurred for units that have not yet been sold. The incurred cost comprises construction costs (materials,
own or outsourced labor, and other related items), and legal expenses relating to the acquisition of land and projects, land costs,
and financial charges which relate to a project over the construction period.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.7. | Properties for sale --Continued
| | ------ | -------------------------------



The classification of land between
current and non-current assets is made by Management based on the expected period for launching real estate ventures. Management
periodically revises the estimates of real estate ventures launches.



| | 2.2.8. | Prepaid expenses
| | ------ | ----------------



These are recognized in profit
or loss as incurred using the accrual basis of accounting.



| | 2.2.9. | Land available for sale
| | ------ | -----------------------



Land available for sale is measured
at the lower of the carrying value and the fair value less costs to sell, and is classified as held for sale if its carrying value
is to be recovered through a sale transaction of the land. This condition is considered fulfilled only when the sale is highly
probable, and the asset is available for immediate sale under its current condition. Management shall commit to sell it within
one year of the classification date.



| | 2.2.10. | Investments in associates
| | ------- | -------------------------



Investments in associates are
recorded using the equity method.



When the Company's share of
the losses of associates is equal to or higher than the amount invested, since the Company assumes obligations and makes payments
on behalf of these companies, the Company recognizes a provision at an amount considered appropriate to meet the obligations of
the associates (Note 9).



| | 2.2.11. | Property and equipment
| | ------- | ----------------------



Items of property and equipment
are measured at cost, less accumulated depreciation and/or any accumulated impairment losses, if applicable.



An item of property and equipment
is derecognized when no future economic benefits are expected from its use or disposal. The gain or loss arising from derecognition
of an asset (calculated as the difference between the net disposal proceeds and the carrying value of the asset) is recognized
in profit or loss upon derecognition.



Depreciation is calculated based
on the straight-line method considering the estimated useful lives of the assets (Note 10).





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.11. | Property and equipment --Continued
| | ------- | ----------------------------------



Expenditures incurred in the
construction of sales stands, display apartments and related furnishings are capitalized as property and equipment of the Company
and its subsidiaries. Depreciation of these assets commences upon launch of the development and is recorded over the average term
the stand is in use, and is written-off when it is retired.



Property and equipment are subject
to periodic assessments of impairment.



| | 2.2.12. | Intangible assets
| | ------- | -----------------



| | (i) | Expenditures related to the acquisition and implementation of computer systems and software licenses
are recorded at acquisition cost, and amortized on straight-line basis over a period of up to five years, and are subject to periodic
assessments of impairment of assets.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | The Company’s investments in subsidiaries include goodwill when the acquisition cost exceeds
the market value of net assets of the acquiree.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------



Impairment testing of goodwill
is performed at least annually, or whenever circumstances indicate an impairment loss.



| | 2.2.13. | Payables for purchase of properties and advances from customer
| | ------- | --------------------------------------------------------------



Payables for purchase of properties
are recognized at the amounts corresponding to the contractual obligations assumed. Subsequently they are measured at amortized
cost, plus, when applicable, interest and charges proportional to the incurred period (“pro rata” basis), net of present
value adjustment.



The obligations related to barter
transactions of land in exchange for real estate units are stated at fair value of the units to be delivered.



| | 2.2.14. | Income tax and social contribution on net income
| | ------- | ------------------------------------------------



| | (i) | Current income tax and social contribution
| | --- | ------------------------------------------



Current tax is the expected
tax payable or receivable/to be offset in relation to taxable profit for the year.



Income taxes in Brazil comprise
income tax (25%) and social contribution on net income (9%), for entities on the standard profit regime, for which the composite
statutory rate is 34%. Deferred taxes for these entities are recognized on all temporary differences at the reporting date between
the tax bases of assets and liabilities, and their carrying values.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.14. | Income tax and social contribution on net income --Continued
| | ------- | ------------------------------------------------------------



| | (i) | Current income tax and social contribution --Continued
| | --- | ------------------------------------------------------



As permitted by tax legislation,
certain subsidiaries opted for the presumed profit regime, a method under which the taxable profit is calculated as a percentage
of gross sales. For these companies, the income tax is calculated on estimated profits at rate of 8% and 12% of gross revenues,
respectively, on which the rates of the respective tax and contribution are levied.



As permitted by legislation,
the development of certain ventures are subject to the “afetação” regime, based on which the land and
any other related right where a real estate will be developed, as well as other binding assets, rights and obligations, are separated
from the developer’s assets, and comprise the “patrimônio de afetação” (detached assets),
of the corresponding development and which real estate units will be delivered to the buyers. Its main objective is to provide
guarantees to the buyers’ rights in acquisition of units in construction. In addition, certain subsidiaries made the irrevocable
option for the Special Taxation Regime (RET), adopting the ”patrimônio de afetação”, according
to which the income tax and social contribution are calculated at 1.92% on gross revenues (4% also levying PIS and COFINS on revenues).



| | (ii) | Deferred income tax and social contribution
| | ---- | -------------------------------------------



Deferred taxes are recognized
in relation to tax losses and temporary differences between the carrying amount of assets and liabilities for accounting purposes
and the corresponding amounts used for tax purposes.



They are recognized to the
extent that it is probable that future taxable profit will be available to be used for offsetting deferred tax assets, based on
profit projections made using internal assumptions, and considering future economic scenarios that make it possible their full
or partial use, upon the recognition of a provision for the non-realization of the balance. The recognized amounts are periodically
reviewed, and the impacts of realization or settlement are reflected in compliance with tax legislation provisions.



Deferred tax on accumulated
tax losses does not have an expiration date, however, they can only be offset against up to 30% of the taxable profit for each
year. Companies that opt for the presumed profit tax regime cannot offset tax losses for a period in subsequent years.



Deferred tax assets and liabilities
are stated at net amount in the balance sheet when there is the legal right and intention to offset them when determining the current
taxes, related to the same legal entity and the same tax authority.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.15. | Other current and non-current liabilities
| | ------- | -----------------------------------------



These liabilities are stated
at their known or estimated amounts, plus, when applicable, adjustment for charges and inflation-indexed variations through the
balance sheet date, which contra-entry is recorded in profit or loss. When applicable, current and non-current liabilities are
recorded at present value based on interest rates that reflect the term, currency and risk of each transaction.



| | 2.2.16. | Stock option plans
| | ------- | ------------------



As approved by its Board of
Directors, the Company offers executives and employees share-based compensation plans (stock options), as payments for services
received.



The fair value of options is
determined on the grant date, considering that it is recognized as expense in profit or loss (as contra-entry to equity), to the
extent services are provided by employees and executives.



In an equity-settled transaction,
in which the plan is modified, a minimum expense is recognized corresponding to the expense that would have been recorded if the
terms have not been changed. An additional expense is recognized for any modification that increases the total fair value of granted
options, or that otherwise benefits the employee, measured on the modification date.



In case of cancellation of a
stock option plan, this is treated as if it had been vested on the cancellation date, and any unrecognized plan expense is immediately
recognized. However, if a new plan replaces the cancelled plan, and a substitute plan is designated on the grant date, the cancelled
plan and the new plan are treated as if they were a modification of the original plan, as previously mentioned.



The Company annually revises
its estimates of the amount of options that shall be vested, considering the vesting conditions not related to the market and the
conditions based on length of service. The Company recognizes the impact of the revision of the initial estimates, if any, in the
statement of profit or loss, as contra-entry to equity.



| | 2.2.17. | Share-based payment – Phantom Shares
| | ------- | ------------------------------------



The
Company has a cash-settled share-based payment plan (phantom shares) under fixed terms and conditions. There is no expectation
of the effective negotiation of shares, once there shall be no issue and/or delivery of shares for settling the plan.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.17. | Share-based payment – Phantom Shares --Continued
| | ------- | ------------------------------------------------



These
amounts are recorded as a liability, with contra-entry in profit or loss for the year, based on the fair value of the phantom shares
granted, and during the vesting period. The fair value of this liability is remeasured and adjusted every reporting period, according
to the change in the fair value of the benefit granted and vesting.



| | 2.2.18. | Other employee benefits
| | ------- | -----------------------



The salaries and benefits granted
to the Company’s employees and executives include fixed compensation (salaries, social security contributions (INSS), Government
Severance Indemnity Fund for Employees (FGTS), vacation pay, and 13th monthly salary, among other) and variable compensation such
as profit sharing, bonus, and stock option-based payments. These benefits are recorded in profit or loss for the year, under the
account “General and administrative expenses”, as they are incurred.



The bonus system operates with
individual and corporate targets, structured based on the efficiency of corporate goals, followed by the business goals and, finally,
individual goals.



The Company and its subsidiaries
do not offer private pension or retirement plans.



| | 2.2.19. | Present value adjustment – assets and liabilities
| | ------- | -------------------------------------------------



Assets and liabilities are adjusted
to present value, if the financing component is significant.



In installment sales of not
completed units, real estate development entities adjust receivables by an inflation index, including the installment related to
the delivery of units, without accrual of interest, and shall be discounted to present value, as the agreed inflation rates do
not include interest.



Borrowing costs and other financing
costs directly attributable to the construction of real estate ventures are capitalized. Therefore, the reversal of the present
value adjustment of an obligation related to these items is included in the cost of real estate unit sold or in the inventories
of properties for sale, as the case may be, until the period of construction of the project is completed.



Accordingly, certain assets
and liabilities are adjusted to present value based on discount rates that reflect the best estimate of the time value of money.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.19. | Present value adjustment – assets and liabilities --Continued
| | ------- | -------------------------------------------------------------



The applied discount rate’s
underlying economic basis and assumption is the average rate of the financing and loans obtained by the Company, net of the inflationary
effect (Notes 5 and 12).



| | 2.2.20. | Debenture and public offering costs
| | ------- | -----------------------------------



Transaction costs and premiums
on issuance of securities are accounted for as a direct reduction in the amount raised by the Company and are amortized over the
terms of the instrument and the net balance is classified as reduction in the respective transaction (Note 13).



| | 2.2.21. | Loans and financing costs
| | ------- | -------------------------



Loans and financing costs which
are directly attributable to the development of assets for sale and land, are capitalized as part of the cost of that asset during
the construction period, which are recognized in profit or loss to the extent units are sold. All other loans and financing costs
are expensed when incurred. These costs comprise interest and other related costs incurred, including those for debt issuance.



| | 2.2.22. | Provisions
| | ------- | ----------



| | (i) | Provision for penalties due to delay in construction work
| | --- | ---------------------------------------------------------



As contractually provided,
the Company has the practice of provisioning the charges payable to eligible customers for projects whose delivery is delayed over
180 days, pursuant to the respective contractual clause and history of payments.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.23. | Sales taxes
| | ------- | -----------



For companies under the non-cumulative
taxable profit regime, the PIS and COFINS contribution rates are 1.65% and 7.6%, respectively, levied on gross revenue and discounting
certain credits determined based on incurred costs and expenses. For companies that opt for the presumed profit taxation regime,
under the cumulative taxation regime, the PIS and COFINS contribution rates are 0.65% and 3%, respectively, on gross revenue, without
discounts of credits in relation to incurred costs and expenses. In addition, certains subsidiaries made the irrevocable option
for the Spectial Taxation Regime (RET), adopting the “patrimônio de afetação”, according to which
the PIS and COFINS are calculated at 0.37% and 1.71%, respectively, on gross revenue.



| | 2.2.24. | Treasury shares
| | ------- | ---------------



Own equity instruments that
are repurchased (treasury shares) are recognized at cost and charged to equity. No gain or loss is recognized in the statement
of profit or loss upon purchase, sale, issue, or cancellation of the Company’s own equity instruments.



| | 2.2.25. | Interest on equity and dividends
| | ------- | --------------------------------



The portion of declared dividends
and interest on equity are recorded as current liabilities in the heading “Dividends payable”. Mandatory dividends
are also recorded as current liabilities since it is a legal obligation provided for in the By-laws of the Company.



| | 2.2.26. | Earnings (loss) per share – basic and diluted
| | ------- | ---------------------------------------------



Basic earnings (loss) per share
are calculated by dividing the net income (loss) attributable (allocated) to common shareholders by the weighted average number
of common shares outstanding over the period.



Diluted earnings per share are
calculated in a similar manner, except that the weighted average number of shares outstanding are increased, to include the additional
shares that would be outstanding, in case the shares with dilutive potential attributable to stock option had been issued over
the respective periods, using the weighted average price of shares.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.27. | Non-current asset held for sale and profit or loss from discontinued
operations
| | ------- | -------------------------------------------------------------------------------



The Company classifies a disposal
group as held for sale if its carrying value is expected to be recovered by means of a sale transaction. In such case, the asset
or group of assets held for sale must be available for immediate sale on current conditions, subject to the usual and customary
terms for selling such assets held for sale and its sale must be highly probable.



For a sale to be considered
highly probable, Management must be committed to a plan to sell the asset, and have initiated a program for finding a buyer and
complete the plan at a price that is reasonable in relation to its current fair value. In addition, the sale must be expected to
be completed within one year of the classification date, unless events beyond the control of the Company change such period.



The asset held for sale is measured
at the lower of its carrying value and fair value less cost to sell. In case the carrying value exceeds its fair value, an impairment
loss is recognized in profit or loss for the year. Any reversal or gain shall only be recognized to the extent of such recognized
loss.



The assets and liabilities of
the group of assets held for sale are presented separately in the consolidated financial statements. The profit or loss of discontinued
operations is presented at a single amount in the statement of profit or loss, which included the total after-tax income of these
operations less any impairment-related loss. The net cash flows attributable to operating, investing and financing activities of
discontinued operations are presented in Note 8.2.



According to Note 8.2, the transaction
of spin-off transaction between Gafisa and Tenda was completed on May 4, 2017 with the effective delivery of the totality of shares
comprising Tenda’s capital in the respective processes of capital decrease and preemptive rights.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 2. | Presentation of financial statements and summary of significant accounting policies--Continued
| | -- | ----------------------------------------------------------------------------------------------



| | 2.2. | Summary of significant accounting policies--Continued
| | ---- | -----------------------------------------------------



| | 2.2.28. | Divestment of associate and recognition of subsidiary’s
net assets received at fair value
| | ------- | -----------------------------------------------------------------------------------------



The cost of an acquisition is measured
by the sum of the transferred consideration, measured at fair value at the acquisition date, and the amount of any non-controlling
interests in the acquired entity. The acquisition directly related costs shall be recognized as expense when incurred.



In the acquisition of a business,
Management evaluates the financial assets and liabilities assumed to classify and allocate them according to the contractual terms,
the economic circumstances, and the pertinent conditions that exist at the acquisition date.



Goodwill is initially measured
as the excess of the consideration transferred over the fair value of the acquired net assets (identifiable assets and assumed
liabilities, net). If the consideration is lower than the fair value of acquired net assets, the difference shall be recognized
as gain in the statement of profit or loss. Gains from a bargain purchase are immediately recognized in profit or loss.



After initial recognition, goodwill
is measured at cost, less any accumulated loss on recoverable amount. For purposes of testing the recoverable amount, the goodwill
acquired in a business combination, from the acquisition date, shall be allocated to each of the cash-generating units of the Company
that are expected to be benefitted from the combination synergies, regardless of the other assets or liabilities of the acquired
entity that are attributed to such units.



In the year ended December 31,
2019, the Company concluded the divestment of the associate Alphaville Urbanismo, and received shares in the investee with assets
measured at fair value.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 3. | New standards, changes and interpretation of standards issued and adopted from 2019, and not yet
adopted
| | -- | --------------------------------------------------------------------------------------------------------



| | 3.1 | New standards, changes and interpretation of standards
issued and adopted from 2019
| | --- | -----------------------------------------------------------------------------------



Beginning on
January 1st, 2019, the following standard is in effect:



| | (i) | IFRS 16 – Leases (CPC 06 (R2)) this standard replaces the previous lease standard, IAS 17/CPC
06 (R1) – Leases, and related interpretation, and establishes the principles for the recognition, measurement, presentation
and disclosure of leases for both parties to a contract, that is, the customer(lessees) and providers (lessors). Lessees are required
to recognize a lease liability reflecting the future lease payments and a “right-of-use assets” for practically all
lease contracts, except certain short-term leases and contracts of low-value assets. For lessors, the criteria for recognition
and measurement of leases in the financial statements are substantially maintained. This standard is effective from January 1st,
2019.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The impact of the first-time adoption
on the opening balance as of January 1st, 2019 is as follows:



|                                |  | Company                      |           |  | Consolidated                                 | 
|------------------------------- |  | ---------------------------- | --------- |  | -------------------------------------------- | 
|                                |  | Originally reported balances |           |  | Impact from applying the CPC 06 R2 (Note 10) | 
|Statement of financial position |  |                              |           |  |                                              | 
|Assets                          |  |                              |           |  |                                              | 
|Total current assets            |  |                              | 1,367,727 |  |                                              | 
|Total non-current assets        |  |                              | 1,852,040 |  |                                              | 
|Total Assets                    |  |                              | 3,219,767 |  |                                              | 
|                                |  |                              |           |  |                                              | 
|Liabilities                     |  |                              |           |  |                                              | 
|Total current liabilities       |  |                              | 1,819,565 |  |                                              | 
|Total non-current liabilities   |  |                              | 908,885   |  |                                              | 
|Total equity                    |  |                              | 491,317   |  |                                              | 
|Total liabilities and equity    |  |                              | 3,219,767 |  |                                              | 
|                                |  |                              |           |  |                                              | 

| | (ii) | The ICPC 22 – Uncertainty Over Income Tax Treatments deals with the recognition of income
taxes in the cases in which the tax treatments involve uncertainty that affects the application of IAS 12 (CPC 32) and does not
apply to taxes out of the scope of IAS 12 nor do specifically include the requirements related to the interest and fines associated
with uncertain tax treatments. The interpretation did not have impact on the Company’s Financial Statements.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | The amendments to IAS 28 - Long term interests in associates and Joint Ventures clarifies that
an entity applies IFRS 9 – Financial Instruments to long-term interests in an associate or joint venture that form part of
the net investment in the associate or joint venture but to which the equity method is not applied. This amendment did not have
impact on the Company’s Financial Statements.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 3. | New standards, changes and interpretation of standards issued and adopted from 2019, and not yet adopted --Continued
| | -- | --------------------------------------------------------------------------------------------------------------------



| | 3.2 | New standards, changes and interpretation of standards
issued and not yet adopted
| | --- | ---------------------------------------------------------------------------------



A series of new standards will
be in effect for the years beginning after January 1, 2019. The Company has not adopted these standards in the preparation of the
accompanying Financial Statements. The following standard amendments and interpretations shall not have a significant impact on
the Consolidated Financial Statements of the Company:



| | (i) | Amendments to references to the conceptual framework in IFRS standards (CPC 00)
| | --- | -------------------------------------------------------------------------------



| | (ii) | Definition of a business (amendments to the CPC 15/IFRS 3)
| | ---- | ----------------------------------------------------------



| | (iii) | Definition of materiality (amendments to the CPC 26/IAS 1 and CPC 23/IAS8)
| | ----- | --------------------------------------------------------------------------



| | (iv) | IFRS 17 Insurance Contracts.
| | ---- | ----------------------------



There is no
other standard, changes to standards or interpretation issued and not yet adopted that could, on the Management’s opinion,
have significant impact arising from their adoption on its financial statements.



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 4. | Cash and cash equivalents and short-term investments
| | -- | ----------------------------------------------------



| | 4.1. | Cash and cash equivalents
| | ---- | -------------------------



|                                                                  |  |      |       
|----------------------------------------------------------------- |  | ---- | ------
|                                                                  |  | 2019 |       
|                                                                  |  |      |       
|Cash and banks                                                    |  |      | 12,435
|Government bonds (LFT)                                            |  |      | —     
|Total
cash and cash equivalents (Note
20.i.d, 20.ii.a and 20.iii) |  |      | 12,435



| | 4.2. | Short-term investments
| | ---- | ----------------------



|                                                               |  |      |        
|-------------------------------------------------------------- |  | ---- | -------
|                                                               |  | 2019 |        
|                                                               |  |      |        
|Fixed-income funds (a)                                         |  |      | 125,962
|Government bonds (LFT) (a)                                     |  |      | 231,725
|Securities purchased under resale agreements (b)               |  |      | 125    
|Bank certificates of deposit (c)                               |  |      | 10,523 
|Restricted cash in guarantee to loans (d)                      |  |      | 33,560 
|Equity securities (e)                                          |  |      | —      
|                                                               |  |      |        
|Total
Short-term investments (Note
20.i.d, 20.ii.a and 20.iii) |  |      | 401,895



| | (a) | Exclusive fund managed by Planner Trustee Distribuidora de Títulos e Valores Mobiliarios
and and open-end funds whose purpose is to invest in financial assets and/or fixed-income investment modalities that follow the
fluctuations in interest rates in the interbank deposit market (CDI), by investing its funds mostly in investment fund shares and/or
investment funds comprising investment fund shares.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | As of December 31, 2019, the IOF-exempt securities purchased under resale agreement include earned
interests of 73% of Interbank Deposit Certificates (CDI).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | As of December 31, 2019, Certificates of Bank Deposit (CDBs) include interest earned through the
statement of financial position’s reporting date, ranging from 90% to 103.5% (from 90% to 101.2% in 2018) of Interbank Deposit
Certificates (CDI).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | Restricted cash in guarantee to loans are represented to funds pledged to transactions with financial
institutions.
| | --- | -------------------------------------------------------------------------------------------------------------------



| | (e) | Equity securities are represented by investments in the shares of companies listed on Novo Mercado
of B3, and which make up the IBrX index. These transactions were settled in the period ended February 8, 2019, and reported a gain
of R$2,846.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | Trade accounts receivable
| | -- | -------------------------



|                                                        |  |      |        
|------------------------------------------------------- |  | ---- | -------
|                                                        |  | 2019 |        
|                                                        |  |      |        
|Real estate development and sales                       |  |      | 593,229
|( - ) Allowance for expected credit losses              |  |      | (16,265
|( - ) Allowance for cancelled contracts                 |  |      | (37,485
|( - ) Present value adjustment                          |  |      | (8,518 
|Services and construction and other receivables         |  |      | 14,639 
|                                                        |  |      |        
|Total
trade accounts receivable (Note 20.i.d e 20.ii.a) |  |      | 545,600
|                                                        |  |      |        
|Current                                                 |  |      | 442,542
|Non-current                                             |  |      | 103,058





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 5. | Trade accounts receivable--Continued
| | -- | ------------------------------------



The
current and non-current portions have the following maturities:



|          |                                                                        |  |      | 
|--------- | ---------------------------------------------------------------------- |  | ---- | 
|Maturity  |                                                                        |  | 2019 | 
|          |                                                                        |  |      | 
|Overdue:  |                                                                        |  |      | 
|          | Up to 90 days                                                          |  |      | 
|          | From 91 to 180 days                                                    |  |      | 
|          | Over 180 days                                                          |  |      | 
|          |                                                                        |  |      | 
|          |                                                                        |  |      | 
|Maturity: |                                                                        |  |      | 
|          | 2019                                                                   |  |      | 
|          | 2020                                                                   |  |      | 
|          | 2021                                                                   |  |      | 
|          | 2022                                                                   |  |      | 
|          | 2023 onwards                                                           |  |      | 
|          |                                                                        |  |      | 
|          |                                                                        |  |      | 
|          | ( - ) Present value adjustment                                         |  |      | 
|          | ( - ) Allowance for expected credit losses and cancelled contracts (a) |  |      | 
|          |                                                                        |  |      | 
|          |                                                                        |  |      | 



| | (a) | Allowance related to the cancellations of sales contracts recognized
as revenue overtime during the construction phase.
| | --- | -----------------------------------------------------------------------------------------------------------------------



The
balance of accounts receivable from units sold and not yet completed is not fully reflected in the financial statements. Its recording
is limited to the portion of the recognized revenues net of the amounts already received, according to the accounting practice
mentioned in Note2.2.2(i)(b).



As
of December 31, 2019, the amount received from customers in excess of the recognized revenues totaled R$14,197 (R$12,069 in 2018)
in the consolidated statements, and are classified in the heading “Payables for purchase of properties and advances from
customers" (Note 17). Additionally, as of December 31, 2018, the amount related to
contract assets totaled R$256,106 (R$270,085 in 2018).



Accounts
receivable from completed real estate units financed by the Company are in general subject to IGP-M variation plus annual interest
of 12%, with revenue being recorded in profit or loss in the account “Revenue from real estate development and sale, barter
transactions and construction services".



The
balances of allowance for expected credit losses are considered sufficient by the Company’s management to cover the estimate
of future losses on realization of the accounts receivable.



During the years ended December
31, 2019 and 2018, the changes in the allowance for expected credit losses are summarized as follows:



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 5. | Trade accounts receivable--Continued
| | -- | ------------------------------------



|Balance at December 31, 2017     |  |  | (142,833 | )
|-------------------------------- |  |  | -------- | -
|Additions (Note 22)              |  |  | (2,653   | )
|Write-offs / Reversals (Note 22) |  |  | 44,480   |  
|Balance at December 31, 2018     |  |  | (101,006 | )
|Additions (Note 22)              |  |  | (26,150  | )
|Write-offs / Reversals (Note 22) |  |  | 73,406   |  
|Balance at December 31, 2019     |  |  | (53,750  | )



The
present value adjustment recognized in revenue from real estate development for the year ended December 31, 2019
totaled R$10,873 (R$4,504 in 2018)in the consolidated financial statements.



Receivables
from units not yet completed were measured at present value using a discount rate determined according to the criteria described
in Note 2.2.2. The discount rate applied by the Company and its subsidiaries was 6.64% for the
year 2019 (7.19% in 2018),net of Civil Construction National Index (INCC).



The
Company entered into the following Housing Loan Certificate (CCI) transactions, consisting of the assignment of a portfolio comprising
select residential and business real estate receivables arising out of Gafisa and its subsidiaries. The assigned portfolios, discounted
to present value, are recorded under the heading “obligations assumed on the assignment of receivables”.



|       |                  |                    |                                       | Transaction
balance
        (Note 14)
|------ | ---------------- | ------------------ | ------------------------------------- | -------------------------------------
|       | Transaction date | Assigned portfolio | Portfolio discounted to present value | 2019                                 
|(i)    | Jun/27/2011      | 203,915            | 171,694                               | 412                                  
|(ii)   | Dec/22//2011     | 72,384             | 60,097                                | -                                    
|(iii)  | Jul/06/2012      | 18,207             | 13,917                                | -                                    
|(iv)   | Nov/14/2012      | 181,981            | 149,025                               | 2,586                                
|(v)    | Dec/27/2012      | 72,021             | 61,647                                | 1,683                                
|(vi)   | Nov/29/2013      | 24,149             | 19,564                                | 1,170                                
|(vii)  | Nov/25/2014      | 15,200             | 12,434                                | 1,203                                
|(viii) | Dec/03/2015      | 32,192             | 24,469                                | 5,300                                
|(ix)   | Feb/19/2016      | 27,954             | 27,334                                | 6,429                                
|(x)    | May/09/2016      | 17,827             | 17,504                                | 4,625                                
|(xi)   | Ago/19/2016 (a)  | 15,418             | 14,943                                | 2,392                                
|(xii)  | Dec/21/2016      | 21,102             | 19,532                                | 6,106                                
|(xiii) | Mar/29/2017      | 23,748             | 22,993                                | 8,455                                
|       |                  |                    |                                       | 40,361                               



| | (a) | The
                                         consolidated balance of the transaction as of December 31, 2019 and 2018 (Note 14) does
                                         not include the jointly-controlled entities, which are accounted for using the equity
                                         method, according to CPCs 18(R2) and 19(R2).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Transaction
(i) was entered into with Banco BTG Pactual S.A. (Note 14).



Transactions
(ii) and (iii) were entered into with Polo Multisetorial Fundo de Investimento em Direitos Creditórios (Note 14).



Transactions
(iv), (v), (vi) and (vii) were entered into with Polo Multisetorial Fundo de Investimento em Direitos Creditórios Não
Padronizados (Note 14).



Transactions
(viii), (ix), (x), (xi), (xii) and (xiii) were entered into with Polo Capital Securitizadora S.A. (Note 14).



In
the transactions above, the Company and its subsidiaries are jointly responsible until the time of the transfer of the collateral
to the securitization company.



For
the items (i) to (iii) and (viii) to (xiii)above, the Company was engaged to perform, among
other duties, the management of the receipt of receivables, the assignment’s underlying assets, collection of defaulting
customers, among other, according to the criteria of each investor, being paid for these services.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 5. | Trade accounts receivable--Continued
| | -- | ------------------------------------



The
difference between the face value of the portfolio of receivables and the amount discounted to present value was recorded in profit
or loss for the year in the account “Discount related to Securitization Transaction” under finance expenses.



| | 6. | Properties for sale
| | -- | -------------------



|                                                                                              |  |      |          
|--------------------------------------------------------------------------------------------- |  | ---- | ---------
|                                                                                              |  | 2019 |          
|                                                                                              |  |      |          
|Land                                                                                          |  |      | 573,715  
|( - ) Write-down to net realizable value of land                                              |  |      | (110,182 
|( - ) Adjustment to present value                                                             |  |      | (5,198   
|Property under construction (Note 29)                                                         |  |      | 355,980  
|Completed units                                                                               |  |      | 283,991  
|( - ) Write-down to net realizable value of properties under construction and completed units |  |      | (67,099  
|Allowance for cancelled contracts                                                             |  |      | 47,099   
|                                                                                              |  |      |          
|Total properties for sale                                                                     |  |      | 1,078,306
|                                                                                              |  |      |          
|Current portion                                                                               |  |      | 799,099  
|Non-current portion                                                                           |  |      | 279,207  



In
the years ended December 31, 2019 and 2018,the change in the write-down to net realizable
value of land and properties under construction and completed units is summarized as follows:



|                                                          |  |  |         
|--------------------------------------------------------- |  |  | --------
|Balance at December 31, 2017                              |  |  | (179,462
|Reclassification from land available for sale (Note 8.1)  |  |  | (15,937 
|Reclassification to land available for sale (Note 8.1)    |  |  | 27,874  
|Additions:                                                |  |  |         
|Land (Note 23)                                            |  |  | (30,550 
|Property under construction and completed units (Note 23) |  |  | (8,097  
|Write-offs (a)                                            |  |  | 41,569  
|Balance at December 31, 2018                              |  |  | (164,603
|Reclassification from land available for sale (Note 8.1)  |  |  | (39,756 
|Write-offs (a)                                            |  |  | 27,079  
|                                                          |  |  |         
|Balance at December 31, 2019                              |  |  | (177,280



| | (a) | The
                                         amount of write-offs refers to the respective units sold in the period.
| | --- | --------------------------------------------------------------------------------------------------------------------



The amount of properties for
sale offered as guarantee for financial liabilities is described in Note 12.



As disclosed in Note 12, the
balance of capitalized financial charges as of December 31, 2019 was R$210,412 (R$223,807 in 2018) in the consolidated statements.



| | 7. | Other assets
| | -- | ------------



|                                                   |  |      |        
|-------------------------------------------------- |  | ---- | -------
|                                                   |  | 2019 |        
|                                                   |  |      |        
|Advances to suppliers                              |  |      | 20,702 
|Recoverable taxes (IRRF, PIS, COFINS, among other) |  |      | 17,285 
|Arbitration decision amount (a)                    |  |      | 66,391 
|Judicial deposit (Note 16.a)                       |  |      | 129,933
|Total other assets                                 |  |      | 234,311
|                                                   |  |      |        
|Current portion                                    |  |      | 67,395 
|Non-current portion                                |  |      | 166,916



| | (a) | Amount
                                         related to the outcome of the arbitration decision related to venture construction contracts
                                         with partners, which was awarded on November 12, 2019 by the Arbitration Court, managed
                                         by the Center for Arbitration and Mediation of the Chamber of Commerce Brazil –
                                         Canada.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 8. | Non-current assets held for sale
| | -- | --------------------------------



8.1Land available for sale



The
Company, in line with its strategic direction, opted to sell land not included in the business plan in
effect.Likewise, it devised a specific plan for the sale of such land. The carrying value of such land, adjusted to market
value when applicable, after the test for impairment, is as follows:



|                                                   |  |      |         
|-------------------------------------------------- |  | ---- | --------
|                                                   |  | Cost |         
|                                                   |  |      |         
|Balance at December 31, 2017                       |  |      | 233,522 
|Reclassification from properties for sale (Note 6) |  |      | 58,795  
|Reclassification to properties for sale (Note 6)   |  |      | (40,262 
|Additions (Note 23)                                |  |      | 25,349  
|Reversal/Write-offs (a)                            |  |      | (127,916
|Balance at December 31, 2018                       |  |      | 149,488 
|Reclassification from properties for sale (Note 6) |  |      |         
|Reclassification to properties for sale (Note 6)   |  |      | (83,579 
|Additions (Note 23)                                |  |      |         
|Reversal/Write-offs (b)                            |  |      | (50,117 
|Balance at December 31, 2019                       |  |      | 15,792  



| | (a) | The amount of write-offs over
                                         the period mainly refers to the sale of land in June 2018, located in the city of Salvador,
                                         Bahia, through the SPEs Manhattan Residencial 02 and Manhattan Comercial 02, for the
                                         amount of R$28,500, of which R$12,060 receivable in 24 months, and the remaining balance
                                         of R$16,440 was settled on July 24, 2018.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | The
                                         amount of write-offs over the period mainly refers to the cancelled land sales contract
                                         in January 2019,located in the city of Rio
                                         de Janeiro – RJ.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



8.2 Non-current asset
held for sale and profit or loss of discontinued operations



|                                                    |  | 2019 |   |  | 2018 |  |   | 2017 | 
|--------------------------------------------------- |  | ---- | - |  | ---- |  | - | ---- | 
|                                                    |  |      |   |  |      |  |   |      | 
|Reversal of impairment loss (i)                     |  |      | — |  |      |  | — |      | 
|Portion related to payable for sale of shares (iii) |  |      | — |  |      |  | — |      | 
|Transaction costs                                   |  |      | — |  |      |  | — |      | 
|Impairment loss on Tenda’s profit or loss           |  |      | — |  |      |  | — |      | 
|Tenda’s profit or loss for the period (ii)          |  |      | — |  |      |  | — |      | 
|Profit or loss of discontinued operations           |  |      | — |  |      |  | — |      | 



|(i) The measurement of
        non-current asset held for sale at the lower of its carrying value and the fair value less cost to sell. For the period
        ended May 4, 2017, the fair value of discontinued operations was adjusted, considering the weighted average price per
        share for exercising preemptive rights at R$12.12.
        
        (ii) Amounts of assets
        held for sale, liabilities related to assets held for sale, and profit or loss of discontinued operations, net of the
        eliminations related to intercompany transactions, for the period ended May 04, 2017.
        
        (iii) Amount of R$107,720
        related to the obligation to sell 50% of Construtora Tenda S.A.’s shares for the price of R$8.13 per share, settled
        on May 4, 2017, reflected in the profit or loss of discontinued operations, in order to reflect the difference between
        the fair value of the group of assets held for sale and the effective selling price.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 8. | Non-current assets held for sale --Continued
| | -- | --------------------------------------------



8.2 Non-current asset
held for sale and profit or loss of discontinued operations --Continued



As
of May 4, 2017,the Company’s Management carried out the remeasurement of the fair
value of the disposal group held for sale, related to Construtora Tenda S.A. The basis for measurement
used (i) the price of R$8.13 per share, related to the transaction settled on May 4, 2017, and (ii) the weighted average price
per share of the exercise of preemptive rights traded over the period between March 17 and 31, 2017, calculated at R$3.99 per share.
The resulting price of R$12.12 per share indicated, at that time, a valuation of Construtora Tenda S.A. in the amount of R$754,460.



The
main lines of the statements of profit or loss and cash flows of the subsidiary Tenda are as follows:



|Statement of profit or loss           |  | Period ended 05/04/2017 |  |  |  | Cash flow            | Period ended 05/04/2017 |  | 
|------------------------------------- |  | ----------------------- |  |  |  | -------------------- | ----------------------- |  | 
|                                      |  |                         |  |  |  |                      |                         |  | 
|Net operating revenue                 |  | 404,737                 |  |  |  | Operating activities | 51,959                  |  | 
|Operating costs                       |  | (269,144)               |  |  |  | Investing activities | 48,663                  |  | 
|Operating expenses, net               |  | (104,310)               |  |  |  | Financing activities | 24,089                  |  | 
|Depreciation and amortization         |  | (5,723)                 |  |  |  |                      |                         |  | 
|Income from equity method investments |  | 269                     |  |  |  |                      |                         |  | 
|Financial income (expenses)           |  | 101                     |  |  |  |                      |                         |  | 
|Income tax and social contribution    |  | (4,519)                 |  |  |  |                      |                         |  | 
|                                      |  | 21,411                  |  |  |  |                      |                         |  | 
|Non-controlling interests             |  | (1,369)                 |  |  |  |                      |                         |  | 
|Net income for the year               |  | 22,780                  |  |  |  |                      |                         |  | 



F-45


Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 9. | Investments in associates and jointly-controlled investees
| | -- | ----------------------------------------------------------



| | (i) | Information on associates and jointly-controlled investees
| | --- | ----------------------------------------------------------



|                                                                   |     |                             |                  |                       |                                                    |                                |             |                                           |           |           |         |        
|------------------------------------------------------------------ | --- | --------------------------- | ---------------- | --------------------- | -------------------------------------------------- | ------------------------------ | ----------- | ----------------------------------------- | --------- | --------- | ------- | -------
|                                                                   |     | Interest
    in capital - % | Total
    assets | Total
    liabilities | Equity
    and advance for future capital increase | Profit
    (loss) for the year | Investments | Income
    from equity method investments |          
|Jointly-controlled
    investees:                                  |     | 2019                        | 2018             | 2019                  | 2019                                               | 2019                           | 2018        |                                           | 2019      | 2018      | 2019    | 2018   
|                                                                   |     |                             |                  |                       |                                                    |                                |             |                                           |           |           |         |        
|Gafisa e Ivo Rizzo
    SPE-47 Emp. Imob. Ltda.                     |     | 80%                         | 80%              | 21,077                | 1,170                                              | 19,907                         | 19,901      |                                           | 6         | (53)      | 13,438  | 13,433 
|Sitio Jatiuca
    Emp. Imob. SPE Ltda                              |     | 50%                         | 50%              | 35,252                | 5,615                                              | 29,636                         | 29,413      |                                           | 223       | 1,270     | 14,818  | 14,707 
|Varandas Grand
    Park Emp. Imob. SPE Ltda.                       | (a) | 50%                         | 50%              | 36,813                | 8,039                                              | 28,773                         | 24,989      |                                           | 2,742     | 2,686     | 14,387  | 12,495 
|Gafisa SPE-116
    Emp. Imob. Ltda.                                |     | 50%                         | 50%              | 31,533                | 6,422                                              | 25,111                         | 22,537      |                                           | 2,574     | (20,971)  | 12,555  | 11,268 
|Parque Arvores
    Empr. Imob. Ltda.                               | (a) | 50%                         | 50%              | 27,833                | 3,218                                              | 24,616                         | 31,153      |                                           | 3,116     | 755       | 12,308  | 15,577 
|Atins Emp. Imob.
    Ltda.                                         |     | 50%                         | 50%              | 26,656                | 5,843                                              | 20,813                         | 17,729      |                                           | 3,084     | (1,269)   | 10,406  | 8,864  
|FIT 13 SPE Emp.
    Imob. Ltda.                                    |     | 50%                         | 50%              | 23,171                | 3,392                                              | 19,779                         | 19,706      |                                           | 72        | 6         | 9,889   | 9,853  
|Performance Gafisa
    Gen. Severiano Ltda                         |     | 50%                         | 50%              | 11,658                | 27                                                 | 11,631                         | 11,701      |                                           | (69)      | 203       | 5,816   | 5,850  
|Other (*)                                                          | (a) | -                           | -                | 68,881                | 30,130                                             | 38,752                         | 56,340      |                                           | (1,078)   | (9,432)   | 29,122  | 40,449 
|Subtotal Jointly-controlled
    investees                          |     |                             |                  | 282,874               | 63,856                                             | 219,018                        | 233,469     |                                           | 10,669    | (26,805)  | 122,739 | 132,496
|                                                                   |     |                             |                  |                       |                                                    |                                |             |                                           |           |           |         |        
|Associates:                                                        |     |                             |                  |                       |                                                    |                                |             |                                           |           |           |         |        
|Alphaville Urbanismo
    S.A.                                      | (d) | -                           | 30%              | 1,653,141             | 3,132,453                                          | (1,479,312)                    | (937,369)   |                                           | (603,985) | (755,032) | -       | -      
|Citta Ville SPE
    Emp. Imob. Ltda.                               | -   | 50%                         | 50%              | 5,584                 | 1,311                                              | 4,272                          | 14,465      |                                           | 1,571     | 2,235     | 2,136   | 7,233  
|Other
    (*)                                                      |     |                             |                  | 1,202                 | 14                                                 | 1,187                          | 1,134       |                                           | 55        | 14        | 1,488   | 1,236  
|Indirect
    jointly-controlled investees Gafisa                   |     |                             |                  | 1,659,927             | 3,133,778                                          | (1,473,853)                    | (921,770)   |                                           | (602,359) | (752,783) | 3,624   | 8,469  
|                                                                   |     |                             |                  |                       |                                                    |                                |             |                                           |           |           |         |        
|Goodwill
    from remeasurement of investment in associate         | (b) |                             |                  |                       |                                                    |                                |             |                                           |           |           | -       | 161,100
|                                                                   |     |                             |                  |                       |                                                    |                                |             |                                           |           |           |         |        
|Total
    Investments                                              |     |                             |                  |                       |                                                    |                                |             |                                           |           |           | 126,363 | 302,065
|                                                                   |     |                             |                  |                       |                                                    |                                |             |                                           |           |           |        
|(*)Includes
    companies with investment balances below R$ 5,000. |     |                             |                  |                       |                                                    |                                |             |                                           |           |           |        
|                                                                  



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 9. | Investments in associates and jointly-controlled investees--Continued
| | -- | ---------------------------------------------------------------------



| | (i) | Information on associates
and jointly-controlled investees --Continued
| | --- | ----------------------------------------------------------------------



|                                                |                             |                  |                       |                                                    |                                |             |                                           |          |         |          |        
|----------------------------------------------- | --------------------------- | ---------------- | --------------------- | -------------------------------------------------- | ------------------------------ | ----------- | ----------------------------------------- | -------- | ------- | -------- | -------
|                                                | Interest
    in capital - % | Total
    assets | Total
    liabilities | Equity
    and advance for future capital increase | Profit
    (loss) for the year | Investments | Income
    from equity method investments |         
|Provision
    for net capital deficiency (c):   | 2019                        | 2018             | 2019                  | 2019                                               | 2019                           | 2018        |                                           | 2019     | 2018    | 2019     | 2018   
|                                                |                             |                  |                       |                                                    |                                |             |                                           |          |         |          |        
|Gafisa SPE 113 Em. Imob. Ltda.                  | 60%                         | 60%              | 40,870                | 47,661                                             | (6,791)                        | -           |                                           | (10,415) | -       | (4,075)  | -      
|Manhattan Square Emp. Imob. Res. 01 SPE Ltda    | 50%                         | 50%              | 2,617                 | 9,184                                              | (6,567)                        | (4,225)     |                                           | (313)    | (1,395) | (3,284)  | (2,113)
|Manhattan Square Emp.Imob. Com. 01 SPE Ltda     | 50%                         | 50%              | 3,256                 | 9,815                                              | (6,558)                        | (2,247)     |                                           | (294)    | (232)   | (3,279)  | (1,124)
|Other (*)                                       |                             |                  | 16,482                | 20,967                                             | (4,485)                        | (5,830)     |                                           | (3,180)  | (7,165) | (325)    | (298)  
|Total provision
    for net capital deficiency  |                             |                  | 63,225                | 87,627                                             | (24,401)                       | (12,302)    | -                                         | (14,202) | (8,792) | (10,963) | (3,535)
|                                                |                             |                  |                       |                                                    |                                |             |                                           |          |         |          |        
|Total Income from
    equity method investments |                             |                  |                       |                                                    |                                |             |                                           |          |         |          |        



(*)
(Includes companies with investment balances below (R$ 5,000).



| | (a) | The
Company recorded expense of R$791 in Income from equity method investments for the period ended December 31, 2019 related to the
recognition, by jointly-controlled entities, of prior year adjustments, in accordance with the ICPC09 (R2) - Individual, Separate
and Consolidated Financial Statements and the Equity Method of Accounting.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Amount
related to the goodwill arising from the remeasurement of the portion of the remaining investment of 30% in the associate AUSA,
in the amount of R$161,100 in 2018, arising from the sale of control over the entity. On December 27, 2019, the Company completed
the process of divestment of AUSA in a transaction totaling R$100,000, settled by offsetting receivables and receipt of shares
in the investee against assets (Note 9.1).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | The
provision for net capital deficiency is recorded in the heading “Other payables” (Note 15).
| | --- | -----------------------------------------------------------------------------------------------



| | (d) | In view
of the net capital deficiency of AUSA as of December 31, 2018, in line with CPC 18 (R2) – Investment in Associates, Subsidiaries
and Joint Ventures, the Company discontinued the recognition of its interest in future losses after reducing to zero the carrying
amount of the 30% interest.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | Information on significant
investees
| | ---- | ------------------------------------



|                                        | Significant investee:     |           |           |  | Other investees:            
|--------------------------------------- | ------------------------- | --------- | --------- |  | ----------------------------
|                                        | Alphaville Urbanismo S.A. |           |           |  | Jointly-controlled investees
|                                        | 2019                      | 2018      | 2017      |  |                             
|                                        |                           |           |           |  |                             
|Cash and cash equivalents               | -                         | 11,282    |           |  |                             
|Current assets                          | -                         | 974,853   |           |  |                             
|Non-current assets                      | -                         | 908,617   |           |  |                             
|Current liabilities                     | -                         | 549,884   |           |  |                             
|Non-current liabilities                 | -                         | 2,255,091 |           |  |                             
|                                        |                           |           |           |  |                             
|Net revenue                             | -                         | 68,629    | 108,321   |  |                             
|Operating costs                         | -                         | (189,917) | (420,381) |  |                             
|Depreciation and Amortization           | -                         | (13,469)  | (13,733)  |  |                             
|Finance income (expenses)               | -                         | (366,627) | (252,114) |  |                             
|Income tax and social contribution      | -                         | (6,388)   | 3,385     |  |                             
|Profit (loss) from Continued Operations | -                         | (755,032) | (764,142) |  |                             



| | (iii) | Change in investments
| | ----- | ---------------------



|                                                                                    |  | Consolidated
|----------------------------------------------------------------------------------- |  | ------------
|                                                                                    |  |             
|Balance at December 31, 2018                                                        |  | 302,065     
|Income from equity method investments (a)                                           |  | 435         
|Capital contribution (reduction) (b)                                                |  | (19,846)    
|Derecognition of goodwill on remeasurement of investment at fair value (Note 9.i.c) |  | (161,100)   
|Other investments                                                                   |  | 4,808       
|Balance at December 31, 2019                                                        |  | 126,363     



(a)
Amount related to the assignment of shares in controlled SPEs of Gafisa S.A., to SPE Novum Direziones, which is a wholly owned
subsidiary of the Company, in the amount of R$ 27,843.



(*)
Non cash transaction.



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 9. | Investments in associates and jointly-controlled investees--Continued
| | -- | ---------------------------------------------------------------------



9.1 Divestment of associate
and recognition of subsidiary’s net assets received at fair value



| | (i) | Divestment of Alphaville Urbanismo
| | --- | ----------------------------------



According to Note 1, on December
27, 2019, the Company disclosed the completion of the divestment of its 21.20% interest in Alphaville. The total amount of the
transaction is equivalent to R$100,000, settled by offsetting receivables amounting to R$33,500 and receipt of shares in the investee
against assets amounting to R$66,500, measured at fair value.



By the means of this transaction,
through the receipt of shares, the Company acquired the control of SPE GDU Loteamentos Ltda. According to ICPC 09 (R2) and IFRS3/CPC
(15 (R1), as a result of this transaction, the Company made the allocation of the amount of R$39,886 in the line item “Properties
for sale”, in the consolidated information and recognized the amount of R$16,592 as gain from bargain purchase.



The following table shows the
determination of the acquisition cost determined according to CVM Resolution 665/11:



|Disposal of Alphaville (goodwill)                     | 161,100
|----------------------------------------------------- | -------
|Net assets received at fair value of GDU              | 83,092 
|Result of this transaction (effect on profit or loss) | 78,008 
|                                                      |        

The Company commissioned a specialized
company to make a study to obtain the Purchase Price Allocation (PPA) for measurement of the fair value of the identified assets
and allocation of amount. We summarize below the allocation of goodwill arising from the transaction, considering the fair values
of the assets and liabilities of the SPE received at the acquisition date:



|                         | Acquired net assets |  | CPC 15 (R1) adjustments |  | Acquired net assets at fair value
|------------------------ | ------------------- |  | ----------------------- |  | ---------------------------------
|Properties for sale      | 43,206              |  | 39,886                  |  | 83,092                           
|Total current assets     | 43,206              |  | 39,886                  |  | 83,092                           
|Total non-current assets | -                   |  |                         |  |                                  
|                         |                     |  |                         |  |                                  
|Total assets             | 43,206              |  | 39,886                  |  | 83,092                           
|                         |                     |  |                         |  |                                  
|Equity                   | 43,206              |  | 39,886                  |  | 83,092                           
|Total liabilities        | 43,206              |  | 39,886                  |  | 83,092                           





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 9. | Investments in associates and jointly-controlled investees--Continued
| | -- | ---------------------------------------------------------------------



9.1 Divestment of associate
and recognition of subsidiary’s net assets received at fair value--Continued



In line with ICPC 09 and CPC 15,
the measurement of acquired assets and assumed liabilities was based on fair value. The Company measured the assets considering
the income approach and discounted cash flow. The process for determining the fair value involves the use of assumptions, judgments
and estimates relating to cash flows, such as growth rate of revenues, costs and expenses, estimates of investment and future working
capital, and discount rates. The assumptions relating to projections of growth, cash flow and future cash flows are based on the
entity’s business plan, approved by the Management, as well as on comparable market data, and represent the Management’s
best estimate of the economic conditions that will prevail during the entity’s economic life, group of assets that provides
the generation of cash flows. The future cash flows were discounted based on the rate representative of the cost of capital. The
evaluation of the value in use is made for a twenty two-year period, consistently with economic valuation techniques. The main
assumptions used in the estimate of value in use are the following: (a) revenue – revenues were projected for the period
between 2020 and 2041, considering projection of launches and growth in sales, construction progress and client base, including
the inflation adjustments to trade accounts receivable and provided services; (b) operating costs and expenses – costs and
expenses were projected in line with the market performance, as well as the historical growth of revenue; (c) discount rate of
9.90% in nominal terms, and (d) going concern assumption, in line of the entity’s business plan. The key assumptions were
based on the de market performance of business units, and on reasonable macroeconomic assumptions, and supported by the financial
market projections.



In the years ended December 31,
2018 and 2017, the impairment test for goodwill performed by the Company resulted in the need of recognizing a provision for impairment
loss in the amounts of R$112,800 and R$127,429, respectively, related to the goodwill remeasurement of investment in the associate
AUSA.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 10. | Property and equipment
| | --- | ----------------------



|Type                                     |  | 2018 |         |   | Initial application CPC 06 (R2) (Note 3) |  |        | Addition |  |  | Write-off |   |  | 100% depreciated items |        |   | 2019 | 
|---------------------------------------- |  | ---- | ------- | - | ---------------------------------------- |  | ------ | -------- |  |  | --------- | - |  | ---------------------- | ------ | - | ---- | 
|Cost                                     |  |      |         |   |                                          |  |        |          |  |  |           |   |  |                        |        |   |      | 
|Hardware                                 |  |      | 10,297  |   |                                          |  | —      |          |  |  | 318       |   |  |                        | —      |   |      | 
|Leasehold improvements and installations |  |      | 834     |   |                                          |  | —      |          |  |  | —         |   |  |                        | —      |   |      | 
|Furniture and fixtures                   |  |      | 764     |   |                                          |  | —      |          |  |  | —         |   |  |                        | —      |   |      | 
|Machinery and equipment                  |  |      | 2,640   |   |                                          |  | —      |          |  |  | —         |   |  |                        | —      |   |      | 
|Right-of-use asset                       |  |      | —       |   |                                          |  | 4,457  |          |  |  | —         |   |  |                        | (1,222 | ) |      | 
|Sales stands                             |  |      | 16,541  |   |                                          |  | —      |          |  |  | 552       |   |  |                        | (5,455 | ) |      | 
|                                         |  |      | 31,076  |   |                                          |  | 4,457  |          |  |  | 870       |   |  |                        | (6,677 | ) |      | 
|                                         |  |      |         |   |                                          |  |        |          |  |  |           |   |  |                        |        |   |      | 
|Accumulated depreciation                 |  |      |         |   |                                          |  |        |          |  |  |           |   |  |                        |        |   |      | 
|Hardware                                 |  |      | (2,129  | ) |                                          |  | —      |          |  |  | (3,280    | ) |  |                        |        |   |      | 
|Leasehold improvements and installations |  |      | (436    | ) |                                          |  | —      |          |  |  | (364      | ) |  |                        |        |   |      | 
|Furniture and fixtures                   |  |      | (563    | ) |                                          |  | —      |          |  |  | (64       | ) |  |                        |        |   |      | 
|Machinery and equipment                  |  |      | (2,136  | ) |                                          |  | —      |          |  |  | (258      | ) |  |                        |        |   |      | 
|Right-of-use asset                       |  |      | —       |   |                                          |  | (1,711 | )        |  |  | —         |   |  |                        |        |   |      | 
|Sales stands                             |  |      | (5,739  | ) |                                          |  | —      |          |  |  | (4,151    | ) |  |                        | 5,264  |   |      | 
|                                         |  |      | (11,003 | ) |                                          |  | (1,711 | )        |  |  | (8,117    | ) |  |                        | 5,264  |   |      | 
|                                         |  |      |         |   |                                          |  |        |          |  |  |           |   |  |                        |        |   |      | 
|Total property and equipment             |  |      | 20,073  |   |                                          |  | 2,746  |          |  |  | (7,247    | ) |  |                        | (1,413 | ) |      | 
|                                         |  |      |         |   |                                          |  |        |          |  |  |           |   |  |                        |        |   |      | 



The following useful lives and rates are used for
calculating depreciation:



|                                         | Useful life | Average annual depreciation rate - %
|---------------------------------------- | ----------- | ------------------------------------
|Leasehold improvements and installations | 4 years     | 25                                  
|Furniture and fixture                    | 10 years    | 10                                  
|Hardware                                 | 5 years     | 20                                  
|Machinery and equipment                  | 10 years    | 10                                  
|Sales stands                             | 1 year      | 100                                 



The residual value, useful life, and depreciation
methods are reviewed at the end of each year; no change having been made in relation to the information for the prior year.



Property and equipment are subject to periodic
analysis of impairment. As of December 31, 2019 and 2018 there was no indication of impairment of property and equipment.



| | 11. | Intangible assets
| | --- | -----------------



|                        |          |          |           
|----------------------- | -------- | -------- | ----------
|                        | 2018     |          |           
|                        | Balance  | Addition | Write-down
|                        |          |          |           
|Software – Cost         | 26,285   | 468      | (1,388)   
|Software – Depreciation | (14,515) | —        | 852       
|Total intangible assets | 11,770   | 468      | (536)     



As of December 31, 2019, the
test of recovery of the intangible assets of the Company resulted in the need for recognition of a provision for loss on realization
(impairment) in the amount of R$536 (R$4,962 in 2018), related to the Company’s software.



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 12. | Loans and financing
| | --- | -------------------



|                                                            |                            |                                                     |        
|----------------------------------------------------------- | -------------------------- | --------------------------------------------------- | -------
|Type                                                        | Maturity                   | Annual interest rate                                | 2019   
|                                                            |                            |                                                     |        
|National Housing System - SFH /SFI (i)                      | December 2019 to July 2021 | 8.30% to 14.20% + TR
        13.66% and 143% of CDI | 456,247
|Certificate of Bank Credit -
        CCB (ii)               | March 2021 to August 2021  | Fixed 19.56%
        2.5%/ 3.70%/ 4.25%+CDI         | 55,022 
|Other transactions                                          |                            |                                                     | 21,884 
|                                                            |                            |                                                     |        
|Total loans and financing(Note 20.i.d, 20.ii.a and 20.iii)) | 533,153                    | 623,747                                            
|                                                            |                            |                                                     |        
|Current portion                                             |                            |                                                     | 426,124
|Non-current portion                                         |                            |                                                     | 107,029



| | (i) | The SFH financing is used for covering costs related to the development of real estate ventures
of the Company and its subsidiaries, and backed by secured guarantee by the first-grade mortgage of real estate ventures and the
fiduciary assignment or pledge of receivables.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | In the year ended December 31, 2019, the Company made payments in the total amount of R$162,065,
of which R$133,024 related to principal and R$29,041 related to the interest payable. Additionally, during the year, the Company
entered into three CCB transactions in the amount of R$10,000, with final maturity in April 2022.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Rates | 
| | ----- | 



| | · | CDI -Interbank
Deposit Certificate;
| | - | -----------------------------------



| | · | TR -Referential
Rate.
| | - | ---------------------



The
current and non-current installments fall due as follows:



|         |  |        
|-------- |  | -------
|Maturity |  | 2019   
|         |  |        
|2019     |  | —      
|2020     |  | 426,124
|2021     |  | 103,269
|2022     |  | 3,760  
|         |  |        
|         |  | 533,153



The Company and its subsidiaries
have restrictive covenants under certain loans and financing that limit their ability to perform certain actions, such as the issuance
of debt, and that could require the early maturity or refinancing of loans if the Company does not fulfill certain restrictive
convents. As of December 31, 2019, the Company and its subsidiaries were in compliance with the contractual covenants, except for
three SFH loans, for which we need to re-establish their guarantees. The Company is in the process of negotiating the re-establishment
of the related SFH loans guarantees and have not received an acceleration notice in connection with such non-compliance. The Company
analyzed all of its other debt agreements and did not identify any impact on its restrictive covenants in such other debt agreements
resulting from this non-compliance.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 12. | Loans and financing--Continued
| | --- | ------------------------------



The ratios and minimum and maximum
amounts required under restrictive covenants for loan and financing transactions are as follows:



|                                                                                                                                                                                                 | 2019         | 2018      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------ | ----------
|                                                                                                                                                                                                 |              |           
|                                                                                                                                                                                                 |              |           
|Loans and financing                                                                                                                                                                              |              |           
|Net debt cannot exceed 100% of equity plus noncontrolling interests (a)                                                                                                                          | Debt settled | 152.53%   
|Total accounts receivable(1) plus inventory required to be below zero or 2.0 times over venture debt(2)                                                                                          | 4.52 times   | 4.51 times
|Total accounts receivable(1) plus inventory of completed units required to be below zero or 2.0 times over net debt less venture debt(2)                                                         | (9.04) times | 7.09 times
|Total debt, less venture debt, less cash and cash equivalents and short-term investments(3), cannot exceed 75% of equity plus non-controlling interests                                          | 16.03%       | 45.44%    
|Total receivables(1) plus unrecognized income plus total inventories of completed units required to be 1.5 time over the net debt plus payable for purchase of properties plus unrecognized cost | 3.75 times   | 1.81 times
|Total accounts receivable(1)plus total inventories required to be below zero or 2.0 times over net debt                                                                                          | Debt settled | 3.17 times
|                                                                                                                                                                                                 |              |           

| | (1) | Total
                                         receivables, whenever mentioned, refer to the amount reflected in the Statement of Financial
                                         Position plus the amount not shown in the Statement of Financial Position.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Venture
                                         debt and secured guarantee debt refer to SFH debts, defined as the sum of all disbursed
                                         borrowing contracts which funds were provided by the SFH.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Cash
                                         and cash equivalents and short-term investments refer to cash and cash equivalents and
                                         marketable securities.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) | For
                                         the years ended December 31, 2018, the covenant limit is 100%, according to the waiver
                                         obtained from the creditor.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Financial expenses of loans,
financing and debentures (Note 13) are capitalized at the cost of each venture and land, according to the use of funds, and recognized
in profit or loss for the year, according to the criteria for revenue recognition. The capitalization rate used in the determination
of costs of loans eligible to capitalization was 10.84% as of December 31, 2019 (11.55% in 2018).



The following table shows the
summary of financial expenses and charges and the capitalized portion in the line item properties for sale.



|                                                                      |  | 2019 |         |   | 2018 |  |          | 2017 | 
|--------------------------------------------------------------------- |  | ---- | ------- | - | ---- |  | -------- | ---- | 
|                                                                      |  |      |         |   |      |  |          |      | 
|Total financial charges for the year                                  |  |      | 89,737  |   |      |  | 104,066  |      | 
|Capitalized financial charges (Note 30)                               |  |      | (30,358 | ) |      |  | (35,686  | )    | 
|Subtotal  (Note 24)                                                   |  |      | 59,379  |   |      |  | 68,380   |      | 
|                                                                      |  |      |         |   |      |  |          |      | 
|Financial charges included in “Properties for sale”:                  |  |      |         |   |      |  |          |      | 
|                                                                      |  |      |         |   |      |  |          |      | 
|Opening balance                                                       |  |      | 223,807 |   |      |  | 301,025  |      | 
|Capitalized financial charges                                         |  |      | 30,358  |   |      |  | 35,686   |      | 
|Financial charges related to cancelled land sales contract (Note 8.1) |  |      | (8,955  | ) |      |  | —        |      | 
|Charges recognized in profit or loss (Note 23)                        |  |      | (38,275 | ) |      |  | (112,904 | )    | 
|Closing balance (Note 6)                                              |  |      | 206,935 |   |      |  | 223,807  |      | 





The amount of properties for
sale offered as guarantee for loans, financing and debentures is R$421,120 (R$552,752 in 2018).



| | 13. | Debentures
| | --- | ----------



|                                                          |                |                 |                |        
|--------------------------------------------------------- | -------------- | --------------- | -------------- | -------
|Program/placement                                         | Principal - R$ | Annual interest | Final Maturity | 2019   
|                                                          |                |                 |                |        
|Tenth placement (i)                                       | 27,224         | IPCA + 7.8%     | December 2023  | 38,038 
|Eleventh placement – 1st series A (ii)                    | 52,026         | CDI + 5.25 %    | May 2020       | 52,008 
|Twelfth placement (iii)                                   | 57,481         | CDI + 3.75 %    | December 2020  | 57,139 
|Thirteenth placement (iv)                                 | 35,366         | CDI + 3.00%     | June 2022      | 33,792 
|Fourteenth placement (v) (a)                              | 15,597         | CDI + 5.00%     | October 2020   | 16,548 
|Total debentures (Note 20.i.d, 20.ii.a, 20.iii and 30.ii) | 197.525        | 265,666        
|                                                          |                |                 |                |        
|Current                                                   |                |                 |                | 158,179
|Non-current                                               |                |                 |                | 39,346 



| | (a) | On April 14, 2019, the Company approved the 14th Private
Placement of Non-convertible Debentures, with secured guarantee, in sole series in the total amount of up to R$40,000, with final
maturity in October 2020. The net proceeds from the placement will be fully and solely used in the development of real estate
ventures called “Gafisa Square Ipiranga” and “Moov Espaço Cerâmica”, and their guarantees
are represented by the fiduciary assignment of real estate receivables and conditional sale of units. The face value of the Placement
will accrue interest corresponding to the cumulative change in Interbank Deposit (DI) plus a surcharge equivalent to 5%p.a..
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In the year ended December 31,
2019, the Company made the following payments:



|      | Face value placement | Interest payable | Total amortization
|----- | -------------------- | ---------------- | ------------------
|(i)   | 9,442                | 7,429            | 16,871            
|(ii)  | 17,045               | 7,788            | 24,833            
|(iii) | 45,426               | 5,951            | 51,377            
|(iv)  | 9,187                | 6,099            | 15,286            
|      | 81,100               | 27,267           | 108,367           



The current and non-current
portions have the following maturities:



|         | Company and Consolidated
|-------- | ------------------------
|Maturity | 2019                    
|         |                         
|2019     | —                       
|2020     | 158,179                 
|2021     | 23,119                  
|2022     | 11,243                  
|2022     | 4,984                   
|         | 197,525                 





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 13. | Debentures--Continued
| | --- | ---------------------



The Company is compliant with
the restrictive covenants of debentures at the reporting date of these financial statements. The ratios and minimum and maximum
amounts required under such restrictive covenants are as follows:



|                                                                                                                                                           | 2019          | 2018       
|---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | -----------
|                                                                                                                                                           |               |            
|                                                                                                                                                           |               |            
|Tenth placement                                                                                                                                            |               |            
|Total receivables(1) plus inventories required to be below zero or 2.0 times over net debt less venture debt(2)                                            | (14.62) times | 10.63 times
|Total debt, less venture debt(2), less cash and cash equivalents and short-term investments(3), cannot exceed 75% of equity plus non-controlling interests | 16.03%        | 45.44%     
|                                                                                                                                                           |               |            
|                                                                                                                                                           |               |            
|                                                                                                                                                           |               |            



| | (1) | Total receivables, whenever mentioned, refers to the
amount reflected in the Statement of Financial Position plus the amount not shown in the Statement of Financial Position.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Venture debt and secured guarantee debt refer to SFH
debts, defined as the sum of all disbursed borrowing contracts which funds were provided by SFH.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Cash and cash equivalents and short-term investments
refer to cash and cash equivalents and marketable securities.
| | --- | ------------------------------------------------------------------------------------------------------------------



| | 14. | Obligations assumed on the assignment of receivables
| | --- | ----------------------------------------------------



The
transactions of assignment of the receivable portfolio are as follows:



|                                                                                 |  |      |       
|-------------------------------------------------------------------------------- |  | ---- | ------
|                                                                                 |  | 2019 |       
|                                                                                 |  |      |       
|Obligation CCI June/2011 - Note 5(i)                                             |  |      | 412   
|Obligation CCI December/2011 - Note 5(ii)                                        |  |      | —     
|Obligation CCI July/2012 - Note 5(iii)                                           |  |      | —     
|Obligation CCI November/2012 - Note 5(iv)                                        |  |      | 2,586 
|Obligation CCI December /2012 - Note 5(v)                                        |  |      | 1,683 
|Obligation CCI November /2013 - Note 5(vi)                                       |  |      | 1,170 
|Obligation CCI November /2014 - Note 5(vii)                                      |  |      | 1,203 
|Obligation CCI December /2015 - Note 5(viii)                                     |  |      | 5,300 
|Obligation CCI February/2016 - Note 5(ix)                                        |  |      | 6,429 
|Obligation CCI May/2016 - Note 5(x)                                              |  |      | 4,625 
|Obligation CCI August/2016 - Note 5(xi)                                          |  |      | 2,392 
|Obligation CCI December /2016 - Note 5(xii)                                      |  |      | 6,106 
|Obligation CCI March/2017 - Note 5(xiii)                                         |  |      | 8,455 
|Total obligations assumed on assignment of receivables (Note 20.i.d and 20.ii.a) |  |      | 40,361
|                                                                                 |  |      |       
|Current                                                                          |  |      | 20,526
|Non-current                                                                      |  |      | 19,835



The current and non-current portions have the following
maturities:



|         |  |       
|-------- |  | ------
|Maturity |  | 2019  
|         |  |       
|2019     |  | —     
|2020     |  | 20,526
|2021     |  | 7,020 
|2022     |  | 4,284 
|2023     |  | 8,531 
|         |  | 40,361



Regarding
the above transactions,the assignor is required to fully formalize the guarantee instruments
of receivables in favor of the assignee. Until it is fully fulfilled, these amounts will be classified into a separate account
in current and non-current liabilities.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 14. | Obligations assumed on the assignment of receivables--Continued
| | --- | ---------------------------------------------------------------



Transaction
(i) was entered into with Banco BTG Pactual S.A. at rates of 11.48% plus INCC for receivables of units not delivered, and IGP-M
or IPCA for the period after the certificate of occupancy.



Transactions
(ii) and (iii) were entered into with Polo Multisetorial Fundo de Investimento em Direitos Creditórios at rates that range
between 11.25% and 11.50%, plus INCC for receivables of units not delivered, and IGP-M or IPCA for the period after the certificate
of occupancy.



Transactions
(iv), (v), (vi) and (vii) were entered into with Polo Multisetorial Fundo de Investimento em Direitos Creditórios Não
Padronizados at rates that range between 10.50% and 11.48%, plus INCC for receivables of units not delivered, and IGP-M or IPCA
for the period after the certificate of occupancy.



Transactions
(viii), (ix), (x), (xi), (xii) and (xiii) were entered into with Polo Capital Securitizadora S.A. at rates of 12.00%, plus INCC
for receivables of units not delivered, and IGP-M or IPCA for the period after the certificate of occupancy.



| | 15. | Other payables
| | --- | --------------



|                                                                          |  |      |        
|------------------------------------------------------------------------- |  | ---- | -------
|                                                                          |  | 2019 |        
|                                                                          |  |      |        
|Provision for penalties due to delay in construction work                 |  |      | 5,283  
|Cancelled contract payable and allowance for cancelled contracts          |  |      | 97,255 
|Warranty provision                                                        |  |      | 14,419 
|Long term PIS and COFINS (deferred and payable)                           |  |      | 8,372  
|Provision for net capital deficiency (Note 9.i.d)                         |  |      | 10,963 
|Long-term suppliers (Note 20.i.d)                                         |  |      | 1,382  
|Forward transactions – Share Repurchase Program (Note 20.ii a and 20.iii) |  |      | —      
|Share-based payment - Phantom Shares (Note 18.4)                          |  |      | 1,702  
|Other liabilities                                                         |  |      | 5,181  
|Total other payables                                                      |  |      | 144,557
|                                                                          |  |      |        
|Current portion                                                           |  |      | 135,492
|Non-current portion                                                       |  |      | 9,065  



| | 16. | Provisions for legal claims and commitments
| | --- | -------------------------------------------



The Company and its subsidiaries
are parties to lawsuits and administrative proceedings at various courts and government bodies that arise from the ordinary course
of business, involving tax, labor, civil, and other matters. Management, based on information provided by its legal counsel, analysis
of the pending claims and, with respect to the labor claims, based on past experience regarding the amounts claimed, recognized
a provision in an amount considered sufficient to cover the estimated losses on pending decisions. The Company does not expect
any reimbursement in connection with these claims.



In the years ended December
31, 2019 and 2018, the changes in the provision are summarized as follows:





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 16. | Provisions for legal claims and commitments --Continued
| | --- | -------------------------------------------------------



|Consolidated                               | Civil lawsuits | Tax proceedings | Labor claims | Total   
|------------------------------------------ | -------------- | --------------- | ------------ | --------
|Balance at December 31, 2017               | 138,636        | 759             | 58,982       | 198,377 
|Additional provision (Note 23)             | 150,140        | 8               | 22,284       | 172,432 
|Payment and reversal of provision not used | (53,294)       | (130)           | (23,576)     | (77,000)
|Balance at December 31, 2018               | 235,482        | 637             | 57,690       | 293,809 
|Additional
    provision (Note 23) (a)     | 17,754         | 1,369           | 1,475        | 20,598  
|Payment and reversal of provision not used | (13,769)       | 696             | (24,423)     | (37,496)
|Balance at December 31, 2019               | 239,467        | 2,702           | 34,742       | 276,911 
|                                           |                |                 |              |         
|Current portion                            | 119,425        | 2,015           | 31,593       | 153,033 
|Non-current portion                        | 120,042        | 687             | 3,149        | 123,878 





| | (a) | Of this amount, R$12,298 is related to legal settlements recorded as subsequent events (Note 31 (vi))
| | --- | -----------------------------------------------------------------------------------------------------





| | (b) | Civil lawsuits, tax proceedings and labor claims
| | --- | ------------------------------------------------



As of December 31, 2019, the Company
and its subsidiaries have deposited in court the amount of R$129,933 (R$106,793 in 2018) in the consolidated statements (Note 7).



|                |  |        
|--------------- |  | -------
|                |  | 2019   
|                |  |        
|Civil lawsuits  |  | 54,706 
|Tax proceedings |  | 41,989 
|Labor claims    |  | 33,238 
|Total (Note 7)  |  | 129,933



| | (i) | As of December 31, 2019, the provisions related to civil
lawsuits include R$13,397 (R$21,274 in 2018) related to lawsuits in which the Company is included in the defendant side to be liable
for in and out of court debts which original debtor is a former shareholder of the Company, Cimob Companhia Imobiliária
(“Cimob”), or involve other companies of the same economic group of Cimob. In these lawsuits, the plaintiff argues
that the Company should be liable for Cimob’s debts, because in its understanding the requirements for piercing of the corporate
veil of Cimob to reach the Company (business succession, merger of assets and/or formation of a same economic group involving
the Company and the Cimob Group) are present.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company does not agree with
the statement of facts based on which it has been included in these lawsuits and continues to dispute in court its liability for
the debts of a third company, as well as the amount charged by the plaintiffs. The Company has already obtained favorable and unfavorable
decisions in relation to this matter, which is the reason why it is not possible to estimate a uniform outcome in all lawsuits.
The Company also aims to file a lawsuit against Cimob and its former and current parent companies for obtaining the recognition
that it should not be liable for the debts of that company, as well as indemnity of the amounts already paid by the Company in
lawsuits relating to the charge of debts owed by Cimob.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 16. | Provisions for legal claims and commitments --Continued
| | --- | -------------------------------------------------------



| | (ii) | Environmental risk
| | ---- | ------------------



Considering the diversity of
environmental legislation in the federal, state and municipal levels, which may restrict or impede the development of real estate
ventures, the Company analyzes all environmental risks, including the possible existence of hazardous or toxic materials, residues,
vegetation and proximity of the land to permanent preservation areas, in order to mitigate risks in the development of ventures,
during the process of land acquisition for future ventures.



In addition, the environmental
legislation establishes criminal, civil and administrative sanctions to individuals and legal entities for activities considered
as environmental infringements or offense. The penalties include the stop of development activities, loss of tax benefits, confinement
and fines. The lawsuits in dispute by the Company in civil court are considered by the legal counsel as possible loss in the amount
of R$829 in the consolidated statements (R$18,324 in the consolidated statements in 2018).



| | (iii) | The Company requested an Arbitration Procedure to the Center for Arbitration and Mediation of the
Chamber of Commerce Brazil-Canada, on July 31, 2018,  against Yogo Participações e Empreendimentos Imobiliários
S.A. (“Yogo”); Polo Real Estate Fundo de Investimentos e Participações, and Polo Capital Real Estate
Gestão de Recursos Ltda. as shareholders of Yogo; and Comasa – Construtora Almeida de Martins Ltda., in view of the
breach of contractual obligations. As of December 31, 2019, the arbitration is in initial stage, no decision being awarded yet.
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | Lawsuits in which likelihood of loss is rated as possible
| | ---- | ---------------------------------------------------------



As of December 31, 2019, the
Company and its subsidiaries are aware of other claims, and civil, labor and tax risks. Based on the history of probable lawsuits
and the specific analysis of main claims, the measurement of the claims with likelihood of loss considered possible amounted to
R$540,593 (R$319,902 in 2018), based on average past outcomes adjusted to current estimates, for which the Company’s Management
believes it is not necessary to recognize a provision for any losses. The change in the period was caused by change in the volume
of lawsuits with diluted amounts, and review of the involved amounts.



|                |  |      |        
|--------------- |  | ---- | -------
|                |  | 2019 |        
|                |  |      |        
|Civil lawsuits  |  |      | 388,739
|Tax proceedings |  |      | 83,306 
|Labor claims    |  |      | 68,548 
|                |  |      | 540,593

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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 16. | Provisions for legal claims and commitments --Continued
| | --- | -------------------------------------------------------



| | (b) | Payables related to the completion of real estate ventures
| | --- | ----------------------------------------------------------



The Company commits to complete
units sold and to comply with the laws regulating the civil construction sector, including obtaining licenses from the proper authorities,
and compliance with the terms for starting and delivering the ventures, being subject to legal and contractual penalties. As of
December 31, 2019, the Company and its subsidiaries have restricted cash in guarantee to loans, which will be released to the extent
the guarantee ratios described in Note 4.2 are met, which include land and receivables pledged in guarantee of 120% of the debt
outstanding.



| | (c) | Other commitments
| | --- | -----------------



In addition to the commitments
mentioned in Notes 6, 12 and 13, the Company has commitments related to the rental of two commercial properties where its facilities
are located, at a monthly cost of R$167 (including rent, condominium fees, and IPTU), indexed to the IGP-M/FGV change and termination
of contract in August 2024.



The estimate of minimum future
rent payments of this new contract for commercial property (cancellable leases) totals R$9,486, considering the above-mentioned
contract expiration, as follows.



|                    |      
|------------------- | -----
|Estimate of payment | 2019 
|                    |      
|2020                | 2,057
|2021                | 2,139
|2022                | 2,224
|2023                | 2,314
|2024 onwards        | 752  
|                    | 9,486



| | 17. | Payables for purchase of properties and advances from customers
| | --- | ---------------------------------------------------------------



|                                                                                                |  |          |                               |  |      | 
|----------------------------------------------------------------------------------------------- |  | -------- | ----------------------------- |  | ---- | 
|                                                                                                |  | Maturity |                               |  | 2019 | 
|                                                                                                |  |          |                               |  |      | 
|Payables for purchase of properties                                                             |  |          | January 2020 to November 2022 |  |      | 
|Present value adjustment                                                                        |  |          |                               |  |      | 
|Advances from customers                                                                         |  |          |                               |  |      | 
|Development and services (Note 5)                                                               |  |          |                               |  |      | 
|Barter transaction - Land (Note 30 (i))                                                         |  |          |                               |  |      | 
|                                                                                                |  |          |                               |  |      | 
|Total payables for purchase of properties and advance from customers (Notes 20.i.d and 20.ii.a) |  |          |                               |  |      | 
|                                                                                                |  |          |                               |  |      | 
|Current portion                                                                                 |  |          |                               |  |      | 
|Non-current portion                                                                             |  |          |                               |  |      | 



The current and non-current portions have the following
maturities:



|         |              |  |      | 
|-------- | ------------ |  | ---- | 
|Maturity |              |  | 2019 | 
|         |              |  |      | 
|         | 2019         |  |      | 
|         | 2020         |  |      | 
|         | 2021         |  |      | 
|         | 2022         |  |      | 
|         | 2023         |  |      | 
|         | 2024 onwards |  |      | 
|         |              |  |      | 



As of December 31, 2019, the amount related to contract
liabilities totaled R$159,593 (R$187,336 in 2018).





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 18. | Equity
| | --- | ------



| | 18.1. | Capital
| | ----- | -------



The Company’s Board of
Directors ratified the following capital increases in the year ended December 31, 2019:



| | · | On
June 24, 2019: subscription and payment of 26,273,962 new common shares, of which 12,170,035 shares at the price of R$5.12 and
14,103,927 shares at the price of R$4.96, totaling R$62,311 and R$69,955, respectively.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | On October 23, 2019: subscription and payment
of 48,968,124 new common shares, of which 45,554,148 shares, at the price of R$5.58 and 3,413,976 shares at the price of R$5.42,
totaling R$254,192 and R$18,503, respectively.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Therefore, as of December 31,
2019, the Company's authorized and paid-in capital amounted to R$2,926,280 (R$2,521,319 in 2018), represented by 120,000,000 (43,727,589
in 2018) registered common shares, with no par value, of which 2,981,052 (3,943,420 in 2018) were held in treasury.



According to the Company’s
Articles of Incorporation, capital may be increased without the need to amend it upon resolution of the Board of Directors, which
shall set the conditions for issuance within the limit of 120,000,000 (one hundred and twenty million) common shares.



On April 24, 2019, the Company
disclosed a Notice to the Market informing about the re-issue of 1,400,325 shares of the Company, related to the previously cancelled
shares, of which (i) 1,030,325 shares had been cancelled in the meeting of the Board of Directors on December 19, 2018; and (ii)
370,000 shares had been cancelled on January 22, 2019, according to the resolution taken at the Extraordinary Shareholders’
Meeting held on April 15, 2019.



The Company transferred 9,174
shares (17,319 in 2018), in the total amount of R$141 (R$530 in 2018) related to the exercise of options under the stock option
plan of common shares by the beneficiaries, for which it received the total amount of R$148 (R$418 in 2018), and made the disposal
of 59,480 shares, for which it received the total amount of R$714.



|                 | Treasury shares |                        |                          
|---------------- | --------------- | ---------------------- | -------------------------
|                 | Type            | GFSA3                  | R$                       
|Acquisition date | Number (i)      | Weighted average price | % - on shares outstanding
|2001             | 11/20/2001      | 44,462                 | 38.9319                  
|                 |                 |                        |                          
|2013             | Acquisitions    | 1,372,096              | 51.9927                  
|                 |                 |                        |                          
|2014             | Acquisitions    | 3,243,947              | 35.5323                  
|2014             | Transfers       | (405,205)              | 43.3928                  
|2014             | Cancellations   | (2,039,086)            | 44.9677                  
|                 |                 |                        |                          
|2015             | Acquisitions    | 884,470                | 27.3124                  
|2015             | Transfers       | (90,622)               | 33.3473                  
|2015             | Cancellations   | (2,225,020)            | 33.3543                  
|                 |                 |                        |                          
|2016             | Acquisitions    | 334,020                | 26.0254                  
|2016             | Transfers       | (68,814)               | 31.2290                  
|                 |                 |                        |                          
|2017             | Transfers       | (112,203)              | 30.6320                  
|                 |                 |                        |                          
|2018             | Acquisitions    | 13,221,300             | 13.4953                  
|2018             | Transfers       | (17,319)               | 30.6022                  
|2018             | Cancellation    | (1,030,326)            | -                        
|2018             | Disposal        | (9,168,280)            | 16.1463                  
|                 |                 |                        |                          
|2019             | Acquisitions    | 6,794,011              | 14.7355                  
|2019             | Transfers       | (9,174)                | 15.3695                  
|2019             | Cancellation    | (370,000)              | 15.5324                  
|2019             | Disposal        | (7,377,205)            | 14.5999                  
|                 |                 | 2,981,052              | 14.5976                  
|                 |                 |                        |                          



| | (*) | Market value
                                         calculated based on the closing share price on December 31, 2019 of R$8.67 in 2018 (R$16.90
                                         in 2018) not considering the effect of occasional volatilities.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 18. | Equity --Continued
| | --- | ------------------



| | 18.1. | Capital --Continued
| | ----- | -------------------



The change in the number of outstanding
shares is as follows:



|                                                               | Common shares - In thousands
|-------------------------------------------------------------- | ----------------------------
|Outstanding shares as of December 31, 2017                     | 26,972                      
|Subscription of shares                                         | 16,718                      
|Transfer related to the stock option plan                      | 17                          
|Repurchase of shares                                           | (13,221)                    
|Disposal of shares                                             | 9,168                       
|Cancellation of treasury shares                                | (1,030)                     
|Change in shares held by the management members of the Company | (25)                        
|Outstanding shares as of December 31, 2018                     | 38,599                      
|Subscription of shares                                         | 76,642                      
|Repurchase of shares                                           | (7,164)                     
|Disposal of shares                                             | 7,386                       
|Cancellation of treasury shares                                | 370                         
|Change in shares held by the management members of the Company | 1,172                       
|Outstanding shares as of December 31, 2019                     | 117,005                     
|                                                               |                             
|Weighted average shares outstanding (Note 27)                  | 68,584                      



| | 18.2. | Allocation of profit (loss) for the year
| | ----- | ----------------------------------------



According to the Company’s
Articles of Incorporation, profit for the year is allocated as follows, after deduction for any accumulated losses and provision
for income taxes: (i) 5% to legal reserve, reaching up to 20% of paid-in capital, or when the legal reserve balance plus capital
reserves is in excess of 30% of capital; (ii) 25% of the remaining balance to pay mandatory dividends; and (iii) amount not in
excess of 71.25% to set up the Reserve for Investments, with the purpose of financing the expansion of the operations of the Company
and its subsidiaries.



The Board of Directors, by resolution
at the Annual Shareholders’ Meeting, shall examine the accounts and financial statements related to the fiscal year 2019.



In view of the accumulated losses
as of December 31, 2019, the allocation of profit or loss for the year is not applicable.



|Balance of accumulated losses for 2017 | (1,866,289)
|-------------------------------------- | -----------
|Net loss for 2018                      | (419,526)  
|Share repurchase program               | (22,588)   
|Balance of accumulated losses for 2018 | (2,308,403)
|Net loss for 2019                      | (26,040)   
|Share repurchase program               | (4,521)    
|Balance of accumulated losses for 2019 | (2,338,964)
|                                       |            

| | 18.3. | Stock option plan
| | ----- | -----------------



Expenses
for granting stocks are recorded under the account “General and administrative expenses” (Note 23) and showed the following
effects on profit or loss in the years ended December 31, 2019, 2018 and 2017:



|                                      |  | 2019 |        |   | 2018 |  |       | 2017 | 
|------------------------------------- |  | ---- | ------ | - | ---- |  | ----- | ---- | 
|                                      |  |      |        |   |      |  |       |      | 
|Equity-settled stock option plans (i) |  |      | 417    |   |      |  | 1,304 |      | 
|Phantom Shares (Note 18.4)            |  |      | (2,783 | ) |      |  | 623   |      | 
|Total option grant expenses (Note 23) |  |      | (2,366 | ) |      |  | 1,927 |      | 



(i)
In the year ended December 31, 2018, the amount of R$2,104 was reversed because the options of beneficiaries were cancelled for
forfeiture.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 18. | Equity --Continued
| | --- | ------------------



| | 18.3. | Stock option plan --Continued
| | ----- | -----------------------------



| | (i) | Gafisa
| | --- | ------



The Company has a total of six
stock option plans comprising common shares, launched in 2012, 2013, 2014, 2015, 2016 and 2018 which follows the rules established
in the Stock Option Plan of the Company.



The granted options entitle their
holders (employees) to subscribe common shares of the Company’s capital, after periods that range from one to four years
of employment (essential condition to exercise the option), and expire six to ten years after the grant date.



The fair value of options is
set on the grant date, and it is recognized as expense in profit or loss (as contra-entry to equity) during the grace period of
the plan, to the extent the services are provided by employees and management members.



Changes in the stock options
outstanding in the years ended December 31, 2019 and 2018, including the respective weighted average exercise prices are as follows:



|                                                                                            |  | 2019              |           |   | 2018                                    | 
|------------------------------------------------------------------------------------------- |  | ----------------- | --------- | - | --------------------------------------- | 
|                                                                                            |  | Number of options |           |   | Weighted average exercise price (Reais) | 
|Options outstanding at the beginning of the year                                            |  |                   | 1,239,557 |   |                                         | 
|Options granted                                                                             |  |                   | —         |   |                                         | 
|Options exercised (i)                                                                       |  |                   | (9,174    | ) |                                         | 
|Options cancelled for forfeiture (ii)                                                       |  |                   | —         |   |                                         | 
|Options cancelled and adjustment to number due to the discontinued operations of Tenda, net |  |                   | —         |   |                                         | 
|Options outstanding at the end of the year                                                  |  |                   | 1,230,383 |   |                                         | 



| | (i) | In the year ended December 31, 2019, the amount received
through exercised options was R$148 (R$418 in 2018).
| | --- | -------------------------------------------------------------------------------------------------------------



| | (ii) | Options cancelled for forfeiture as the beneficiaries
who would be entitled were dismissed as part of the process of turnaround and streamlining of the corporate structure of the Company.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of December 31, 2019, the stock
options outstanding and exercisable are as:



|Options outstanding | Options exercisable                                
|------------------- | ---------------------------------------------------
|Number of options   | Weighted average remaining contractual life (years)
|                    |                                                    
|1,230,383           | 8.06                                               



During
the year ended December 31, 2019, the Company did not grant any option (2,685,474 option granted in 2018) in connection with its
stock option plans comprising common shares.



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)


| | 18. | Equity --Continued
| | --- | ------------------



| | 18.3. | Stock option plan --Continued
| | ----- | -----------------------------



The models used by the Company
for pricing granted options are the Binomial model for traditional options and the MonteCarlo model for options in the Restricted
Stock Options format.



In 2018, the fair value of the
options granted totaled R$17,032, which was determined based on the following assumptions. In view of the cancellation of options
for forfeiture of beneficiaries, the program’s fair value, considering the remaining options, is R$1,071.



|                                         | 2018     
|---------------------------------------- | ---------
|Pricing model                            | Binomial 
|Exercise price of options (R$)           | R$15.00  
|Weighted average price of options ( (R$) | R$15.00  
|Expected volatility (%) – (*)            | 52%      
|Expected option life (years)             | 4.6 years
|Dividend income (%)                      | 1.98%    
|Risk-free interest rate (%)              | 6.64%    



(*)
The volatility was determined based on regression analysis of the ratio of the share volatility of Gafisa S.A. to the Ibovespa
index.



| | 18.4. | Share-based payment – Phantom Shares
| | ----- | ------------------------------------



The Company has a total of two
cash-settled share-based payment plans with fixed terms and conditions, according to the plans approved by the Company, launched
in 2015 and 2016.



As of December 31, 2019, the
amount of R$1,702 (R$4,602 in 2018), related to the fair value of the phantom shares granted, is recognized in the heading “Other
payables” (Note 15).



| | 19. | Income tax and social contribution
| | --- | ----------------------------------



The reconciliation of the effective
tax rate for the years ended December 31, 2019, 2018 and 2017 is as follows:



|                                                                         |  |      |         |   |      | 
|------------------------------------------------------------------------ |  | ---- | ------- | - | ---- | 
|                                                                         |  | 2019 |         |   | 2018 | 
|                                                                         |  |      |         |   |      | 
|Loss before income tax and social contribution, and statutory interest   |  |      | (61,676 | ) |      | 
|Income tax calculated at the applicable rate - 34%                       |  |      | 20,970  |   |      | 
|                                                                         |  |      |         |   |      | 
|Net effect of subsidiaries and ventures taxed by presumed profit and RET |  |      | 17,951  |   |      | 
|Income from equity method investments                                    |  |      | (1,701  | ) |      | 
|Stock option plan                                                        |  |      | (142    | ) |      | 
|Net effect on divestment of associate                                    |  |      | 22,610  |   |      | 
|Other permanent differences                                              |  |      | 19,102  |   |      | 
|Charges on payables to venture partners                                  |  |      | 18      |   |      | 
|Net effect on discontinued operations                                    |  |      | —       |   |      | 
|Recognized (unrecognized) tax credits                                    |  |      | (43,533 | ) |      | 
|                                                                         |  |      | 35,275  |   |      | 
|                                                                         |  |      |         |   |      | 
|Tax expenses - current                                                   |  |      | (1,984  | ) |      | 
|Tax income (expenses) - deferred                                         |  |      | 37,259  |   |      | 



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 19. | Income tax and social contribution --Continued
| | --- | ----------------------------------------------



| | (ii) | Deferred income tax and social contribution
| | ---- | -------------------------------------------



The Company recognized deferred
tax assets on tax losses and income tax and social contribution carryforwards for prior years, which have no expiration, and for
which offset is limited to 30% of annual taxable profit, to the extent the taxable profit is probable to be available for offsetting
temporary differences, based on the assumptions and conditions established in the business model of the Company.



As of December 31, 2019 and
2018, deferred income tax and social contribution are from the following sources:



| | (ii) | Deferred income tax and social contribution --Continued
| | ---- | -------------------------------------------------------



|                                                      |  |      |         
|----------------------------------------------------- |  | ---- | --------
|                                                      |  | 2019 |         
|Assets                                                |  |      |         
|Provisions for legal claims                           |  |      | 94,149  
|Temporary differences – Deferred PIS and COFINS       |  |      | 14,997  
|Provisions for realization of non-financial assets    |  |      | 261,816 
|Temporary differences –  CPC adjustment               |  |      | 11,896  
|Other provisions                                      |  |      | 5,325   
|Income tax and social contribution loss carryforwards |  |      | 432,801 
|                                                      |  |      | 820,984 
|                                                      |  |      |         
|Unrecognized tax credits of continued operations      |  |      | (749,399
|                                                      |  |      | (749,399
|Liabilities                                           |  |      |         
|Discounts                                             |  |      | (2,069  
|Temporary differences –CPC adjustment                 |  |      | (15,237 
|Income taxed between cash and accrual basis           |  |      | (66,393 
|                                                      |  |      | (83,699 
|                                                      |  |      |         
|Total net                                             |  |      | (12,114 



The balances of income tax and
social contribution loss carryforwards for offset are as follows:



|                                                                 |           
|---------------------------------------------------------------- | ----------
|                                                                 | 2019      
|                                                                 | Income tax
|Balance of income tax and social contribution loss carryforwards | 1,272,943 
|Deferred tax asset (25%/9%)                                      | 318,236   
|Recognized deferred tax asset                                    | 3,818     
|Unrecognized deferred tax asset                                  | 314,418   



In the years ended December
31, 2019 and 2018, the effect of income tax and social contribution on statement of profit or loss of the Company is mainly caused
by the write-off and impairment recorded at the initial value of the portion of remeasurement of the investment stated at fair
value, respectively.



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 20. | Financial instruments
| | --- | ---------------------



The Company and its subsidiaries
engage in operations involving financial instruments. These instruments are managed through operational strategies and internal
controls aimed at providing liquidity, return and safety. The use of financial instruments for hedging purposes is achieved through
a periodical analysis of exposure to the risk that the management intends to cover (exchange, interest rate, etc.) which is submitted
to the corresponding Management bodies for approval and subsequent execution of the proposed strategy. Company’s policy consists
of ongoing monitoring of the contracted conditions in relation to the prevailing market conditions. The Company and its subsidiaries
do not use derivatives or any other risky assets for speculative purposes. The result from these operations is consistent with
the policies and strategies devised by the Company’s Management. The Company and its subsidiaries operations are subject
to the risk factors described below:



| | (i) | Risk considerations
| | --- | -------------------



| | a) | Credit risk
| | -- | -----------



The Company and its subsidiaries
restrict their exposure to credit risks associated with cash and cash equivalents, investing only in short-term securities of top
tier financial institutions.



With regards to accounts receivable,
the Company restricts its exposure to credit risks through sales to a broad base of customers and ongoing credit analysis. Additionally,
there is no relevant history of losses due to the existence of secured guarantee, represented by real estate unit, for the recovery
of its products in the cases of default during the construction period. As of December 31, 2019 and 2018, there was no significant
credit risk concentration associated with customers.



| | b) | Derivative financial instruments
| | -- | --------------------------------



As of December 31, 2019, the
Company does not have derivative instruments to mitigate the risk arising from its exposure to index and interest volatility recognized
at their fair value in profit or loss for the year.



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 20. | Financial instruments --Continued
| | --- | ---------------------------------



| | (i) | Risk considerations--Continued
| | --- | ------------------------------



| | b) | Derivative financial instruments --Continued
| | -- | --------------------------------------------



Additionally, during the year
ended December 31, 2018, in the context of the treasury share repurchase program (Note 18.1), the Company used derivative financial
instruments, through forward contracts, to make transactions with shares traded in the market, which were settled in the year ended
December 31, 2019.



The
estimated fair value of derivative financial instruments purchased by the Company was determined based on information available
in the market and specific valuation methodologies. However, considerable judgment was necessary for interpreting market data to
produce the estimated fair value of each transaction, which may vary upon the financial settlement of transactions.



| | c) | Interest rate risk
| | -- | ------------------



Interest rate risk arises from
the possibility that the Company and its subsidiaries may experience gains or losses arising from fluctuations in the interest
rates of its financial assets and liabilities. Aiming to mitigate this kind of risk, the Company and its subsidiaries seek to diversify
funding in terms of fixed and floating rates. The interest rates on loans, financing and debentures are disclosed in Notes 12 and
13. The interest rates contracted on financial investments are disclosed in Note 4. Accounts receivable from completed real estate
units (Note 5) are subject to annual interest rate of 12%, recognized on a pro ratabasis.



| | d) | Liquidity risk
| | -- | --------------



Liquidity risk refers to the
possibility that the Company and its subsidiaries do not have sufficient funds to meet their commitments in view of the settlement
terms of its rights and obligations.



To mitigate liquidity risks,
and to optimize the weighted average cost of capital, the Company and its subsidiaries monitor on an on-going basis the indebtedness
levels according to the market standards, and the fulfillment of covenants provided for in loan, financing and debenture agreements,
in order to guarantee that the operating-cash generation and the advance funding, when necessary, are sufficient to meet the schedule
of commitments, appropriately mitigating liquidity risk to the Company or its subsidiaries (Notes 12 and 13).



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 20. | Financial instruments --Continued
| | --- | ---------------------------------



| | (i) | Risk considerations--Continued
| | --- | ------------------------------



| | d) | Liquidity risk --Continued
| | -- | --------------------------



The maturities of financial instruments
of loans, financing, suppliers, debentures, forward transactions, obligations assumed on assignment of receivables, suppliers,
payables for purchase of properties and advance from customers are as follows:



|Year ended December 31, 2019                                             |  |                  |        
|------------------------------------------------------------------------ |  | ---------------- | -------
|Liabilities                                                              |  | Less than 1 year |        
|Loans and financing (Note 12)                                            |  |                  | 426,124
|Debentures (Note 13)                                                     |  |                  | 158,179
|Obligations assumed on assignment of receivables (Note 14)               |  |                  | 20,526 
|Suppliers (Note 15 and Note 20.ii.a)                                     |  |                  | 95,450 
|Payable for purchase of properties and advances from customers (Note 17) |  |                  | 117,515
|                                                                         |  |                  | 817,794
|Assets                                                                   |  |                  |        
|Cash and cash equivalents and short-term investments (Notes 4.1 and 4.2) |  |                  | 414,330
|Trade accounts receivable (Note 5)                                       |  |                  | 442,542
|                                                                         |  |                  | 856,872



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 20. | Financial instruments --Continued
| | --- | ---------------------------------



| | (i) | Risk considerations--Continued
| | --- | ------------------------------



| | d) | Liquidity risk --Continued
| | -- | --------------------------



Fair value classification



The Company uses the following
classification to determine and disclose the fair value of financial instruments by the valuation technique o:



Level 1: quoted prices (without
adjustments) in active markets for identical assets or liabilities;



Level 2: inputs other than the
quoted market prices within Level 1 that are observable for asset or liability, either directly (as prices) or indirectly (derived
from prices); and



Level 3: inputs for asset or
liability not based on observable market data (unobservable inputs).



The classification level of fair
value for financial instruments measured at fair value through profit or loss of the Company as of December 31, 2019 and 2018 is
as follows:



|                                  | Fair value classification
|--------------------------------- | -------------------------
|As of December 31, 2019           | Level 1                  
|                                  |                          
|Financial assets                  |                          
|Short-term investments (Note 4.2) | —                        



|                                  | Fair value classification
|--------------------------------- | -------------------------
|As of December 31, 2018           | Level 1                  
|                                  |                          
|Financial assets                  |                          
|Short-term investments (Note 4.2) | —                        



In the years ended December 31,
2019 and 2018, there was no transfer between the Levels 1 and 2 fair value classifications, nor were transfers between Levels 3
and 2 fair value classifications.



| | (ii) | Fair value of financial instruments
| | ---- | -----------------------------------



| | a) | Fair value measurement
| | -- | ----------------------



The following estimated fair
values were determined using available market information and proper measurement methodologies. However, a considerable amount
of judgment is necessary to interpret market information and estimate fair value. Accordingly, the estimates presented in this
document are not necessarily indicative of amounts that the Company could realize in the current market. The use of different market
assumptions and/or estimation methodology may have a significant effect on estimated fair values.



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 20. | Financial instruments —Continued
| | --- | --------------------------------



| | (ii) | Fair value of financial instruments--Continued
| | ---- | ----------------------------------------------



| | a) | Fair value measurement --Continued
| | -- | ----------------------------------



The following methods and assumptions
were used in order to estimate the fair value of each financial instrument type for which the estimate of values is practicable.



| | (i) | The amounts of cash and cash equivalents, short-term investments, accounts receivable, other receivables,
suppliers, and other current liabilities approximate to their fair values recorded in the financial statements.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | The fair value of bank loans and other financial debts is estimated through future cash flows discounted
using benchmark interest rates available for similar and outstanding debts or terms.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The most significant carrying
values and fair values of financial assets and liabilities as of December 31, 2019 and 2018 are as follows:



|                                                                         |                |           
|------------------------------------------------------------------------ | -------------- | ----------
|                                                                         | 2019           | 2018      
|                                                                         | Carrying value | Fair value
|                                                                         |                |           
|Financial assets                                                         |                |           
|Cash and cash equivalents (Note 4.1)                                     | 12,435         | 12,435    
|Short-term investments (Note 4.2)                                        | 401,895        | 401,895   
|Trade accounts receivable (Note 5)                                       | 545,600        | 545,600   
|Loans receivable  (Note 21.1)                                            | 33,416         | 33,416    
|                                                                         |                |           
|Financial liabilities                                                    |                |           
|Loans and financing (Note 12)                                            | 533,153        | 542,909   
|Debentures (Note 13)                                                     | 197,525        | 278,727   
|Forward transactions – Share repurchase program (Note 15)                | —              | —         
|Suppliers                                                                | 96,832         | 96,832    
|Obligations assumed on assignment of receivables(Note 14)                | 40,361         | 40,361    
|Payable for purchase of properties and advances from customers (Note 17) | 210,590        | 210,590   
|Loans payable  (Note 21.1)                                               | 9,280          | 9,280     



(*) Fair value through profit
or loss



(**) Amortized cost



F-67


Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 20. | Financial instruments --Continued
| | --- | ---------------------------------



| | (ii) | Fair value of financial instruments--Continued
| | ---- | ----------------------------------------------



| | a) | Risk of debt acceleration
| | -- | -------------------------



As
of December 31, 2019, the Company has loans and financing contracts with restrictive covenants related to cash generation, indebtedness
ratios, capitalization, debt coverage, maintenance of shareholding position, and others. The breach of such obligations by the
Company may give rise to the acceleration of its debts and/or acceleration of other debts of the Company, including due to the
performance of any cross default or cross acceleration clauses, which may negatively impact the profit or loss of the Company and
the value of its shares.



As
of December 31, 2019, the Company and its subsidiaries were in compliance with the contractual covenants provided for in our debentures
and our credit instruments, except for three SFH loans, for which we need to re-establish their guarantees. Currently, the Company
is in the process of negotiating the re-establishment of the related SFH loans guarantees and we have not received an acceleration
notice in connection with such non-compliance. The Company analyzed all of its other debt agreements and did not identify any impact
on its restrictive covenants in such other debt agreements resulting from this non-compliance and it does 	not limit its ability
to conduct its business as usual.



| | (iii) | Capital stock management
| | ----- | ------------------------



The
objective of the Company’s capital stock management is to guarantee the maintenance of a strong credit rating in institutions
and an optimum capital ratio, in order to support the Company’s business and maximize value to shareholders.



The
Company controls its capital structure by making adjustments and adapting to current economic conditions. In order to maintain
its structure adjusted, the Company may pay dividends, return on capital to shareholders, take out new loans and issue debentures,
among others.



There
were no changes in objectives, policies or procedures during the years ended December 31, 2019 and 2018.



The
Company included in its net debt structure: loans and financing, debentures, obligations assumed on assignment of receivables,
and payables to venture partners less cash and cash equivalents and short-term investments):



|                                                     |  |      |         
|---------------------------------------------------- |  | ---- | --------
|                                                     |  | 2019 |         
|                                                     |  |      |         
|Loans and financing (Note 12)                        |  |      | 533,153 
|Debentures (Note 13)                                 |  |      | 197,525 
|( - ) Cash and cash equivalents and (Note 4.1 e 4.2) |  |      | (414,330
|Net debt                                             |  |      | 316,348 
|Equity                                               |  |      | 882,845 





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 20. | Financial instruments --Continued
| | --- | ---------------------------------



| | (iv) | Sensitivity analysis
| | ---- | --------------------



The
sensitivity analysis of financial instruments for the year ended December 31, 2019 describes the risks that may give rise to material
changes in the Company’s profit or loss, as provided for by CVM, through Rule 475/08, in order to show a 10%, 25% and 50%
increase/decrease in the risk variable considered.



As
of December 31, 2019, besides the derivative instruments, the Company has the following financial instruments:



| | a) | Short-term investments, loans and financing and debentures linked to the Interbank Deposit Certificate
(CDI);
| | -- | -------------------------------------------------------------------------------------------------------------



| | b) | Loans and financing linked to the Referential Rate (TR) and CDI, and debentures linked to the CDI
and Broad Consumer Price Index (IPCA);
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------



| | c) | Accounts receivable and payable for purchase of properties, linked to the National Civil Construction
Index (INCC) and General Market Price Index (IGP-M).
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



For
the sensitivity analysis in the year ended December 31, 2019, the Company considered the interest rates of investments, loans and
accounts receivable, the CDI rate at 5.96%, TR at 0%, INCC at 4.15%, IPCA at 4.31% and IGP-M at 7.32%. The scenarios considered
were as follows:



Scenario
I - Probable: 10% increase/decrease in the risk variables used for pricing



Scenario
II - Possible: 25% increase/decrease in the risk variables used for pricing



Scenario
III - Remote: 50% increase/decrease in the risk variables used for pricing



The
Company shows in the following chart the sensitivity to risks to which the Company is exposed, taking into account that the possible
effects would impact the future results, based on the exposures shown as of December 31, 2019. The effects on equity are basically
the same of the profit or loss ones.



|                                    |                            | Scenario     
|----------------------------------- | -------------------------- | -------------
|                                    |                            | I            
|Transaction                         | Risk                       | Increase  10%
|                                    |                            |              
|Financial investments               | Increase/decrease of CDI   | 2,072        
|Loans and financing                 | Increase/decrease of CDI   | (1,429)      
|Debentures                          | Increase/decrease of CDI   | (804)        
|                                    |                            |              
|Net effect of CDI change            |                            | (161)        
|                                    |                            |              
|Loans and financing                 | Increase/decrease of TR    | -            
|                                    |                            |              
|Net effect of TR change             |                            | -            
|                                    |                            |              
|Debentures                          | Increase/decrease of IPCA  | (157)        
|                                    |                            |              
|Net effect of IPCA change           |                            | (157)        
|                                    |                            |              
|Receivables                         | Increase/decrease of INCC  | 1,191        
|Payables for purchase of properties | Increase/decrease of INCC  | (886)        
|                                    |                            |              
|Net effect of INCC change           |                            | 305          
|                                    |                            |              
|Receivables                         | Increase/decrease of IGP-M | 1,763        
|                                    |                            |              
|Net effect of IGP-M change          |                            | 1,763        



F-69


Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 21. | Related parties
| | --- | ---------------



| | 21.1. | Balances with related parties
| | ----- | -----------------------------



The
transactions between the Company and related companies are made under conditions and prices established between the parties.



|                                                    |  |      |        
|--------------------------------------------------- |  | ---- | -------
|Current account                                     |  | 2019 |        
|                                                    |  |      |        
|Assets                                              |  |      |        
|Current account (a):                                |  |      |        
|Total SPEs                                          |  |      | 64,441 
|Subsidiaries                                        |  |      | 57,027 
|Jointly-controlled investees                        |  |      | 7,381  
|Associates                                          |  |      | 33     
|Condominium, consortia (b) and third-party works(c) |  |      | 13,165 
|Loans receivable  (d) (Note 20.ii.a)                |  |      | 33,416 
|Dividends receivable                                |  |      | —      
|                                                    |  |      | 111,022
|                                                    |  |      |        
|Current                                             |  |      | 77,606 
|Non-current                                         |  |      | 33,416 
|                                                    |  |      |        
|Liabilities                                         |  |      |        
|Current account (a):                                |  |      |        
|Total SPEs                                          |  |      | (55,104
|Subsidiaries                                        |  |      | (29,211
|Jointly-controlled investees                        |  |      | (23,229
|Associates                                          |  |      | (2,664 
|Loans payables  (d) (Note 20.ii.a)                  |  |      | (9,280 
|                                                    |  |      | (64,384
|                                                    |  |      |        
|Current                                             |  |      | (64,384
|Non-current                                         |  |      | —      



| | (a) | The
                                         Company participates in the development of real estate ventures with other partners,
                                         directly or through related parties, based on the formation of condominiums and/or consortia.
                                         The management structure of these ventures and the cash management are centralized in
                                         the lead partner of the venture, which manages the construction schedule and budgets.
                                         Thus, the lead partner ensures that the investments of the necessary funds are made and
                                         allocated as planned. The sources and use of resources of the venture are reflected in
                                         these balances, observing the respective interest of each investor, which are not subject
                                         to indexation or financial charges and do not have a fixed maturity date. Such operations
                                         aim at simplifying business relations that demand the joint management of amounts reciprocally
                                         owed by the involved parties and, consequently, the control over the change of amounts
                                         reciprocally provided which offset against each other at the time the current account
                                         is closed. The average term for the development and completion of the ventures in which
                                         the resources are invested is between 24 and 30 months. The Company receives a compensation
                                         for the management of these ventures.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Refers
                                         to transactions between the lead partner of consortium, partners, and condominiums.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------



| | (c) | Refers
                                         to operations in third-party’s works.
| | --- | -------------------------------------------------------------------------------------



| | (d) | The
                                         loans of the Company with its subsidiaries, shown below, are made to provide subsidiaries
                                         with cash to carry out their respective activities, subject to the respective agreed-upon
                                         financial charges. The businesses and operations with related parties are carried out
                                         strictly at arm’s length, in order to protect the interests of the both parties
                                         involved in the business.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
composition, nature and conditions of the balances of loans receivable and payable of the Company are as follows. Loans have maturity
from January 2020 and are tied to the cash flows of the related ventures.



|                                                                 |        |        |             
|---------------------------------------------------------------- | ------ | ------ | ------------
|                                                                 | 2019   | 2018   | Nature      
|                                                                 |        |        |             
|Lagunas - Tembok Planej. e Desenv. Imob. Ltda.                   | 6,272  | 5,486  | Construction
|Manhattan Residencial I - OAS Empreendimentos                    | 392    | 685    | Construction
|Target Offices & Mall- SPE Yogo Part. Emp. Imob. e Comasa Const. | 26,752 | 22,238 | Construction
|Total receivable                                                 | 33,416 | 28,409 |             
|                                                                 |        |        |             
|Dubai Residencial - Franere, Com. Const. e Imob. Ltda.           | 1,025  | 4,787  | Construction
|Parque Árvores - Franere, Com. Const. e Imob. Ltda.              | 5,372  | 7,877  | Construction
|Parque Águas - Franere, Com. Const. e Imob. Ltda.                | 2,883  | 2,787  | Construction
|Total payable                                                    | 9,280  | 15,451 | Construction





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 21. | Related parties--Continued
| | --- | --------------------------



| | 21.1. | Balances with related parties--Continued
| | ----- | ----------------------------------------



In
the year ended December 31, 2019 the recognized finance income from interest on loans amounted to R$4,195 (R$4,899 in 2018) (Note
24).



The
information regarding management transactions and compensation is described in Note 25.



| | 21.2. | Endorsements, guarantees and sureties
| | ----- | -------------------------------------



The financial transactions of
the subsidiaries are guaranteed by the endorsement or surety in proportion to the interest of the Company in the capital stock
of such companies, in the amount of R$132,336 as of December 31, 2019 (R$218,344 in 2018).



| | 22. | Net operating revenue
| | --- | ---------------------



|                                                                                         |          |          
|---------------------------------------------------------------------------------------- | -------- | ---------
|                                                                                         | 2019     | 2018     
|                                                                                         |          |          
|Gross operating revenue                                                                  |          |          
|Real estate development, sale, barter transactions and construction services             | 390,032  | 1,006,317
|(Recognition) Reversal of allowance for expected losses and cancelled contracts (Note 5) | 47,257   | 41,828   
|Taxes on sale of real estate and services                                                | (36,824) | (87,254) 
|Net operating revenue                                                                    | 400,465  | 960,891  



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 23. | Costs and expenses by nature
| | --- | ----------------------------



These
are represented by the following:



|                                                                        |  |      |          |     
|----------------------------------------------------------------------- |  | ---- | -------- | ----
|                                                                        |  | 2019 |          | 2018
|                                                                        |  |      |          |     
|Cost of real estate development and sale:                               |  |      |          |     
|Construction cost                                                       |  |      | (199,538 | )   
|Land cost                                                               |  |      | (67,082  | )   
|Development cost                                                        |  |      | (6,227   | )   
|Provision for loss on realization of properties for sale (Note 6 and 8) |  |      | 27,079   |     
|Capitalized financial charges (Note 12)                                 |  |      | (38,275  | )   
|Maintenance / warranty                                                  |  |      | 1,359    |     
|Total cost of real estate development and sale                          |  |      | (282,684 | )   
|                                                                        |  |      |          |     
|Selling expenses:                                                       |  |      |          |     
|Product marketing                                                       |  |      | (3,950   | )   
|Brokerage and sale commission                                           |  |      | (4,331   | )   
|Customer Relationship Management (CRM) and corporate marketing          |  |      | (6,473   | )   
|Other                                                                   |  |      | (135     | )   
|Total selling expenses                                                  |  |      | (14,889  | )   
|                                                                        |  |      |          |     
|General and administrative expenses:                                    |  |      |          |     
|Salaries and payroll charges                                            |  |      | (20,650  | )   
|Employee benefits                                                       |  |      | (1,982   | )   
|Travel and utilities                                                    |  |      | (218     | )   
|Services                                                                |  |      | (16,035  | )   
|Rents and condominium fees                                              |  |      | (3,803   | )   
|IT                                                                      |  |      | (7,751   | )   
|Stock option plan (Note 18.3)                                           |  |      | 2,366    |     
|Reversal (Expense) of reserve for profit sharing (Note 25.iii)          |  |      | (5,000   | )   
|Depreciation and amortization (Notes 10 and 11)                         |  |      | (14,181  | )   
|Other                                                                   |  |      | (1,060   | )   
|Total general and administrative expenses                               |  |      | (68,314  | )   
|                                                                        |  |      |          |     
|Other income (expenses), net:                                           |  |      |          |     
|Expenses with lawsuits (Note 16)                                        |  |      | (20,598  | )   
|Loss on realization of investment stated at fair value (Note 9)         |  |      | —        |     
|Result of divestment in associate (Note 9.1)                            |  |      | (78,008  | )   
|Other (a)                                                               |  |      | 66,979   |     
|Total other income (expenses), net                                      |  |      | (31,627  | )   



| | (a) | Amount of R$66,391 in the consolidated statements related to the outcome of the arbitration decision
related to venture construction contracts with partners, which was awarded on November 12, 2019 by the Arbitration Court, managed
by the Center for Arbitration and Mediation of the Chamber of Commerce Brazil – Canada.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 24. | Finance income (expenses)
| | --- | -------------------------



|                                                     |  |      |         |     
|---------------------------------------------------- |  | ---- | ------- | ----
|                                                     |  | 2019 |         | 2018
|Finance income                                       |  |      |         |     
|Income from financial investments                    |  |      | 12,649  |     
|Derivative transactions (Note 20.i.b)                |  |      | —       |     
|Finance income on loans (Note 21.i)                  |  |      | 4,195   |     
|Other finance income                                 |  |      | 362     |     
|Total finance income                                 |  |      | 17,206  |     
|                                                     |  |      |         |     
|Finance expenses                                     |  |      |         |     
|Interest on funding, net of capitalization (Note 12) |  |      | (59,379 | )   
|Amortization of debenture cost                       |  |      | (2,857  | )   
|Banking expenses                                     |  |      | (8,931  | )   
|Offered discount and other finance expenses          |  |      | (5,663  | )   
|Total finance expenses                               |  |      | (76,830 | )   

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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 25. | Transactions with management and employees
| | --- | ------------------------------------------



| | (i) | Management compensation
| | --- | -----------------------



In the years ended December
31, 2019, 2018 and 2017, the amounts recorded in the line item “General and administrative expenses” related to the
compensation of the Company’s Management are as follows:



|                                      | Management compensation |                     
|------------------------------------- | ----------------------- | --------------------
|Year ended December 31, 2019          | Board of Directors      | Executive Management
|                                      |                         |                     
|Number of members                     | 10                      | 6                   
|Annual fixed compensation (in R$)     |                         |                     
|Salary/Fees                           | 765                     | 5,915               
|Direct and indirect benefits          | -                       | 10                  
|Other (INSS)                          | 153                     | 1,083               
|Average monthly compensation (in R$)  | 77                      | 584                 
|Total compensation                    | 918                     | 7,008               
|Profit sharing (Note 25.iii)          | -                       | -                   
|Total compensation and profit sharing | 918                     | 7,008               



|                                      | Management compensation |                     
|------------------------------------- | ----------------------- | --------------------
|Year ended December 31, 2018          | Board of Directors      | Executive Management
|                                      |                         |                     
|Number of members                     | 5,5                     | 5,0                 
|Annual fixed compensation (in R$)     |                         |                     
|Salary/Fees                           | 1,264                   | 3,576               
|Direct and indirect benefits          | -                       | 151                 
|Other (INSS)                          | 253                     | 715                 
|Average monthly compensation (in R$)  | 126                     | 370                 
|Total compensation                    | 1,517                   | 4,442               
|Profit sharing (Note 25.iii)          | -                       | -                   
|Total compensation and profit sharing | 1,517                   | 4,442               



|                                      | Management compensation |                     
|------------------------------------- | ----------------------- | --------------------
|Year ended December 31, 2017          | Board of Directors      | Executive Management
|                                      |                         |                     
|Number of members                     | 7                       | 5                   
|Annual fixed compensation (in R$)     |                         |                     
|Salary / Fees                         | 1,693                   | 3,460               
|Direct and indirect benefits          | -                       | 203                 
|Others (INSS)                         | 339                     | 692                 
|Monthly compensation (in R$)          | 169                     | 363                 
|Total compensation                    | 2,032                   | 4,355               
|Profit sharing (Note 25 (iii))        | -                       | 1,625               
|Total compensation and profit sharing | 2,032                   | 5,980               



There is no amount related to
expenses with option grant to current management members of the Company for the years ended December 31, 2019 and 2018 (R$3,317
in 2017).



The maximum aggregate compensation
of the Company’s management members for the year 2019 was established at R$7,782 (R$23,599 in 2018), as fixed and variable
compensation, as approved at the Annual Shareholders’ Meeting held on April 30, 2019.



| | (ii) | Sales transactions
| | ---- | ------------------



In the years ended December
31, 2019 and December 31, 2018 no transaction of sale of units to current Management was carried out.



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| | 25. | Transactions with management and employees --Continued
| | --- | ------------------------------------------------------



| | (iii) | Profit sharing
| | ----- | --------------



The Company has a profit sharing
plan that entitles its employees and management members, as well as those of its subsidiaries, to participate in the distribution
of profits of the Company.



This plan is tied to the achievement
of specific targets, established, agreed-upon and approved by the Board of Directors at the beginning of each year.



In the year ended December 31,
2019, the Company recorded a reversal of expense for profit sharing amounting to R$5,000 in the consolidated statement (reversal
of R$14,750 in 2018) in the account “General and Administrative Expenses " (Note 23).



|                               |  |      |       |  |      | 
|------------------------------ |  | ---- | ----- |  | ---- | 
|                               |  | 2019 |       |  | 2018 | 
|                               |  |      |       |  |      | 
|Executive officers (Note 25.i) |  |      | —     |  |      | 
|Other employees                |  |      | 5,000 |  |      | 
|Reserve reversal               |  |      | —     |  |      | 
|Total profit sharing           |  |      | 5,000 |  |      | 



Profit sharing is calculated
and reserved based on the achievement of the Company’s targets for the year.



As shown in the previous tables
and paragraphs, the aggregate compensation of Management and Fiscal Council members of the Company is according to the limit approved
at the Annual Shareholders’ Meeting held on April 27, 2018.



| | 26. | Insurance
| | --- | ---------



Gafisa S.A. and its subsidiaries
maintain insurance policies against engineering risk, barter guarantee, completion bond, and civil liability related to unintentional
personal damages caused to third parties and material damages to tangible assets, as well as against fire hazards, lightning strikes,
electrical damages, natural disasters and gas explosion. The contracted coverage is considered sufficient by management to cover
possible risks involving its assets and/or responsibilities.



The liabilities covered by insurance
and the respective amounts as of December 31, 2019 are as follows:



|Insurance type                                 | Coverage 
|---------------------------------------------- | ---------
|Engineering risks and completion bond          | 943,646  
|Civil liability (Directors and Officers – D&O) | 161,228  
|                                               | 1,104,874



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 27. | Earnings (loss) per share
| | --- | -------------------------



In accordance with CPC 41, the
Company is required to report basic and diluted losses per share. The comparison data of basic and diluted earnings/losses per
share is based on the weighted average number of shares outstanding for the year, and all dilutive potential shares outstanding
for each reported year, respectively.



Diluted earnings per share is
computed similarly to basic earnings per share except that the outstanding shares are increased to include the number of additional
shares that would have been outstanding if the potential dilutive shares attributable to stock options and redeemable shares of
noncontrolling interest had been issued during the respective periods, using the weighted average stock price.



The following table shows the
calculation of basic and diluted earnings and losses per share. In view of the losses for the years ended December 31, 2019 and
2018, shares with dilutive potential are not considered, because the impact would be antidilutive.



|                                                                        |  |      |         |   |      |  |          |      | 
|----------------------------------------------------------------------- |  | ---- | ------- | - | ---- |  | -------- | ---- | 
|                                                                        |  | 2019 |         |   | 2018 |  |          | 2017 | 
|Basic numerator                                                         |  |      |         |   |      |  |          |      | 
|Undistributed loss from continued operations                            |  |      | (26,040 | ) |      |  | (419,526 | )    | 
|Undistributed profit (loss) from discontinued operations                |  |      | —       |   |      |  | —        |      | 
|Undistributed profit (loss), available for the holders of common shares |  |      | (26,040 | ) |      |  | (419,526 | )    | 
|                                                                        |  |      |         |   |      |  |          |      | 
|Basic denominator (in thousands of shares)                              |  |      |         |   |      |  |          |      | 
|Weighted average number of shares (Note 18.1)                           |  |      | 68,584  |   |      |  | 41,147   |      | 
|                                                                        |  |      |         |   |      |  |          |      | 
|Basic earnings (loss) per share in Reais                                |  |      | (0.380  | ) |      |  | (10.196  | )    | 
|From continued operations                                               |  |      | (0.380  | ) |      |  | (10.196  | )    | 
|From discontinued operations                                            |  |      |         |   |      |  |          |      | 
|Diluted numerator                                                       |  |      |         |   |      |  |          |      | 
|Undistributed loss from continued operations                            |  |      | (26,040 | ) |      |  | (419,526 | )    | 
|Undistributed profit (loss) from discontinued operations                |  |      | —       |   |      |  | —        |      | 
|Undistributed loss, available for the holders of common shares          |  |      | (26,040 | ) |      |  | (419,526 | )    | 
|                                                                        |  |      |         |   |      |  |          |      | 
|Diluted denominator (in thousands of shares)                            |  |      |         |   |      |  |          |      | 
|Weighted average number of shares (Note 18.1)                           |  |      | 68,584  |   |      |  | 41,147   |      | 
|Stock options                                                           |  |      | 836     |   |      |  | 572      |      | 
|Anti-dilution effect                                                    |  |      | (836    | ) |      |  | (572     | )    | 
|Diluted weighted average number of shares                               |  |      | 68,584  |   |      |  | 41,147   |      | 
|                                                                        |  |      |         |   |      |  |          |      | 
|                                                                        |  |      |         |   |      |  |          |      | 
|Diluted earnings (loss) per share in Reais                              |  |      | (0.380  | ) |      |  | (10.196  | )    | 
|From continued operations                                               |  |      | (0.380  | ) |      |  | (10.196  | )    | 
|From discontinued operations                                            |  |      | —       |   |      |  | —        |      | 



| | 28. | Segment information
| | --- | -------------------



With the completion of the discontinuation
of Tenda’s operations (Note 8.2), the Company operates only in one segment, according to the nature of its products.



The reports used for making
decisions are the consolidated financial statements, and no longer the analysis by operating segments. Therefore, in line with
CPC 22 – Operating Segments, the Company understands that there is no reportable segment to be disclosed in the years ended
December 31, 2019, 2018 and 2017.



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 29. | Real estate ventures under construction – information and commitments
| | --- | ---------------------------------------------------------------------



In compliance with Circular
Letter CVM/SNC/SEP 02/2018, related to the recognition of revenue from contracts for purchase and sale of real state units not
yet completed in Brazilian real estate development companies, the Company reports information on the ventures in construction as
of December 31, 2019:



|                                                                                  |  | Consolidated |          
|--------------------------------------------------------------------------------- |  | ------------ | ---------
|                                                                                  |  | 2019         |          
|                                                                                  |  |              |          
|Unrecognized sales revenue of units sold                                          |  |              | 439,514  
|Unrecognized estimated cost of units sold                                         |  |              | (244,442 
|Unrecognized estimated cost of units in inventory                                 |  |              | (179,102 
|                                                                                  |  |              |          
|(i) Unrecognized sales revenue of units sold                                      |  |              |          
|Ventures under construction:                                                      |  |              |          
|(a)	Contracted sales revenue                                                      |  |              | 1,368,112
|Recognized sales revenue:                                                         |  |              |          
|Recognized revenue                                                                |  |              | 973,277  
|Cancelled contracts – reversed revenue                                            |  |              | (44,679  
|(b)	Net recognized sales revenue                                                  |  |              | 928,598  
|Unrecognized sales revenue (a+b) (a)                                              |  |              | 439,514  
|                                                                                  |  |              |          
|(ii) Income from damages for cancelled contracts                                  |  |              | 1,933    
|                                                                                  |  |              |          
|(iii) Unrecognized sales revenue of contracts not eligible to revenue recognition |  |              | 31,855   
|(iv) Allowance for cancelled contracts (liabilities)                              |  |              |          
|Adjustments in recognized revenues                                                |  |              | 85,377   
|Adjustments in trade accounts receivable                                          |  |              | 42,926   
|Income from damages for cancelled contracts                                       |  |              | (16,981  
|Liabilities – return due to cancelled contracts                                   |  |              | 25,470   
|                                                                                  |  |              |          
|(v) Unrecognized estimated costs of units sold                                    |  |              |          
|Ventures under construction:                                                      |  |              |          
|(a)	Estimated cost of units                                                       |  |              | (805,216 
|Incurred cost of units:                                                           |  |              |          
|Construction cost                                                                 |  |              | (591,011 
|Cancelled contracts – construction costs                                          |  |              | 30,237   
|(b)	Net incurred cost                                                             |  |              | (560,774 
|Cost to be incurred of units sold (a+b) (b)                                       |  |              | (244,442 
|(iii) Unrecognized estimated cost of units in inventory                           |  |              |          
|Ventures under construction:                                                      |  |              |          
|Estimated cost of units                                                           |  |              | (535,082 
|Incurred cost of units (Note 6)                                                   |  |              | 355,980  
|Unrecognized estimated cost                                                       |  |              | (179,102 



| | (a) | The unappropriated sales revenue of units sold are measured by
the face value of contracts, plus the contract adjustments and deducted for cancellations, not considering the effects of the levied
taxes and adjustment to present value, and do not include ventures that are subject to restriction due to a suspensive clause (legal
period of 180 days in which the Company can cancel a development), and therefore is not appropriated to profit or loss.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | The estimated cost of units sold and in inventory to be incurred
do not include financial charges, which are appropriated to properties for sale and profit or loss (cost of real estate sold) in
proportion to the real estate units sold as they are incurred.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of December
31, 2019, the percentage of assets consolidated in the financial statements related to ventures included in the equity segregation
structure of the development stood at 29.0% (25.1% in 2018).



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 30. | Additional Information on the Statement of Cash Flows
| | --- | -----------------------------------------------------



| | (i) | Transactions that did not affect Cash and Cash Equivalents
| | --- | ----------------------------------------------------------



The Company and its subsidiaries
performed the following investing and financing activities that did not affect cash and cash equivalents, which were not included
in the statements of cash flows:



|                                        |  |      |         |   |      | 
|--------------------------------------- |  | ---- | ------- | - | ---- | 
|                                        |  | 2019 |         |   | 2018 | 
|                                        |  |      |         |   |      | 
|Capital contribution (reduction)        |  |      | 19,846  |   |      | 
|Capitalized financial charges (Note 12) |  |      | (30,358 | ) |      | 
|Physical barter – Land (Note 17)        |  |      | (29,871 | ) |      | 
|Divestment in Alphaville Urbanismo      |  |      | 78,008  |   |      | 
|                                        |  |      | 37,625  |   |      | 



| | (ii) | Reconciliation of the asset and liability changes with the cash flows from financing activities
| | ---- | -----------------------------------------------------------------------------------------------



|                                                  |  |  | Transactions affecting cash |   |  |  | Transactions not affecting cash |  
|------------------------------------------------- |  |  | --------------------------- | - |  |  | ------------------------------- | -
|Consolidated                                      |  |  | Opening
balance 2018        |   |  |  | Funding/ Receipt                |  
|                                                  |  |  |                             |   |  |  |                                 |  
|Loans, financing and debentures (Notes 12 and 13) |  |  | (889,412                    | ) |  |  | (42,978                         | )
|Loans (Note 21.1)                                 |  |  | 12,958                      |   |  |  | —                               |  
|Paid-in capital (Note 18.1)                       |  |  | (2,521,319                  | ) |  |  | (404,961                        | )
|Capital reserve (Note 18.1)                       |  |  | (250,599                    | ) |  |  | —                               |  
|                                                  |  |  | (3,648,372                  | ) |  |  | (447,939                        | )



| | 31. | Subsequent events
| | --- | -----------------



| | (i) | UPCON Merger
| | --- | ------------



According to Note 1, on December
16, 2019, the Company disclosed a Material Fact whereby it informed that it entered into a non-binding Letter of Intent with UPCON
Incorporadora S.A. (“UPCON”), concerning the acquisition by the Company of the totality of shares issued by UPCON.
On March 2, 2020, the Company informed that the Administrative Council for Economic Defense (CADE) approved, without restriction,
the merger of the totality of shares of UPCON into the Company. Once the required approval stages are completed, UPCON will become
a wholly-owned subsidiary of Gafisa.



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 31. | Subsequent events --Continued
| | --- | -----------------------------



| | (ii) | Coronavirus – COVID-19
| | ---- | ----------------------



Until the date of disclosure
of the Financial Statements, there was no impact from the outbreak of coronavirus on the Company’s operations. A Crisis Management
Committee has been created that holds periodically meetings and total availability for discussing and taking important disease
prevention measures.



Awareness campaigns to promote
actions that mitigate transmission (frequent hygiene, distancing, meeting through virtual platforms, exclusive service channel,
among others) have been created. We have preventatively determined that back-office personnel work remotely, providing all employees
with the required infrastructure they are able to work from home and interact with the internal team and external staff. We have
implemented a series of educative and preventative measures targeted at our construction site employees, reducing the staff considered
to be in the risk group. The sales operations have focused on digital interactions with prospective customers.



The Company will keep
following the implementation of the necessary actions with the Government Authorities, Ministry of Health, and trade associations.



Thus far, there is a high volatility
in the Company’s stock price traded on the stock exchange as a result of the global concern for this pandemic and its developments
and the Company has not noted a significant increase in customer default or reduction in sales volume. Moreover, the construction
of ventures has been according to the original schedule.



However, due to the Covid-19
pandemic, the Company has postponed the launches planned for the second quarter to the second half of this year.



Therefore, even considering
the scenario of uncertainty over the end of the pandemic for resuming activities and its negative impact on the country’s
economy, based on its best estimate, management has performed an anlysis and has concluded that there is no need to recognize additional
loss allowance, nor is any material adverse effect on its operations. The Company is going to keep monitoring the pandemic to continually
update its projections and analysis on any effect on its financial information.



The development and evolution of the COVID-19 in
Brazil and globally still has great uncertainty in its duration and severity, which may further amplify and delay the impact on
the recovery of the real estate industry. Given the uncertainty about the situation, the Company currently cannot estimate the
impact to the 2020 financial performance and cash flows and understands that at present, the projections used in the analysis of
realization of its assets shall not suffer significant changes in the face of this event and keeps the adopted assumptions.



| | (iii) | Renegotiation of liabilities
| | ----- | ----------------------------



On March 26, 2020, the Company
disclosed a Material Fact whereby it informed that it has completed the renegotiation of its financial liabilities with the financial
institution Banco do Brasil S.A. in the total amount of R$138,355. This transaction enables the Company to extend the final maturity
of such debts until June 2025 and reduce the finance cost. Also in the scope of the renegotiation, the Company started to have
the time required to sell the units in inventory tied to this transaction. The completion of this renegotiation strengthens the
Company’s capital structure and represents the building of closer credit relationships in the financial market.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 31. | Subsequent events --Continued
| | --- | -----------------------------



| | (iv) | Annual and Extraordinary Shareholders’ Meeting
| | ---- | ----------------------------------------------



On April 30, 2020, the Annual
and Extraordinary Shareholders’ Meeting was held, and the following resolutions were taken: (i) approval of the management
accounts, examine, discuss and vote the Financial Statements for the year ended December 31, 2019; (ii) deliberation about the
allocation of net income for the year; (iii) setting of the management’s maximum aggregate compensation for the year 2020;
and (iv) approval of the capital reduction, to absorb the retained loss of the Company.



Additionally, in relation to
the purchase and sale of UPCON Incorporadora S.A.’s shares, the following matters have been approved: (i) acquisition of
the totality of stocks issued by UPCON by Gafisa; (ii) increase in the Company’s capital by R$310,001; (iii) issue of two
series of debentures convertible into common shares to cover the transaction with UPCON, in the total amount of R$150,000; (iv)
change in the composition of Board of Directors, which will have seven to nine members; (v) election of members to the Board of
Directors; and (vi) plan for repurchasing the Company’s shares, within the limit of 10,327,558 shares to be acquired by the
Company.



| | (v) | Increase in capital and issue of convertible debentures – Beginning of the period for exercising preemptive rights
| | --- | ------------------------------------------------------------------------------------------------------------------



On May 11, 2020, the Company
has disclosed a Notice to Shareholders containing information related to the exercise of the preemptive rights and convertible
debentures, which will begin on May 15, 2020 and end on June 15, 2020.



In the scope of the capital
increase, 75,610,000 registered book-entry common shares, with no par value, at the unit price of R$4.10 will be issued.



The first debenture series comprises
667 units, at the unit price of R$50,000, falling due on July 15, 2021, and interest of 0.50% p.a. paid with the principal on maturity
date.



The second debenture series
comprises 333 units, at the unit price of R$100,000, falling due on February 28, 2021, and interest of 0.50% p.a. paid with the
principal on maturity date. Both series are adjusted by IGP-M.



The proceeds from the first
and second debenture series will be used in the payment for the purchase of the totality of shares issued by UPCON and acquisition
of the receivable that Gilberto Benevides is entitled from UPCON, in which he is a shareholder.



| | (vi) | Legal claims settlements
| | ---- | ------------------------



The Company has recorded in its Financial Statements the following legal claims settlements in accordance with CPC 24 - Subsequent
Event guidelines:



| | a. | On April 30, 2020, it was settled an agreement in the
amount of R$4,332 related to an attorney’s fee claim, to be paid by the transfer of ordinary shares
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | On June 12, 2020, it was settled an agreement in the
amount of R$8,000 related to debt’s liability of former Company’s shareholder, Cimob Companhia Imobiliaria (Note 16
(a) (i)).
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



These legal claims were settled in view of economic and time benefits in connection with Company’s business and operations
considerations.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




| | 32. | Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the years ended
December 31, 2019, 2018 and 2017
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(a)   Description
of the GAAP differences



The Company’s accounting policies and its consolidated
financial statements comply with and are prepared in accordance with Brazilian GAAP.



A summary of the Company’s principal accounting
policies under Brazilian GAAP that differ significantly from US GAAP is set forth below.



(i)    Revenue
recognition



Under both Brazilian GAAP and US GAAP, the Company
should apply the following steps for revenue recognition: 1) identify the contract with a customer; 2) identify the performance
obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations
in the contract; 5) recognize revenue when the Company satisfies a performance obligation.



Under Brazilian GAAP, real estate development sales
revenues, costs and related expenses are recognized based on the transfer of control, which is performed over time, according to
the satisfaction or not of the contractual performance obligations. Revenue is recognized using the percentage-of-completion method
for each project, this percentage being measured in view of the incurred cost in relation to the total estimated cost of the respective
project. Land is treated as a portion of budgeted construction costs and is appropriated proportionally to each real estate development.
Under the percentage-of-completion method of accounting, revenues for work completed are recognized prior to receipt of actual
cash proceeds or vice-versa. Revenues start to be recognized under the percentage-of-completion when the Company is no longer able
to cancel the launched project, after the sales period established by law.



Under USGAAP, the Company follows the guidance of
ASC 606-10-25-30 (ASU 2014-09 – Revenue from contracts with customers (Topic 606)) to recognize the sale of individual units
upon delivery of keys for each real estate unit, as an indicator of the transfer of the control, to depict the transfer of promised
real estate units to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those real estate units. Revenues start to be recognized when the Company satisfies a performance obligation at a point in
time by transferring the real estate units to customers, which occurs when the customer obtains control of it. The amount of recognized
revenue is the transaction price that is allocated to that performance obligation.



ASU 2014-09 is effective for annual reporting periods
beginning after December 15, 2017. As a transition method, the Company has recognized the cumulative effect of initially applying
this guidance as an adjustment to the opening balance of retained earnings as of January 01, 2017 to all contracts at the date
of initial adoption (Notes 3.1 and 32 (c)(i).





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| | 32. | Supplemental Information - Summary
                                         of Principal Differences between Brazilian GAAP and accounting principles generally accepted
                                         in the United States “US GAAP” for the years ended December 31, 2019, 2018
                                         and 2017--Continued
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(a) Description
of the GAAP differences--Continued



| | (i) | Revenue recognition--Continued
| | --- | ------------------------------



(a) Allowance
for credit losses



Under Brazilian GAAP, expected
losses are measured using one of the following bases: 12-month expected credit losses, and full lifetime expected credit losses,
and the Company carries out the measurement of the allowance regarding the expected credit losses on contracts sold, which is recorded
together with the recognition of the respective revenue.



Under USGAAP, ASU 2016-13: Financial Instruments—Credit
Losses (Topic 326) related to the allowance for credit losses is effective for fiscal years beginning after December 15, 2019.
Therefore, for USGAAP purposes, the Company has derecognized its allowance for expected credit losses.



| | (ii) | Net realizable value for properties for sale
| | ---- | --------------------------------------------



Under Brazilian GAAP, a new assessment is made of
net realizable value in each subsequent period. When the circumstances that previously caused properties for sale to be written
down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic
circumstances, the amount of write-down is reversed, so that the new carrying amount is the lower of the cost and the revised net
realizable value.



Under USGAAP, ASC 330-10-35-14, a reversal of a write-down
for an increase in market value is not permitted.



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| | 32. | Supplemental Information - Summary
                                         of Principal Differences between Brazilian GAAP and accounting principles generally accepted
                                         in the United States “US GAAP” for the years ended December 31, 2019, 2018
                                         and 2017--Continued
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(a)  Description
of the GAAP differences--Continued



| | (iii) | Classification of balance sheet line items
| | ----- | ------------------------------------------



Under Brazilian GAAP, the classification of certain
balance sheet items is presented differently from US GAAP. The Company has recast its consolidated balance sheet under Brazilian
GAAP to present a condensed consolidated balance sheet in accordance with US GAAP (Note 32(d)(i)). The reclassifications are summarized
as follows:



·Under
Brazilian GAAP, restricted cash is presented as short-term investment in the balance sheet (Note 4.2(d)). For US GAAP purposes,
restricted cash is presented separately.



·Under
Brazilian GAAP, the assets and liabilities included within a disposal group classified as held for sale, must be presented separately
in a single line only for the current year. For US GAAP purposes, according to ASU 2014-08, an entity is required to present, for
each comparative period, the assets and liabilities of a disposal group that includes an asset classified as held for sale separately
in the asset and liabilities sections.



·Under
Brazilian GAAP, when the Company is in breach of a covenant, the waiver must be in place before the balance sheet date in order
for the debt to be classified as a non-current liability. Under US GAAP even if the waiver is obtained after the balance sheet
date, but before the issuance of the financial statements, the debt will still be classified as a non-current liability.



| | (iv) | Classification of statement of income (operations)
line items
| | ---- | -------------------------------------------------------------



Under Brazilian GAAP, in addition to the issues noted
above, the classification of certain income and expense items is presented differently from US GAAP. The Company has recast its
statement of income (loss) prepared under the Brazilian GAAP to present a condensed consolidated statement of income (loss) in
accordance with US GAAP (Note 32(d)(ii)). The reclassifications are summarized as follows:



·Under
Brazilian GAAP accounts receivable present value adjustment and monetary variation are recorded in the operating revenue. For US
GAAP purpose the realization of accounts receivable present value adjustment and monetary variation are classified in the financial
income/expense.



·The
net income differences between Brazilian GAAP and US GAAP (Note 32(b)(i)) were incorporated in the consolidated statement of profit
or loss in accordance with US GAAP.



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| | 32. | Supplemental Information - Summary
                                         of Principal Differences between Brazilian GAAP and accounting principles generally accepted
                                         in the United States “US GAAP” for the years ended December 31, 2019, 2018
                                         and 2017--Continued
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(a)  Description
of the GAAP differences--Continued



| | (v) | Deferred taxes
| | --- | --------------



Deferred tax differences between Brazilian GAAP
and US GAAP arise related to the adjustments mentioned above.



Under Brazilian GAAP, deferred tax assets are recognized
to the extent that it is probable that taxable profit will be available against which the asset can be utilized.



Under US GAAP, deferred tax assets are recognized
in full. A valuation allowance reduces the deferred tax asset to the amount that is the more-likely-than-not to be realized.



Deferred tax assets are recognized to the extent supported
by reversing taxable temporary differences under both Brazilian GAAP and US GAAP for our most significant tax-paying components.
Furthermore, for US GAAP purposes, deferred income tax results are allocated between the pretax loss from operations and the gain
on discontinued operations. The differences in the amount of deferred tax asset considered realizable for the respective years
are an expense of R$12,102 in 2019, R$19,930 in 2018 and a reversal of R$ 12,519 in 2017. Additionally, there is no tax benefit
associated with share-based payments due to the valuation allowance position.



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| | 32. | Supplemental Information - Summary
                                         of Principal Differences between Brazilian GAAP and accounting principles generally accepted
                                         in the United States “US GAAP” for the years ended December 31, 2019, 2018
                                         and 2017- Continued
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(b)  Reconciliation
of significant differences between Brazilian GAAP and US GAAP



| | (i) | Net income (loss)
| | --- | -----------------



|                                                                                  |  | Note |    |         | 2019 |  |         | 2018 |  |  | 2017     |  
|--------------------------------------------------------------------------------- |  | ---- | -- | ------- | ---- |  | ------- | ---- |  |  | -------- | -
|                                                                                  |  |      |    |         |      |  |         |      |  |  |          |  
|Net income (loss) under Brazilian GAAP attributable to owners of Gafisa S.A.      |  |      |    |         |      |  | (26,040 | )    |  |  | (419,526 | )
|Revenue recognition - net operating revenue                                       |  |      | 32 | (a)(i)  |      |  | (13,536 | )    |  |  | (166,968 | )
|Revenue recognition - operating costs                                             |  |      | 32 | (a)(i)  |      |  | 7,551   |      |  |  | 135,937  |  
|Revenue recognition – allowance for expected credit losses                        |  |      | 32 | (a)(i)  |      |  | (719    | )    |  |  | (2,243   | )
|Equity pick-up                                                                    |  |      | 32 | (a)(i)  |      |  | (3,134  | )    |  |  | 1,637    |  
|Present value adjustment on revenue recognition adjustments above and other       |  |      |    |         |      |  | 2,796   |      |  |  | (48      | )
|Deferred tax on adjustments above, net of valuation allowance                     |  |      | 32 | (a)(v)  |      |  | 31      |      |  |  | (1,407   | )
|Reversal of write-down in net realizable value due to an increase in market value |  |      | 32 | (a)(ii) |      |  | (27,638 | )    |  |  | —        |  
|                                                                                  |  |      |    |         |      |  |         |      |  |  |          |  
|Net income (loss) attributable to shareholders of Gafisa under US GAAP            |  |      |    |         |      |  | 60,689  | )    |  |  | (452,618 | )
|                                                                                  |  |      |    |         |      |  |         |      |  |  |          |  
|Net income attributable to the non-controlling interests under US GAAP            |  |      |    |         |      |  | (361    | )    |  |  | (1,750   | )
|                                                                                  |  |      |    |         |      |  |         |      |  |  |          |  
|Net income (loss) under US GAAP                                                   |  |      |    |         |      |  | (61,050 | )    |  |  | (454,368 | )
|Weighted-average number of shares outstanding in the year (in thousands)          |  |      |    |         |      |  |         |      |  |  |          |  
|Common shares                                                                     |  |      |    |         |      |  | 68,584  |      |  |  | 41,147   |  
|Earnings (loss) per share attributable to shareholders of Gafisa                  |  |      |    |         |      |  |         |      |  |  |          |  
|Basic                                                                             |  |      | 32 | (d)(iv) |      |  | (0.8901 | )    |  |  | (11.0426 | )
|Diluted                                                                           |  |      | 32 | (d)(iv) |      |  | (0.8901 | )    |  |  | (11.0426 | )



| | (a) | Net income (loss) from continuing operations
| | --- | --------------------------------------------



|                                                                                  |  | Note |    |         | 2019 |  |         | 2018 |  |  | 2017     |  
|--------------------------------------------------------------------------------- |  | ---- | -- | ------- | ---- |  | ------- | ---- |  |  | -------- | -
|                                                                                  |  |      |    |         |      |  |         |      |  |  |          |  
|Net income (loss) under Brazilian GAAP from continuing operations.                |  |      |    |         |      |  | (26,401 | )    |  |  | (421,276 | )
|Revenue recognition - net operating revenue                                       |  |      | 32 | (a)(i)  |      |  | (13,536 | )    |  |  | (166,968 | )
|Revenue recognition - operating costs                                             |  |      | 32 | (a)(i)  |      |  | 7,551   |      |  |  | 135,937  |  
|Revenue recognition – allowance for expected credit losses                        |  |      | 32 | (a)(i)  |      |  | (719    | )    |  |  | (2,243   | )
|Equity pick-up                                                                    |  |      | 32 | (a)(i)  |      |  | (3,134  | )    |  |  | 1,637    |  
|Present value adjustment on revenue recognition adjustments above and other       |  |      |    |         |      |  | 2,796   |      |  |  | (48      | )
|Deferred tax on adjustments above, net of valuation allowance                     |  |      | 32 | (a)(v)  |      |  | 31      |      |  |  | (1,407   | )
|Reversal of write-down in net realizable value due to an increase in market value |  |      | 32 | (a)(ii) |      |  | (27,638 | )    |  |  | —        |  
|                                                                                  |  |      |    |         |      |  |         |      |  |  |          |  
|Net income (loss) under US GAAP from continuing operations                        |  |      |    |         |      |  | (61,050 | )    |  |  | (454,368 | )
|Weighted-average number of shares outstanding in the year (in thousands)          |  |      |    |         |      |  |         |      |  |  |          |  
|Common shares                                                                     |  |      |    |         |      |  | 68,584  |      |  |  | 41,147   |  
|Earnings (loss) per share from continuing operations                              |  |      |    |         |      |  |         |      |  |  |          |  
|Basic                                                                             |  |      | 32 | (d)(iv) |      |  | (0.8901 | )    |  |  | (11.0426 | )
|Diluted                                                                           |  |      | 32 | (d)(iv) |      |  | (0.8901 | )    |  |  | (11.0426 | )
|                                                                                  |  |      |    |         |      |  |         |      |  |  |          |  





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32. Supplemental Information
- Summary of Principal Differences between Brazilian GAAP and accounting principles generally accepted in the United States “US
GAAP” for the years ended December 31, 2019, 2018 and 2017--Continued



| | (b) | Reconciliation of significant differences between Brazilian GAAP and US GAAP--Continued
| | --- | ---------------------------------------------------------------------------------------



(i)    Net
income (loss)--Continued



(b)   Net
income (loss) from discontinued operations



|                                                                            |  | Note |           |  | 2019 |  |   | 2018 |  |  | 2017 | 
|--------------------------------------------------------------------------- |  | ---- | --------- |  | ---- |  | - | ---- |  |  | ---- | 
|                                                                            |  |      |           |  |      |  |   |      |  |  |      | 
|Net income (loss) under Brazilian GAAP from discontinued operations.        |  |      |           |  |      |  | — |      |  |  | —    | 
|Revenue recognition - net operating revenue                                 |  |      | 32(a)(i)  |  |      |  | — |      |  |  | —    | 
|Revenue recognition - operating costs                                       |  |      | 32(a)(i)  |  |      |  | — |      |  |  | —    | 
|Equity pick-up                                                              |  |      | 32(a)(i)  |  |      |  | — |      |  |  | —    | 
|Present value adjustment on revenue recognition adjustments above and other |  |      |           |  |      |  | — |      |  |  | —    | 
|Deferred tax on adjustments above, net of valuation allowance               |  |      | 32(a)(v)  |  |      |  | — |      |  |  | —    | 
|Impairment loss remeasurement                                               |  |      | 32(d)(iv) |  |      |  | — |      |  |  | —    | 
|Discontinued operation adjustments                                          |  |      | 32(b)(i)  |  |      |  | — |      |  |  | —    | 
|                                                                            |  |      |           |  |      |  |   |      |  |  |      | 
|Net income (loss) under US GAAP from discontinued operations                |  |      |           |  |      |  | — |      |  |  | —    | 
|Weighted-average number of shares outstanding in the year (in thousands)    |  |      |           |  |      |  |   |      |  |  |      | 
|Common shares                                                               |  |      |           |  |      |  | — |      |  |  | —    | 
|Earnings (loss) per share from discontinued operations                      |  |      |           |  |      |  |   |      |  |  |      | 
|Basic                                                                       |  |      | 32(d)(iv) |  |      |  | — |      |  |  | —    | 
|Diluted                                                                     |  |      | 32(d)(iv) |  |      |  | — |      |  |  | —    | 



(ii)   Equity



|                                                                                  |  | Note |           |  | 2019 |  |            | 2018 |  |  | 2017       |  
|--------------------------------------------------------------------------------- |  | ---- | --------- |  | ---- |  | ---------- | ---- |  |  | ---------- | -
|                                                                                  |  |      |           |  |      |  |            |      |  |  |            |  
|Equity under Brazilian GAAP                                                       |  |      |           |  |      |  | 881,410    |      |  |  | 491,317    |  
|Revenue recognition - net operating revenue                                       |  |      | 32(a)(i)  |  |      |  | (1,144,341 | )    |  |  | (1,097,861 | )
|Revenue recognition - operating costs                                             |  |      | 32(a)(i)  |  |      |  | 890,934    |      |  |  | 847,643    |  
|Revenue recognition – allowance for expected credit losses                        |  |      | 32(a)(i)  |  |      |  | 1,101      |      |  |  | 1,820      |  
|US GAAP adjustment equity accounted investees                                     |  |      | 32(a)(i)  |  |      |  | (11,147    | )    |  |  | (8,014     | )
|Reversal of write-down in net realizable value due to an increase in market value |  |      | 32(a)(ii) |  |      |  | (27,638    | )    |  |  | —          |  
|Deferred tax on adjustments above, net of valuation allowance                     |  |      | 32(a)(v)  |  |      |  | 3,669      |      |  |  | 3,639      |  
|                                                                                  |  |      |           |  |      |  |            |      |  |  |            |  
|Equity attributable to shareholders of Gafisa under US GAAP                       |  |      |           |  |      |  | 593,988    |      |  |  | 238,544    |  
|                                                                                  |  |      |           |  |      |  |            |      |  |  |            |  
|Equity attributable to non-controlling interests under US GAAP                    |  |      |           |  |      |  | 1,435      |      |  |  | 1,874      |  
|                                                                                  |  |      |           |  |      |  |            |      |  |  |            |  
|Equity under US GAAP                                                              |  |      |           |  |      |  | 595,423    |      |  |  | 240,418    |  





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




32. Supplemental Information
- Summary of Principal Differences between Brazilian GAAP and accounting principles generally accepted in the United States “US
GAAP” for the years ended December 31, 2019, 2018 and 2017-- Continued



| | (b) | Reconciliation of significant differences between Brazilian GAAP and US GAAP--Continued
| | --- | ---------------------------------------------------------------------------------------



(ii)  Equity--Continued



|Condensed changes in total equity under US GAAP |  | 2019 |         |   | 2018 |  |          | 2017 | 
|----------------------------------------------- |  | ---- | ------- | - | ---- |  | -------- | ---- | 
|                                                |  |      |         |   |      |  |          |      | 
|At beginning of the year                        |  |      | 240,418 |   |      |  | 495,385  |      | 
|Changes in equity, BRGAAP                       |  |      | 10,755  |   |      |  | (52,449  | )    | 
|Capital reduction (Tenda spin-off)              |  |      | —       |   |      |  | —        |      | 
|Stock options                                   |  |      | 417     |   |      |  | 1,304    |      | 
|Net profit (loss) attributable to Gafisa        |  |      | (60,689 | ) |      |  | (452,618 | )    | 
|Capital increase                                |  |      | 404,961 |   |      |  | 250,766  |      | 
|Non-controlling interests                       |  |      | (439    | ) |      |  | (1,973   | )    | 
|Other                                           |  |      | —       |   |      |  | 3        |      | 
|At end of the year                              |  |      | 595,423 |   |      |  | 240,418  |      | 



|Condensed equity under US GAAP                                                                   |  | 2019 |            |   | 2018 |  |            | 2017 | 
|------------------------------------------------------------------------------------------------ |  | ---- | ---------- | - | ---- |  | ---------- | ---- | 
|                                                                                                 |  |      |            |   |      |  |            |      | 
|Equity                                                                                           |  |      |            |   |      |  |            |      | 
|Common shares, comprising 117,018,984 shares outstanding  (2018 – 39,784,169; 2017 – 27,102,118) |  |      | 2,926,280  |   |      |  | 2,521,319  |      | 
|Treasury shares                                                                                  |  |      | (43,517    | ) |      |  | (58,950    | )    | 
|Accumulated reserve (losses)                                                                     |  |      | (2,288,775 | ) |      |  | (2,223,825 | )    | 
|                                                                                                 |  |      |            |   |      |  |            |      | 
|Total equity attributable to shareholders of Gafisa                                              |  |      | 593,988    |   |      |  | 238,544    |      | 
|                                                                                                 |  |      |            |   |      |  |            |      | 
|Equity attributable to non-controlling interests                                                 |  |      | 1,435      |   |      |  | 1,874      |      | 
|                                                                                                 |  |      |            |   |      |  |            |      | 
|Total equity                                                                                     |  |      | 595,423    |   |      |  | 240,418    |      | 



| | (c) | Recent US GAAP accounting pronouncements
| | --- | ----------------------------------------



(i)  Recently adopted US GAAP
accounting standards



The adoption of the following Updates is neither
applicable nor had a material impact on our consolidated financial statements, except for the Updates related to Topic 606.





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




32. Supplemental Information
- Summary of Principal Differences between Brazilian GAAP and accounting principles generally accepted in the United States “US
GAAP” for the years ended December 31, 2019, 2018 and 2017- Continued



| | (c) | Recent US GAAP accounting pronouncements--Continued
| | --- | ---------------------------------------------------



(i) Recently adopted US GAAP
accounting standards--Continued



The following Updates related to Topic 606 were adopted,
as it follows:



In May 2014, the FASB issued ASU 2014-09 - Revenue
from contracts with customers (Topic 606). The amendments in ASU 2014-09 create revenue from contracts with customers (Topic 606),
and supersede the revenue recognition requirements in revenue recognition (topic 605), including most industry-specific revenue
recognition guidance throughout the Industry Topics of the Codification. In addition, the amendments supersede the cost guidance
in revenue recognition—construction-type and production-type contracts (subtopic 605-35), and create new subtopic 340-40,
other assets and deferred costs—Contracts with Customers. In summary, the core principle of Topic 606 is that an entity recognizes
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2014-09 are effective for annual
reporting periods beginning after December 15, 2017.



In March 2016, the FASB issued ASU 2016-08 - Principal
versus Agent Considerations (Reporting Revenue Gross versus Net). The core principle of the guidance in Topic 606 is that an entity
should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should
apply the following steps: 1. Identify the contract(s) with a customer; 2. Identify the performance obligations in the contract;
3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; and 5. Recognize
revenue when (or as) the entity satisfies a performance obligation. The amendments in this Update do not change the core principle
of the guidance. The amendments clarify the implementation guidance on principal versus agent considerations. For public business
entities, the amendments in this Update affect the guidance in Accounting Standards Update 2014-09, Revenue from Contracts with
Customers (Topic 606), which is not yet effective. The effective date and transition requirements for the amendments in this Update
are the same as the effective date and transition requirements of Update 2014-09.



In April 2016, the FASB issued ASU 2016-10: Revenue
from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The core principle of the guidance
in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The
amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update
clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance,
while retaining the related principles for those areas. The effective date and transition requirements for the amendments in this
Update are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by Update 2014-09).





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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




32. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the years ended
December 31, 2019, 2018 and 2017- Continued



| | (c) | Recent US GAAP accounting pronouncements--Continued
| | --- | ---------------------------------------------------



(i) Recently adopted US GAAP
accounting standards--Continued



In May 2016, the FASB issued ASU 2016-12: Revenue
from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The core principle of the guidance
in Topic 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The
amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update
affect only some of the narrow aspects of Topic 606.



The effective date and transition requirements for
the amendments in this Update are the same as the effective date and transition requirements for Topic 606 (and any other Topic
amended by Update 2014-09).



In December 2016, the FASB issued ASU 2016-20: Technical
Corrections and Improvements (Topic 606): Revenue from Contracts with Customers. The amendments in this Update include items brought
to the Board’s attention through a variety of sources, including: the Codification’s online feedback mechanism; submissions
to the Transition Resource Group for Revenue Recognition (TRG); and stakeholders’ technical inquiries. The amendments in
this Update affect narrow aspects of the guidance issued in Update 2014-09. The effective date and transition requirements for
the amendments are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update
2014-09).



In September 2017, the FASB issued ASU 2017-13: Revenue
Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments
to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements
and Observer Comments (SEC Update). : This Update adds, amends, and supersedes SEC paragraphs of the ASC related to the adoption
and transition provisions of ASU No. 2014-09, Revenue from Contracts with Customers and ASU 2016-02, Leases for
public business entities. It is effective upon issuance.



Based on the assessments undertaken, the adoption
of the requirements above, has changed the revenue recognition, from over the time (PoC method) to a point in time, upon delivery
of keys for each real estate unit. ASUs Topic 606 are effective for annual reporting periods beginning after December 15, 2017.
As a transition method, the Company applied the full retrospective method and has recognized the cumulative effect of initially
applying this guidance as an adjustment to the opening balance of retained earnings as of January 01, 2016 to all contracts at
the date of initial application.





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32. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the years ended
December 31, 2019, 2018 and 2017- Continued



| | (c) | Recent US GAAP accounting pronouncements--Continued
| | --- | ---------------------------------------------------



(i) Recently adopted US GAAP
accounting standards--Continued



In June 2016, the FASB issued ASU 2016-13: Financial
Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this Update
require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected
to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial
asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. In addition, available-for-sale
accounting recognizes that value may be realized either through collection of contractual cash flows or through sale of the security.
Therefore, the amendments limit the amount of the allowance for credit losses to the amount by which fair value is below amortized
cost because the classification as available for sale is premised on an investment strategy that recognizes that the investment
could be sold at fair value, if cash collection would result in the realization of an amount less than fair value. The amendments
in this Update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal
years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those
fiscal years.



In February 2017, the FASB issued ASU 2017-06: Defined
Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965).
The amendments in this Update require all plans to disclose (1) their master trust’s other asset and liability balances and
(2) the dollar amount of the plan’s interest in each of those balances. The amendments will require the health and welfare
benefit plan to disclose the name of the defined benefit pension plan in which those investment disclosures are provided, so that
participants can easily access those statements for information about the 401(h) account assets, if needed. The amendments in this
Update are effective for fiscal years beginning after December 15, 2018. Early adoption is permitted.





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32. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the years ended
December 31, 2019, 2018 and 2017- Continued



| | (c) | Recent US GAAP accounting pronouncements--Continued
| | --- | ---------------------------------------------------



(i) Recently adopted US GAAP
accounting standards--Continued



In March 2017, the FASB issued ASU 2017-08: Receivables—Nonrefundable
Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in this Update
shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the
premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a
discount; the discount continues to be amortized to maturity. The amendments in this Update are effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted.



In May 2017, the FASB issued ASU 2017-11: Earnings
Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting
for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable
Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.
The amendments in this Update change the classification of certain equity-linked financial instruments (or embedded features) with
down round features. The amendments also clarify existing disclosure requirements for equity-classified instruments. For freestanding
equity-classified financial instruments, the amendments require entities that present earnings per share in accordance with FASB
ASC 260, Earnings Per Share, to recognize the effect of the down round feature when it is triggered. That effect is treated as
a dividend and as a reduction of income available to common shareholders in basic earnings per share. Convertible instruments with
embedded conversion options that have down round features would be subject to the specialized guidance for contingent beneficial
conversion features (in FASB ASC 470), including related earnings per share guidance (in FASB ASC 260). The amendments in Part
II of this Update recharacterize the indefinite deferral of certain provisions of FASB ASC 480, Distinguishing Liabilities from
Equity, that now are presented as pending content in the Codification, to a scope exception. For public business entities, the
amendments in Part I of this Update are



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32. Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the years ended
December 31, 2019, 2018 and 2017- Continued



| | (c) | Recent US GAAP accounting pronouncements--Continued
| | --- | ---------------------------------------------------



(i) Recently adopted US GAAP
accounting standards--Continued



effective for fiscal years beginning after December
15, 2018. Early adoption is permitted. The amendments in Part II of this Update do not require any transition guidance because
those amendments do not have an accounting effect.



In August 2017, the FASB issued ASU 2017-12: Derivatives
and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This Update improves the financial reporting
of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial
statements. In addition to that main objective, the amendments in this Update make certain targeted improvements to simplify the
application of the hedge accounting guidance in current GAAP. For public business entities, the amendments in this Update are effective
for fiscal years beginning after December 15, 2018. Early application is permitted.



In February 2018, the FASB issued ASU 2018-02: Income
Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive
Income. The amendments in this Update require an entity to disclose a description of its accounting policy for releasing income
tax effects from accumulated other comprehensive income. The amendments in this Update are effective for fiscal years beginning
after December 15, 2018. Early application is permitted.



In February 2018, the FASB issued ASU 2018-03, Technical
Corrections and Improvements to Financial Instruments – Overall (Subtopic 825): Recognition and Measurement of Financial
Assets and Financial Liabilities. The amendments in this Update clarify certain aspects of the guidance issued in Update 2016-01.
The amendments in this Update are effective for fiscal years beginning after December 15, 2017.



In June 2018, the FASB issued ASU 2018-07: Compensation—Stock
Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this update expand the
scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments
in this Update are effective for fiscal years beginning after December 15, 2018. Early application is permitted.



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32. Supplemental Information
- Summary of Principal Differences between Brazilian GAAP and accounting principles generally accepted in the United States “US
GAAP” for the years ended December 31, 2019, 2018 and 2017- Continued



| | (c) | Recent US GAAP accounting pronouncements--Continued
| | --- | ---------------------------------------------------



(ii) Recently issued US GAAP accounting standards



In January 2017, the FASB issued ASU 2017-04: Intangibles—Goodwill
and Other (Topic 350). Under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment
test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge
for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should
not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects
from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.
The amendments in this Update are effective for the Company’s annual or any interim goodwill impairment tests in fiscal years
beginning after December 15, 2019.



In August 2018, the FASB issued ASU 2018-13: Fair
Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The
amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based
on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this Update are
effective for fiscal years beginning after December 15, 2019. Early application is permitted.



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32. Supplemental Information
- Summary of Principal Differences between Brazilian GAAP and accounting principles generally accepted in the United States “US
GAAP” for the years ended December 31, 2019, 2018 and 2017- Continued



| | (c) | US GAAP condensed consolidated financial information
| | --- | ----------------------------------------------------



Based on the reconciling items and discussion above,
the Gafisa S.A. consolidated balance sheets, statements of income (loss), and statement of changes in shareholders’ equity
(see b(ii)) under US GAAP have been recast in condensed format as follows:



(i) Condensed consolidated balance sheets
under US GAAP



|                                  |  | 2019 |           |  | 2018 |  |           | 2017 | 
|--------------------------------- |  | ---- | --------- |  | ---- |  | --------- | ---- | 
|Assets                            |  |      |           |  |      |  |           |      | 
|Current assets                    |  |      |           |  |      |  |           |      | 
|Cash and cash equivalents         |  |      | 12,435    |  |      |  | 32,304    |      | 
|Short-term investments            |  |      | 368,335   |  |      |  | 97,895    |      | 
|Restricted short-term investments |  |      | 33,560    |  |      |  | 6,961     |      | 
|Trade accounts receivable, net    |  |      | 53,558    |  |      |  | 83,433    |      | 
|Properties for sale               |  |      | 1,658,394 |  |      |  | 1,790,103 |      | 
|Prepaid expenses                  |  |      | 1,860     |  |      |  | 2,668     |      | 
|Other                             |  |      | 165,116   |  |      |  | 198,284   |      | 
|                                  |  |      | 2,293,258 |  |      |  | 2,211,648 |      | 
|Non-current assets                |  |      |           |  |      |  |           |      | 
|Investments in associates         |  |      | 115,216   |  |      |  | 308,833   |      | 
|Property and equipment, net       |  |      | 14,159    |  |      |  | 20,073    |      | 
|Intangibles assets                |  |      | 7,084     |  |      |  | 11,770    |      | 
|Trade accounts receivable, net    |  |      | 12,472    |  |      |  | 32,301    |      | 
|Properties for sale               |  |      | 279,207   |  |      |  | 198,941   |      | 
|Other                             |  |      | 200,331   |  |      |  | 123,602   |      | 
|                                  |  |      | 628,469   |  |      |  | 695,520   |      | 
|                                  |  |      |           |  |      |  |           |      | 
|Total assets                      |  |      | 2,921,727 |  |      |  | 2,907,168 |      | 



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| | 32. | Supplemental Information - Summary of Principal Differences
between Brazilian GAAP and accounting principles generally accepted in the United States “US GAAP” for the years ended
December 31, 2019, 2018 and 2017- Continued
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | US GAAP condensed consolidated financial information--Continued
| | --- | ---------------------------------------------------------------



(i) Condensed consolidated balance sheets under
US GAAP--Continued



|                                                     |  | 2019 |           |  | 2018 |  |           | 2017 | 
|---------------------------------------------------- |  | ---- | --------- |  | ---- |  | --------- | ---- | 
|Liabilities                                          |  |      |           |  |      |  |           |      | 
|Current liabilities                                  |  |      |           |  |      |  |           |      | 
|Loans and financing                                  |  |      | 426,124   |  |      |  | 285,612   |      | 
|Debentures                                           |  |      | 158,179   |  |      |  | 62,783    |      | 
|Payables for purchase of properties                  |  |      | 115,156   |  |      |  | 101,285   |      | 
|Payables for goods and services suppliers            |  |      | 95,450    |  |      |  | 119,847   |      | 
|Taxes and labor contributions                        |  |      | 48,385    |  |      |  | 31,566    |      | 
|Advances from customers                              |  |      | 696,944   |  |      |  | 680,398   |      | 
|Obligations assumed on the assignment of receivables |  |      | 20,526    |  |      |  | 25,046    |      | 
|Other                                                |  |      | 361,197   |  |      |  | 366,140   |      | 
|                                                     |  |      | 1,921,961 |  |      |  | 1,672,677 |      | 
|Non-current liabilities                              |  |      |           |  |      |  |           |      | 
|Loans and financing                                  |  |      | 107,029   |  |      |  | 338,135   |      | 
|Debentures                                           |  |      | 39,346    |  |      |  | 202,883   |      | 
|Deferred tax liabilities and social contribution     |  |      | 12,115    |  |      |  | 49,372    |      | 
|Payables for purchase of properties                  |  |      | 93,075    |  |      |  | 196,076   |      | 
|Obligations assumed on the assignment of receivables |  |      | 19,835    |  |      |  | 32,140    |      | 
|Provisions for legal claims                          |  |      | 123,878   |  |      |  | 155,608   |      | 
|Other                                                |  |      | 9,065     |  |      |  | 19,859    |      | 
|                                                     |  |      | 404,343   |  |      |  | 994,073   |      | 
|                                                     |  |      |           |  |      |  |           |      | 
|Equity attributable to shareholders of Gafisa        |  |      | 593,988   |  |      |  | 238,544   |      | 
|Equity attributable to non-controlling interest      |  |      | 1,435     |  |      |  | 1,874     |      | 
|                                                     |  |      |           |  |      |  |           |      | 
|Total equity                                         |  |      | 595,423   |  |      |  | 240,418   |      | 
|                                                     |  |      |           |  |      |  |           |      | 
|Total liabilities and equity                         |  |      | 2,921,727 |  |      |  | 2,907,168 |      | 



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32. Supplemental Information
- Summary of Principal Differences between Brazilian GAAP and accounting principles generally accepted in the United States “US
GAAP” for the years ended December 31, 2019, 2018 and 2017- Continued



| | (d) | US GAAP condensed consolidated financial information--Continued
| | --- | ---------------------------------------------------------------



(ii)   Condensed
consolidated statements of operations under US GAAP



|                                                                                          |  | 2019 |          |   | 2018 |  |          | 2017 | 
|----------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- |  | -------- | ---- | 
|Gross operating revenue                                                                   |  |      |          |   |      |  |          |      | 
|Real estate development and sales of properties                                           |  |      | 427,383  |   |      |  | 897,846  |      | 
|Taxes on services and revenues                                                            |  |      | (41,174  | ) |      |  | (79,782  | )    | 
|                                                                                          |  |      |          |   |      |  |          |      | 
|Net operating revenue                                                                     |  |      | 386,209  |   |      |  | 818,064  |      | 
|Operating costs                                                                           |  |      | (302,772 | ) |      |  | (736,614 | )    | 
|                                                                                          |  |      |          |   |      |  |          |      | 
|Gross (loss) profit                                                                       |  |      | 83,437   |   |      |  | 81,450   |      | 
|                                                                                          |  |      |          |   |      |  |          |      | 
|Operating income (expenses)                                                               |  |      |          |   |      |  |          |      | 
|Selling general and administrative expenses                                               |  |      | (69,022  | ) |      |  | (141,520 | )    | 
|Other                                                                                     |  |      | (45,805  | ) |      |  | (320,226 | )    | 
|Income (loss) before financial income and expenses and income tax and social contribution |  |      | (31,390  | ) |      |  | (380,296 | )    | 
|                                                                                          |  |      |          |   |      |  |          |      | 
|Financial income                                                                          |  |      | 16,682   |   |      |  | 19,553   |      | 
|Financial expenses                                                                        |  |      | (73,510  | ) |      |  | (100,121 | )    | 
|Income (loss) before income tax and social contribution                                   |  |      | (88,218  | ) |      |  | (460,864 | )    | 
|                                                                                          |  |      |          |   |      |  |          |      | 
|Current tax, including social contribution                                                |  |      | 37,259   |   |      |  | (3,349   | )    | 
|Deferred tax, including social contribution                                               |  |      | (1,954   | ) |      |  | 23,692   |      | 
|Total income tax and social contribution                                                  |  |      | 35,305   |   |      |  | 20,343   |      | 
|                                                                                          |  |      |          |   |      |  |          |      | 
|Income (loss) before equity in results and                                                |  |      |          |   |      |  |          |      | 
|non-controlling interests                                                                 |  |      | (52,913  | ) |      |  | (440,521 | )    | 
|Income from equity method investments                                                     |  |      | (8,137   | ) |      |  | (13,847  | )    | 
|                                                                                          |  |      |          |   |      |  |          |      | 
|Net loss for the year for continuing operations                                           |  |      | (61,050  | ) |      |  | (454,368 | )    | 
|                                                                                          |  |      |          |   |      |  |          |      | 
|Net income (loss) for the year for discontinued operations                                |  |      | —        |   |      |  | —        |      | 
|                                                                                          |  |      |          |   |      |  |          |      | 
|Net loss for the year                                                                     |  |      | (61,050  | ) |      |  | (454,368 | )    | 
|                                                                                          |  |      |          |   |      |  |          |      | 
|Net income (loss) attributable to the non-controlling interests                           |  |      | (361     | ) |      |  | (1,750   | )    | 
|Net loss attributable to shareholders of Gafisa                                           |  |      | (60,689  | ) |      |  | (452,618 | )    | 



(iii)   Condensed
consolidated statements of comprehensive income (loss)



|                                       |  | 2019 |         |   | 2018 |  |          | 2017 | 
|-------------------------------------- |  | ---- | ------- | - | ---- |  | -------- | ---- | 
|                                       |  |      |         |   |      |  |          |      | 
|Net loss for the year                  |  |      | (61,050 | ) |      |  | (454,368 | )    | 
|                                       |  |      |         |   |      |  |          |      | 
|Total comprehensive loss, net of taxes |  |      | (61,050 | ) |      |  | (454,368 | )    | 
|                                       |  |      |         |   |      |  |          |      | 
|Attributable to:                       |  |      |         |   |      |  |          |      | 
|Non-controlling interests              |  |      | (361    | ) |      |  | (1,750   | )    | 
|Shareholders of Gafisa                 |  |      | (60,689 | ) |      |  | (452,618 | )    | 





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32. Supplemental Information
- Summary of Principal Differences between Brazilian GAAP and accounting principles generally accepted in the United States “US
GAAP” for the years ended December 31, 2019, 2018 and 2017- Continued



| | (d) | US GAAP condensed consolidated financial information--Continued
| | --- | ---------------------------------------------------------------



| | (iv) | Disposal group held for sale
| | ---- | ----------------------------



As explained in Note 8.2, the results of operations
of Tenda have been presented as discontinued operations in the Company’s 2017 consolidated statements of operations.



The assets and liabilities of the group of assets
held for sale are presented separately in the consolidated financial statements. The net income (loss) of discontinued operations
is presented as a single amount in the statement of operations, contemplating the total after-tax profit or loss of such operations
less any impairment-related loss, as demonstrated below:



|                                                               |  | 2017 |         
|-------------------------------------------------------------- |  | ---- | --------
|                                                               |  |      |         
|Impairment loss (i)                                            |  | —    |         
|Disposal group held for sale (ii)                              |  | —    |         
|Total disposal group held for sale                             |  | —    |         
|                                                               |  |      |         
|Liabilities directly associated with assets held for sale (ii) |  | —    |         
|                                                               |  |      |         
|Reversal of impairment loss (i)                                |  |      | 215,440 
|Portion related to payable for sale of shares (ii)             |  |      | (107,720
|Impairment loss                                                |  |      | (47,666 
|Tenda’s net income for the period ended May 04, 2017 (iii)     |  |      | 47,666  
|Transaction costs                                              |  |      | (9,545  
|Deferred tax on adjustments above, net of valuation allowance  |  |      | (33,379 
|Net income (loss) of discontinued operations                   |  |      | 64,796  



(i) The measurement of non-current asset held for sale
at the lower of its carrying value and the fair value less cost to sell. For the period ended May 04, 2017, the fair value of discontinued
operations was adjusted, considering the weighted average price per share for exercising preemptive rights at R$12.12 (R$8.13 per
share as of December 31, 2017).



(ii) Amount of R$107,720 related to the obligation
to sell 50% of Construtora Tenda S.A.’s shares for the price of R$8.13 per share, settled on May 04, 2017, reflected in the
profit or loss of discontinued operation, in order to reflect the difference between the fair value of the group of assets held
for sale and the effective selling price.



(iii) The amounts of the disposal group held for sale,
liabilities directly associated with assets held for sale, and profit or loss of discontinued operations, net of the eliminations
related to intercompany transactions.





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32. Supplemental Information
- Summary of Principal Differences between Brazilian GAAP and accounting principles generally accepted in the United States “US
GAAP” for the years ended December 31, 2019, 2018 and 2017- Continued



| | (d) | US GAAP condensed consolidated financial information--Continued
| | --- | ---------------------------------------------------------------



| | (iv) | Disposal group held for sale--Continued
| | ---- | ---------------------------------------



The main lines of the statement of operations of
the subsidiary Tenda are as follows:



|Statement of operations               |  | Period ended May 04, 2017 |         
|------------------------------------- |  | ------------------------- | --------
|                                      |  |                           |         
|Net operating revenue                 |  |                           | 496,004 
|Operating costs                       |  |                           | (329,511
|Operating expenses, net               |  |                           | (105,652
|Depreciation and amortization         |  |                           | (4,381  
|Financial income (expenses)           |  |                           | (4,736  
|Income tax and social contribution    |  |                           | (4,954  
|Income from equity method investments |  |                           | 237     
|Non-controlling interests             |  |                           | (659    
|Net income (loss) for the year        |  |                           | 47,666  



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Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




32. Supplemental Information
- Summary of Principal Differences between Brazilian GAAP and accounting principles generally accepted in the United States “US
GAAP” for the years ended December 31, 2019, 2018 and 2017- Continued



| | (d) | US GAAP condensed consolidated financial information--Continued
| | --- | ---------------------------------------------------------------



(v)   Earnings
(loss) per share



Under US GAAP, the presentation
of earnings (loss) per share is required for public companies, including earnings (loss) per share from continuing operations and
net income (loss) per share on the face of the statement of income (loss), and the per share effect of changes in accounting principles,
discontinued operations and extraordinary items either on the face of the income statement or in a note. A dual presentation is
required: basic and diluted. Computations of basic and diluted earnings per share data should be based on the weighted average
number of shares outstanding during the period and all dilutive potential shares outstanding during each period presented, respectively.



The Company has issued employee stock options (Note
18.3), the dilutive effects of which are reflected in diluted earnings per share by application of the “treasury stock method”.
Under the treasury stock method, earnings per share are calculated as if options were exercised at the beginning of the period,
or at time of issuance, if later, and as if the funds received were used to purchase the Company’s own stock. When the stock
options’ exercise price is greater than the average market price of shares, diluted earnings per share are not affected by
the stock options. Under US GAAP and Brazilian GAAP, potentially dilutive securities are not considered in periods where there
is a loss as the impact would be anti-dilutive. For the years ended December 31, 2017, December 31, 2016 and December 31, 2015
potentially dilutive stock options were not considered.



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32. Supplemental Information
- Summary of Principal Differences between Brazilian GAAP and accounting principles generally accepted in the United States “US
GAAP” for the years ended December 31, 2019, 2018 and 2017- Continued



| | (d) | US GAAP condensed consolidated financial information--Continued
| | --- | ---------------------------------------------------------------



(v)    Earnings
(loss) per share--Continued



The table below presents the determination of net
income available (loss) allocated to common shareholders and weighted average common shares outstanding used to calculate basic
and diluted earnings (loss) per share.



|                                                                                  |  | 2019 |         |   | 2018 |  |          | 2017 | 
|--------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- |  | -------- | ---- | 
|                                                                                  |  |      |         |   |      |  |          |      | 
|Basic numerator                                                                   |  |      |         |   |      |  |          |      | 
|Declared dividends                                                                |  |      | —       |   |      |  | —        |      | 
|U.S. GAAP undistributed profit (loss)                                             |  |      | (60,689 | ) |      |  | (452,618 | )    | 
|Allocated U.S. GAAP undistributed profit (loss) available for Common shareholders |  |      | (60,689 | ) |      |  | (452,618 | )    | 
|                                                                                  |  |      |         |   |      |  |          |      | 
|                                                                                  |  |      |         |   |      |  |          |      | 
|Basic denominator (in thousands of shares)                                        |  |      |         |   |      |  |          |      | 
|Weighted-average number of shares                                                 |  |      | 68,584  |   |      |  | 41,147   |      | 
|Basic earnings (loss) per share – U.S. GAAP - R$                                  |  |      | (0.8849 | ) |      |  | (11.0000 | )    | 



|                                                                                  |  | 2019 |         |   | 2018 |  |          | 2017 | 
|--------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- |  | -------- | ---- | 
|                                                                                  |  |      |         |   |      |  |          |      | 
|Diluted numerator                                                                 |  |      |         |   |      |  |          |      | 
|Dividends proposed                                                                |  |      | —       |   |      |  | —        |      | 
|U.S. GAAP undistributed profit (loss)                                             |  |      | (60,689 | ) |      |  | (452,618 | )    | 
|                                                                                  |  |      |         |   |      |  |          |      | 
|Allocated U.S. GAAP undistributed profit (loss) available for Common shareholders |  |      | (60,689 | ) |      |  | (452,618 | )    | 
|                                                                                  |  |      |         |   |      |  |          |      | 
|Diluted denominator (in thousands of shares)                                      |  |      |         |   |      |  |          |      | 
|Weighted-average number of shares                                                 |  |      | 68,584  |   |      |  | 41,147   |      | 
|Stock options                                                                     |  |      | 836     |   |      |  | 572      |      | 
|Antidilutive effect                                                               |  |      | (836    | ) |      |  | (572     | )    | 
|                                                                                  |  |      |         |   |      |  |          |      | 
|Diluted weighted-average number of shares                                         |  |      | 68,584  |   |      |  | 41,147   |      | 
|                                                                                  |  |      |         |   |      |  |          |      | 
|Diluted earnings (loss) per share – U.S. GAAP - R$                                |  |      | (0.8849 | ) |      |  | (11.0000 | )    | 



F-99


Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




32. Supplemental Information
- Summary of Principal Differences between Brazilian GAAP and accounting principles generally accepted in the United States “US
GAAP” for the years ended December 31, 2019, 2018 and 2017- Continued



| | (d) | US GAAP condensed consolidated financial information--Continued
| | --- | ---------------------------------------------------------------



(vi)   Additional
information – income taxes



Change in the valuation allowance for net operating
losses and temporary differences was as follows:



|                               |  | 2019 |          |   | 2018 |  |          | 2017 | 
|------------------------------ |  | ---- | -------- | - | ---- |  | -------- | ---- | 
|                               |  |      |          |   |      |  |          |      | 
|Opening balance at January 1   |  |      | (758,723 | ) |      |  | (660,645 | )    | 
|Change in valuation allowance  |  |      | (51,417  | ) |      |  | (98,078  | )    | 
|Closing balance at December 31 |  |      | (810,140 | ) |      |  | (758,723 | )    | 



The Company reduces its deferred tax asset with a
valuation allowance such that the amount of the net deferred tax asset is the amount that is more likely than not to be realized.
During the year 2019, movements in the valuation allowance amounted to a net increase of R$51,417 and there was no utilization
of operating loss carryforwards.



During the year 2018, movements in the valuation allowance
amounted to a net increase of R$98,078 and there was no utilization of operating loss carryforwards.



During the year 2017, movements in the valuation allowance
amounted to a net increase of R$143,232 and there was no utilization of operating loss carryforwards.



The Company records the financial statement effects
of an income tax position when it is more likely than not, based on the technical merits, that it will be sustained upon examination.
A tax position that meets the more-likely-than-not recognition threshold is measured as the largest amount of tax benefit that
is greater than 50 percent likely of being realized upon settlement with a taxing authority.



As of December 31, 2019, 2018 and 2017, the Company
has no amount recorded for any uncertainty in income taxes.





F-100


Table of Contents  Gafisa S.A.  Notes to the consolidated financiaol statements December 31, 2019 (Amounts in thousands of Brazilian Reais, except as otherwise stated)




32. Supplemental Information
- Summary of Principal Differences between Brazilian GAAP and accounting principles generally accepted in the United States “US
GAAP” for the years ended December 31, 2019, 2018 and 2017- Continued



| | (d) | US GAAP condensed consolidated financial information--Continued
| | --- | ---------------------------------------------------------------



(vi)   Additional
information – income taxes--Continued



Gafisa S.A. and its subsidiaries file income tax returns
in Brazil. Brazilian income tax returns are subject to inspections by tax authorities for the period beginning in 2015 and forward,
i.e., within 5 years after the filing.



(vii)  Statement
of comprehensive income (loss)



Comprehensive income (loss) is comprised of net income
(loss) and other comprehensive income (loss) that include charges or credits directly to equity which are not the result of transactions
with owners.



(viii) Statement of cash
flows



For each period for which a statement of profit or
loss is presented and required to be reconciled to US GAAP, SEC rules require that the Company provide either a statement of cash
flows prepared in accordance with US GAAP or IFRS; or furnish in a note to the financial statements a qualified description of
the material differences between cash or funds flows reported in the primary financial statements and cash flows that would be
reported in a statement of cash flows, prepared in accordance with US GAAP.



|Statement of Cash flow |  | 2019 |          |   | 2018 |  |         | 2017 | 
|---------------------- |  | ---- | -------- | - | ---- |  | ------- | ---- | 
|                       |  |      |          |   |      |  |         |      | 
|Operating activities   |  |      | 44,019   |   |      |  | 31,450  |      | 
|Investing activities   |  |      | (300,620 | ) |      |  | (3,061  | )    | 
|Financing activities   |  |      | 236,732  |   |      |  | (24,612 | )    | 
|                       |  |      |          |   |      |  |         |      | 

The Company’s primary differences in net income
(loss) between Brazilian GAAP and net income (loss) for US GAAP are explained in items 32(a) (ii) to (vi) above. The statement
of cash flows for Brazilian GAAP was prepared based on CPC 3(R2) - Statement of Cash Flows.



(ix) Statement of value added



The statement of value added for new Brazilian GAAP
was prepared based on CPC 09 - “Demonstração do Valor Adicionado.” For US GAAP, this statement is not
required.



***







F-101