Belarusians may fail housing construction plans

The main funding source for the construction of 3.5 million square metres of housing in 2017 will be people’s savings. In previous years, thanks to soft loans, annual housing construction totalled 5.5 million square metres. Amid budgetary cuts, housing construction plans could be reduced to effective demand.

According to the Ministerial Council Decree No 1113 of December 29^th, 2016, in 2017, Belarus plans to build 3.5 million square metres of housing, of which 1.25 million square metres would make private houses. In order to implement the plan the government requires BYN 3.7 billion, of which BYN 2.9 billion should be secured by the population. Partially, funds will be allocated from the consolidated budget, banks would provide loans totalling BYN 245 million, and organisations would allocate BYN 440 million. As compared with 2016, in 2017, the housing construction for the needy will be reduced to 490 000 square metres and will only make one quarter.

In the previous five years, housing construction totalled 4.5 to 5.5 million square metres per year. This was only possible due to state subsidies and soft loans. In 2014, the state allocated USD 1.4 billion for the housing construction. People funded less than a half of the construction costs. Budget deficit led to a reduction in soft loans, and reduced housing construction volumes. In 2016, 3.8 million square metres of housing was built, which was 17% less compared with 2015.

New rules of the housing construction funding will change significantly the situation on the housing market. Concessional loans will be reduced to a minimum and will be allocated only to large families and employees of power bodies. People will be required to fund a minimum 77% of the total construction costs. Belarusians who have the funds do not need such housing volumes. Given the anticipated increase in the utility tariffs in the absence of the wage growth, housing construction plans may be revised downward. If there is a significant budget surplus, the volume of soft loans may be increased in order to implement the housing construction plans. In the future, housing construction industry may be stripped of the state support entirely and become regulated by the market’s effective demand from the population.

Due to budget deficit, the state was prompted to abandon soft loans for the housing construction. Due to unlikely wage growth in 2017, Belarusians are unlikely to fund housing construction as projected and housing construction plans are likely to be failed.