17:13 08.07.2021

'Resource' bill to significantly slow down implementation of Affordable Mortgage 7% program - developers

3 min read

KYIV. July 8 (Interfax-Ukraine) - The adoption in the "resource" bill (No. 5600) of the norms on taxation of real estate will lead to a sharp rise in the cost of housing by at least 20% and slow down the implementation of the Affordable Mortgage 7% program.

This opinion was expressed by the largest Ukrainian developers at a press conference at the Interfax-Ukraine agency.

"From March 1 of this year, at the initiative of the president of Ukraine, a mortgage program at 7% was launched. It was aimed at the affordability of housing in order to expand the number of citizens who have the opportunity to purchase housing," Vice President of PrJSC Kyivmiskbud Andriy Dzhihil said.

According to him, since the beginning of 2021, property prices have been rising due to the increase in the cost of construction materials. The additional tax burden will lead to an even greater increase in prices for it.

Oleksiy Koval, the project manager of Perfect Group, agrees with this, noting that the number of apartments that meet the criteria for participation in the Affordable Mortgage 7% program will sharply decrease due to an increase in their cost by at least 20%. In addition, with the adoption of this bill in its current form, the number of investment housing sales will decrease.

Founder of KAN Development Ihor Nikonov also noted that the profit of construction funds from the sale of housing, as a rule, is reinvested in further development and new projects, and is not withdrawn, therefore, should not be subject to VAT.

"We are trying to explain to MPs that this point cannot yet be adopted. It is very important that the affordability of housing is widespread, because thanks to this, people remain in Ukraine," Nikonov stressed.

Volodymyr Zubyk, the founder of Intergal-Bud construction company, also announced about the rise in real estate prices in the event of the adoption of the "resource" bill.

"We have calculated that the cost of economy and comfort class housing will increase by $ 150/sq m," he said.

In addition, Zubyk criticized the idea of imposing VAT on contracts for the purchase of housing that had already been concluded at the time of the adoption of the law, but not paid.

"If the law is adopted in the current version and retroactively "enforces" old contracts, this will generally lead to a collapse, it will be a crisis for the industry. There are a lot of people who have not yet paid the contracts in full, because developers generally offer installments for 5, 10, 15 years," he said.

According to Zubyk, small construction companies will be able to reduce the payment of taxes by attracting cash from individuals without raising prices. At the same time, such companies, as a rule, do not invest in social infrastructure, unlike large developers, who will be forced to reduce turnover and cut investment plans.

"If this bill is voted on at second reading, then I think the cost of housing may at least double. Accordingly, commissioning will drop sharply and sales will fall. And the state, instead of increasing tax revenues, on the contrary, will receive even less. We are calling to suspend this draft law, move on to dialogue and find a new format for resolving the issue," Lev Partskhaladze, the President of the Confederation of Builders of Ukraine, said.