For decades, a misery belt has surrounded expanding Latin American cities as people from rural areas flocked to urban centers.

Those searching for opportunities to rise out of poverty gravitated toward Latin American megacities — Mexico City; São Paulo and Rio de Janeiro in Brazil; and Santiago, Chile — encircling the metropolises in squalor, where poor people lived in ramshackle housing built of corrugated tin or even cardboard.

That landscape is shifting in ways that present opportunities and risks for real estate investors. A rising middle class in Latin America is demanding quality of life improvements and opening windows for those with cash to fund development projects. Still, any opportunities come with a major caveat: Only the largest Latin American cities have the size and economic power to meet the requirements of most institutional investors.

Latin America is the most urban region in the developing world, population statistics from t