BRDO experts analyzed the regulation of the development market

12-07-2019

During the Soviet period, the area of construction management and financing was in the list of most controlled and centralized sectors. In Ukraine, professional entrepreneurial organizers of construction (in the EU countries, they are called development companies) began to act in the mid-1990s. During this time, the market of real estate development services has experienced several phases of development and crises, while being currently a relatively sustainable sector of the Ukrainian economy. Nevertheless, the concept of “developer” and “development” remained not regulated at the legislative level, and the current market regulation is actually built on the Soviet principles.

The Ukrainian developers market remains mostly closed to independent players. Although the number of market entities has increased by 15% since 1941, there is a significant share of loss-making enterprises (46.5%). The fact that almost every other enterprise is running at a loss indicates either the ineffectiveness of the market operation or its non-transparency.

In 2017, the total volume of sales in the market amounted to 14.9 billion hryvnias (according to the functional approach), while the total net losses of companies amounted to 1.3 billion hryvnias. Since the total share of labor costs, depreciation and other aspects is rather small (13% on average in 2012-2017, 11% in 2017), the constant losses of companies for a long time are most likely due to the lack of transparency.

To solve the market problems, it is necessary to reform the current legislation, in particular by:

  • creating opportunities to apply internationally recognized forms of construction contracts and mechanisms of distributing risks and responsibilities between employers and contractors;
  • reforming the domestic pricing system in construction;
  • introducing additional mechanisms of guaranteeing the project documentation quality;
  • increasing the effectiveness of technical supervision over construction of architectural projects;
  • improving the legislation on state architectural and construction control;
  • introducing the market control over the production of construction materials and products.

BRDO experts conducted a systematic analysis of the current regulation of the construction management market, the results of which can be found in the Green Paper. Waiting for your comments! http://bit.ly/2xPTkvz

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