To carry on construction
"The underestimation of categories in construction projects, both in residential and non-residential real estate, is among the risks for market participants" — Pavel LUKOMSKIY, partner at Salkom, believes
— How would you describe the trends on the real estate market in 2016? Are there any differences from the situation that existed during the past few years?
— Judging by our work, the main difference is the following: while in 2015 and earlier business thought about what to do in a difficult economic situation, now it has adapted and knows how to survive in such conditions.
The real estate market is interesting due to the fact that construction companies cannot afford to focus on existing facilities and to abandon the new ones, as this verges on the termination of their activities. Therefore, companies are still trying to build new facilities. We can see it due to what is being supplied to the market not only our own customers, but also those of competitors.
With regard to commercial real estate, large infrastructure facilities, for example, industrial parks, they have not gained the momentum expected by market players.
The reduction in floor area of accommodation is an obvious trend in the area of residential real estate. The trend today is apartments that contain everything in one room and the area of which is sometimes beyond the limits of permissible norms. Customers are forced to adapt to and look for possibilities to correspond with the trend because under the current economic conditions such offers are in demand on the market.
— What are the risks that market participants face while investing in real estate?
— The main risk is the method of investment in real estate. After the Supreme Court of Ukraine stated in 2015 that property rights, which were actively used as an investment mechanism, do not confirm ownership of an apartment, the risks for market participants increased significantly.
Certainly, there are more respectable and expensive ways of investing, but when it comes to housing, taking into account low purchasing power, the more expensive method does not always have a competitive advantage. Therefore, today it is necessary to convince the buyer that property rights can be used as a legitimate investment facility.
Preliminary agreements are also being used actively in the purchase of residential real estate. However, the issue of the seller’s honesty arises here because the building as such does not yet exist, and this way does not exclude the risk of double sales.
The problems are almost the same on the commercial real estate market. Although the methods of selling residential and commercial real estate have their own specific features, they can be used in both cases.
The underestimation of categories in construction projects, both in residential and non-residential real estate, can be noted as among other risks. In other words, when a facility, which for all intents and purposes should belong to, for example, the fifth category and to which more stringent requirements with the relevant examinations, approvals, etc. are set, is being constructed, the construction owner artificially divides it into smaller parts and builds it according to the third category, thereby selecting the mechanism that is more convenient for him. However, if (or rather when) the inspections begin, problems emerge from which the investors as people interested in the completion of the construction suffer.
Today, a lot of residential high-rise buildings are being constructed in Kyiv in accordance with the third category. Two identical buildings may stand side by side, but one is built according to the fifth category and the other – according to the third one. And the ordinary investor finds it difficult to determine which category the building should belong to. Therefore, investors can carry substantial risks when acquiring property.
— Legal support for projects involves solving a variety of tasks. What are the most common requests now?
— Curiously enough, but the demand for legal services in this area has provoked an increase in the number of cases of revocation of bank licenses. Therefore, it is necessary to protect the client due to the fact that the bank, with which he cooperated, is liquidated.
There are fewer requests related to obtaining approval documents. Previously, construction companies could give it to outsourcing, but now they are trying to do everything independently, seeking only advice.
The issues of building maintenance, relations with the condominiums in residential units have become more intense.
In general individual peaks still occur despite the inactive state of the market. This is due to the fact that foreign buyers show interest in a property which has become cheaper, and also due to currency fluctuations.
— Late last year a new version of the Law of Ukraine "On the state registration of ownership rights to immovable property and their encumbrances" came into effect. What challenges did market players face after it was adopted?
— I would like to highlight the importance of the provision which envisages a speedy and effective mechanism for stopping the process of raiding: if there is a complaint, the process should be stopped. After that the court must deal with the situation in the manner allowed. The problem resides in the fact that the court cannot promptly stop the whole process because this takes time.
On the one hand, today it has become easier for a business to lose property, therefore, everyone is waiting for changes in the state registration procedure, so that there is no need to go to the registry and check the owners every day. In this respect many persons are unhappy with the law. On the other hand, the law has actually simplified a lot of the mechanisms and in general terms its concept is correct. It is written according to European patterns, but it does not take into account our mentality.
— The President signed the Law "On amendments to some legislative acts of Ukraine regarding improvement of the state registration of rights to immovable property and protection of property rights" on October 28. What suggestions can improve it?
— The issue of payment of the administrative fee for the registration of property rights during the fulfillment of the notarial act and the time frames of such registration should be regulated more thoroughly. Until recently the practical side of the issue has remained controversial. In most cases the real estate buyer had to wait five working days after the transaction to obtain the excerpt from the registry of the registration of his property rights. This issue has been regulated in the new version of the law, but not sufficiently, as it allows for an ambiguous interpretation of the regulations of Article 19 (registration time frames) and Article 34 (the amount of the administrative fee).
— What factors can change the condition in which the sector finds itself? What are the signs of revival on the real estate market?
— Obviously, the revival of the sector depends on the general economic situation in the country. Activation of the privatization process can serve as an impetus for its development, as interest in large infrastructure projects will be rekindled. If large state enterprises start operating and the private investor gets interested in their work, he, accordingly, will scale up the infrastructure. This also applies to commercial and residential real estate, as well as logistics centers.
Today, many business centers are changing their approaches to pricing significantly, and some of them are not being put into operation, thought fully completed: why put them into operation now, when the market, as such, does not exist? Therefore, as soon as there is a rise in purchasing power and demand emerges, the market will be rejuvenated. However, the main condition here is economic growth.