Why the majority of housing developers are not punctual and how to learn to rent out objects on time

Why the majority of housing developers are not punctual and how to learn to rent out objects on time

Residential complex? During? In Ukraine? Fantasy! Unfortunately, in our country only a few projects are delivered on time. And then you still need to figure out what “on time” means – get a certificate, finish the facade, start elevators, plant trees or connect external networks? Therefore, the concept of “on time” can be manipulated: to get a “piece of paper” does not mean to “hand over the object” if there are no external networks (connections to the sewerage, water supply, electricity and gas), no facade, nor, what happens, not even a roof.

Why objects are not delivered on time

1. Developers themselves very often prescribe in the contract that the term for commissioning and registration of property rights may shift from the stated 2-3-4 and even 6 months. So if you have the opportunity to be late, then you will be sure to be late for this period, and then you will be late for the same one and you will also find an explanation. From the point of view of project management, laying yourself a big backlash for deferment is wrong.

2. Contractors. The main construction work is carried out not by customers, but by contractors. And now they can also fly deadlines and fail to make forecasts: the suppliers failed, the tax came, the workers went abroad. All this has a drop in effect on the construction period – and, of course, not in the direction of acceleration.

3. The main force majeure in construction are of two types: political (we have a country of perpetual elections) and technical (few people ideally design and build according to technology, the rest learn at the expense of the customer, although the customer himself also often). In the risk matrix of Ukrainian projects, technical risks occupy 20-30%, while the country and political remaining 70-80%. Despite the fact that there are various methods of calculating risks, in our country this procedure is akin to fortune-telling on a ball. And, for example, if at one fine moment the dollar exchange rate becomes 38 hryvnias, then all plans may remain plans.

4. Permissive documentation. Officials, including the GASI, are making every effort to ensure that the project does not take place on time. Even if the developer does everything right, this is not a guarantee that he will receive the necessary documents and the right to build. That is why market participants are quite positive about the launch of the electronic cabinet of the builder (customer) and so are waiting for the full automation of all possible processes to minimize bureaucratic lawlessness. Electronic services will make the market transparent, which means they will help to avoid both the corruption burden and the unauthorized delay in the issuance of documents by the state.

5. Activists, or rather pseudo-activists. The second, much more than the first – real and really fighting for their rights, and not earning on each new fence. It is they who greatly complicate the life of many projects – and even those that, in terms of legitimacy, are almost crystal-clear. Unfortunately, blocking construction sites is already an entire industry: specially hired people, hiding under good intentions and posing as residents of a neighboring yard, can stop any project if they received such a team or they see this as a financial gain.

According to the bild.ua portal, currently out of 479 residential complexes being built in Kiev and the region, 10% of new buildings are already under construction with a delay of 6 months to a year, 14.4% – one to two years, 15% – two to four years, 6.3% – more than four years, which in general is more like a long-term construction. This situation has essentially not changed for decades, and everyone is used to this development of events: the buyer knows that the developer will be late, the developer knows that he will be late, the contractor knows that he will pay a penalty for being late, which is already included in the price. Everyone got used to and resigned to the fact that projects were late. So now, on the contrary, it has become an advertising chip to declare that the developer managed to deliver the project on time or even ahead of schedule. And this, of course, is a good vector for the market, which, hopefully, can develop into a general trend.

What will help us

In the markets of developed countries, there are fines for developers who motivate not to be late. Because the payment of a fine, for example, to 200 customers is a decent financial burden that can immediately reset all project profitability. But there is one “but”: fines with Ukrainian force majeure and risks are a pretty joyless thing for business. Therefore, the most realistic and correct way out is the developer liability insurance. This is a must.

What is the peculiarity of insurance: the company simply will not write out a policy if it does not understand that the developer is doing well, because she does not want to spend her money on compensating for the losses of buyers. Accordingly, its auditors will check the project for permits, for construction technology, for contracts with normal contractors, for the impact of weather or political risks on this project, for activists and more. And if she signed the policy, then the developer has the opportunity to be on time. An insurance company is a partner and assistant to both the developer and the buyer. Indeed, the more we predict the market, the more attractive it is for people with big and small money.

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