The series about equity participation: the second season

The series about equity participation: the second season

The Verkhovna Rada registered bill No. 3174, which is designed to cancel the abolition of equity participation. The sole author of the bill (before being elected as a deputy – three times the mayor of the city of Nadvirna, Ivano-Frankivsk region) in an explanatory note indicates that after the adoption of the law abolishing equity participation, from January 1, 2021, “local authorities will not have an additional tool to finance activities for creating comfortable living conditions for citizens (to build, repair kindergartens, schools, hospitals, boiler rooms, roads, streets, alleys, etc.) and to regulate the development of territories”.

The author proposes to establish a fixed amount of payment of shared contributions: 4% for non-residential buildings, 2% – for residential, 0% – for industrial buildings. Such rates, according to the current legislation, are provided for the so-called transitional period from 2020 to 2021. If you look at the comparison table, you will actually see a rollback to the previous version of the law “On the regulation of urban development”. Article 30. Technical conditions and Article 40. Equity participation in the development of the infrastructure of a settlement, which were excluded from the law in the autumn, was transferred almost to the carbon copy in the new proposed bill. Here you have the opportunity to set off laying engineering networks as an equity participation, and reimburse the customer for the difference if these networks are more expensive than the equity participation, and the procedure for concluding an agreement on equity participation.

It is noteworthy that on the first day of the work of the Verkhovna Rada of the new convocation then bill No. 1059 “On Amending Certain Legislative Acts of Ukraine regarding the Promotion of Investment Activities in Ukraine”, which in September 2019 canceled the equity participation, was identified by the President as urgent. And now the deputy of the pro-presidential fraction is trying to return everything back. Very interesting why. Because in the explanatory note, except for the general phrases “for all good and against all bad”, the essence and, most importantly, clear justification cannot be found.

What is happening now looks just like deputy populism and a desire to promote. All the “delights of equity” are spoken more than once. Regardless of the calculation method — through ratios or percentages of the estimated construction costs — this is an insanely corrupt and stupid tool. Developers had to pay twice: the first time – directly shared participation, the second time – to create this very infrastructure. At the same time, the money collected, regardless of the size of the amounts, simply dissolved in the general budget and did not go to the development of infrastructure.

The whole industry has been waiting for the cancellation of equity participation for several years, and now, in anticipation of the economic crisis, they are trying to return this notorious “investment tax” to us. That construction can be the engine that will slowly, but very confidently continue to move in the current conditions. It is not difficult to frighten off investors, it is difficult to search for them later, return them and ask them to believe in the country again.

Today, this bill is under consideration by the relevant committee, and I really want to hope that you will go beyond this populist document.

Andriy Ryzhykov, CEO and managing partner of the development company DC Evolution