BRDO: Lack of legal protection of investors’ rights hampers the growth of primary property sales

On March 11, there was a meeting of debating club “A new behavior model of primary property buyers” organized by the RealEstate B2BClub Meeting in the HUB 4.0 premise. The BRDO Construction Sector expert Maria Grabowska told marketing and sales experts about legal aspects of buying the residential property in new buildings and investing in it.

Statistics shows that there are 29 square meters of living space per head in Estonia, in neighboring Hungary – 31, Austria – 43, and in Denmark – 51 m2. At the same time, the Ukrainian index is only 23 m2 per head. In 2014, the total area of the country’s housing stock has reached the lowest level of the last 5 years – 966.1 thousand m2. And this is despite the fact that there were 1 449 245 Donbass and Crimean immigrants registered by social protection authorities as of August 25, 2015.

In spite of the fact that the housing per capita in Ukraine is one of the worst in Europe, property sales on primary markets does not show any growth trends now.

A rapid decline in purchasing capacity of Ukrainian people is aggravated by the imperfect legislative framework regarding protection of investors’ rights. BRDO expert analyzed this problem in details during the debating club meeting.

The current version of 3rd part of 4th Article of the Law of Ukraine “On Investment Activity” demands the non-state investment and construction financing to be made only through the construction financing funds, real estate transaction funds and collective investment schemes by issuing housing bonds and by using other ways defined exclusively in the laws. This regulatory restriction is intended to protect investors’ rights from unconscientious real estate developers in a declarative way, but in fact, it only sets restrictions for all market participants even before starting construction works.

Unconscientious real estate developers who can carry out the double resale of property items while they are under construction also bring great risks for investors. However, none of existing housing investment vehicles in Ukraine cannot protect investors completely.

During the report, Maria Grabowska presented concrete proposals on the regulatory framework improvement prepared by the BRDO together with business representatives for marketing and sales experts.

Draft amendments to legislative acts developed by Better Regulation Delivery Office (BRDO) experts are aimed at solving the most of the problems that prevent the housing segment growth by increasing a number of investment vehicles and introducing modern technologies to control the proper use of invested funds.

Panel members confirmed previous BRDO experts’ conclusions regarding the positive impact on sales level in the residential property sector.

The Better Regulation Delivery Office calls business representatives and the public to join this process and send proposals to [email protected]. All proposals and comments sent to the Better Regulation Delivery Office (BRDO) will be taken into account while preparing the conclusions.