Social housing construction is industry the most hit by the crisis

April 22, 2016 17:44

Decreased volumes of housing construction have become one of the most common indicators of the economic crisis in the country. Social housing has been developing mostly due to the state programmes of concessional lending, which have been de facto suspended.

It is becoming increasingly difficult for the population to obtain soft loans for housing construction. Shortage of funding, both by the government and by private individuals, results in extended construction period.

Another challenge the housing construction faces is the outflow of highly-qualified construction workers and low wages. As a consequence, workers have no motivation to improve their performance. Regardless of the adjustment of wages to the inflation rate, wages of many skilled workers do not exceed one and a half million Belarusian rubles (approximately USD 200).

Mogilev Region

In 2011 Mogilev region had the worst performance in the housing construction sphere.

According to the State Statistics Committee in January-October 2011 in the Mogilev region were built 369 thousand square meters of housing (43.4% of the annual plan). For comparison, 758 thousand square meters (61.6%) were built in the Brest region, 375.6 thousand square meters (45.2%) in the Vitebsk region, 660.6 thousand square meters (60.6%) in the Vitebsk region, 561.3 thousand square meters (59.1%) in the Grodno region and 877.8 thousand square meters (65%) in the Minsk region. 633.1 thousand square meters (52.8%) of housing were built in the city of Minsk. All in all Br 914.20 billion has been invested in the housing construction in the Mogilev region.

Construction companies introduced a practice of placing a burden of compensation for their losses on the tenants.

The situation is similar in Bobruisk. During the first nine months of 2011 629 apartments were built in Bobruisk, which accounted for only 36.1% of the plan. City officials blamed the economic crisis for their failure to fulfill the plan but nevertheless they assured that the 2011 plan will be fulfilled before the end of the year. Moreover, the construction companies recently placed a burden of compensation for their losses on the tenants.

Minsk region

During the first nine month of 2011 almost Br 2 trillion has been spent on the housing construction in the Minsk region or 17.5% of the overall investment. The construction sector employs about 37 thousand people and there are about 300 organizations of different type of ownership.

2011 housing construction plan is unlikely to be implemented: in comparison with January-September 2010, commissioning of housing decreased by 220.3 thousand square meters or by 21.6%.

The cost of 1 sq. m of social housing in the Minsk region in August this year exceeded USD 275 at the exchange rate of 30 September, which is higher than in Minsk (USD 209) and in other regions of the country. Commercial real estate developers charge over USD 1000 per square meter.

 According to Deputy Chairman of the Minsk City Executive Committee Georgy Marchuk, Minsk Oblast has the best performance indicators in terms of provision of social housing to inhabitants of the region.

On January 1, 2011 the list of people eligible for social housing contained 112.9 thousand individuals and 14% of them have been on the list longer than 10 years. According to Deputy Chairman of the Minsk City Executive Committee Georgy Marchuk, Minsk Oblast has the best performance indicators in terms of provision of social housing to inhabitants of the region.

The State Social Housing Construction Programme provides for the construction of large residential areas in the satellite towns for Minsk residents and removal (transfer) of industrial production facilities from the capital to the regions of the country (the Programme was adopted by the Council of Ministers in July 2011). There were reports already that those who have refused three times to build a house in a satellite town of Minsk have been excluded from the list of individuals eligible for social housing in Minsk.

Vitebsk region

Vitebsk region as of November 1, 2011 is the second from the bottom of the list in terms of social housing construction. During 10 months of 2011 375.6 thousand square meters of housing were built, which is 81.8% of the volume of housing built during the identical period of 2010. In Vitebsk 137 279 square meters were built. Social housing construction investment in the Vitebsk region amounted to Br 969.50 billion, or 8% of the national total.

The cost of one square meter of social housing in the Vitebsk Oblast increased by 9.2 – 9.6 % during the first nine months of 2011.

During October meeting of the Executive Committee, Head of Construction Oleg Savitsky talked about difficulties the housing construction faced in Vitebsk, in particular that only 14 houses (26.5%) were commissioned.

Many residents of the area have to give up housing loans, due to the revaluation of their financial capabilities. As a result, there are cases when construction starts at the expense of the working capital of a contractor.

Brest region

In November the Brest City Executive Committee held a number of discussions with local residents regarding the draft master plan of the city development until 2030. Apparently, the purpose of these activities was to show that residential construction was ongoing, while in fact not a single new apartment building construction had been launched recently. All the efforts are concentrated around the speedy commissioning of the houses planned for 2011 or early 2012.

As deadlines for commissioning of houses extend, the price per square meter also changes - sometimes it has been increased by a number of times.

As deadlines for commissioning of houses extend, the price per square meter also changes - sometimes it has been increased by a number of times. Also there were cases reported when members of the housing construction cooperatives refused to make additional payments when new prices were announced – as a result they lost their membership following a board’s decision. The number of cases of unfinished works, defects and flaws at the time of the commissioning of apartments increased, as well as the indebtedness of citizens vis-?-vis developers.

Gomel region

According to the Deputy Chairman of the Committee of Architecture and Construction of the Gomel oblast Yadviga Blatun, the social housing commissioning plan has been fulfilled only at 38%.

Out of 450 thousand square meters planned for construction in 2011, during the first 9 months just over 260000 square meters were commissioned. Losses in the construction sector increased dramatically and as a result, construction companies did not meet the deadlines.

Committee for architecture and construction of the Gomel oblast executive committee explained, that “the main reason behind the failure to meet the construction plan in the first half of 2011 was due to untimely and erratic financing provided through concessional loans by “Belarusbank” and “Belagroprombank” for residential construction, engineering and transport infrastructure development in the areas of residential sites”.

By 1st December 2011 the price per square meter of social housing will reach Br 3 million, and in some cases it will exceed this amount. The cost of “commercial” meter is ranging between 4.446 million (USD 500) in Rechitsa to USD 850 per square meter in Gomel depending on the developer and the type of accommodation.

Increasing costs of housing forces shareholders to withdraw from construction, which results in suspension of development for an indefinite period.