Before the coronavirus crisis, construction accounted for 13% of global GDP, making it the largest industry in the world. In our country, it’s just over 2%. What’s the problem?
A human child is born in nine months, but what has changed in the construction and real estate market during this same period? They abolished the share participation, introduced parametric rationing, launched the developer’s electronic office, and even adopted the 305th regulation.
Before the coronavirus crisis, according to McKinsey Global Institute estimates, construction accounted for 13% of global GDP, and it is the largest industry in the world. In our country, it is a little more than 2%. So, in order for this difference to decrease, we need to continue breaking down all barriers. What is stopping us?
Master plans
The development of Ukrainian cities in general and Kyiv in particular is hampered by master plans, the very concept of which was invented in Soviet times as a kind of entity that determines development. Ukraine has been an independent country for almost 30 years, and this Soviet tool still lives on.
In Kyiv, there was an attempt to move from a master plan to a strategy that the entire developed world is moving towards, but it is still there. Moreover, the capital’s master plan “grew old” this year, but will continue to operate until a new one is approved, and this has been going on for over 10 years.
For example, your baby has grown out of his sliders, but you are not buying new ones, because the old ones are still not good enough. How do you like this story? So Kyiv has long since outgrown its master plan, but what is important: it does not need a new one, it needs a strategy that meets the new realities.
The fate of the new unapproved general plan is very uncertain, but due to the fact that there is no such plan — good, bad, whatever — urban development activity has come to a standstill, because officials cannot sanction it. The situation is especially difficult in the issue of changing the functional purpose. In the capital, thousands of hectares of industrial zones cannot be revitalized just because there is no approved general plan. Therefore, it is necessary to either approve this general plan or finally move on to strategic planning.
Social infrastructure
So far, there are three mechanisms for financing the creation of social infrastructure: from the city budget, at the expense of the developer, and through the payment of a share participation. The latter, I hope, will still disappear in 2021, as stipulated by the law adopted last fall. This is an absolutely non-working tool – money was collected, but no infrastructure appeared.
The first two points remain. Any city always has a limited budget, so it often does not need kindergartens and hospitals. And what about developers? Large developers are already creating infrastructure for their (and not only) residents, but what to do with it later?
For any developer, this is a non-core business, his task is to build and exit the project, not to operate it. And the city authorities are very reluctant to accept new facilities on their balance sheet, and sometimes this process turns into a real epic for the developer.
For a construction company, creating infrastructure is a very serious burden on the budget, so if the city offered some comprehensive partnership programs, it would stimulate the development of infrastructure.
Infrastructure networks
Electricity, water and gas supply, heating, sewage, garbage collection – these “goodies” of engineering infrastructure are equipped with from 47% to 83% of housing in Ukraine. But even these insignificant percentages are in terrible condition – every day something breaks or is disconnected somewhere.
When creating new projects, the developer is forced to lay all the new highways with his own money. And what does the city do? Nothing – except patch up the holes.
In the entire civilized world, the city itself lays all the necessary communications to the site so that the developer can implement his project without being distracted by such moments. Here, everything is exactly the opposite, in addition, the developer is forced to pay for these networks actually twice – the first time when he registers a connection to them, the second time when he directly builds them. As a result, the networks become golden.
And besides, it’s a terrible corruption component. It shouldn’t be like that.
Activists
We have two types of activists: the right ones and the wrong ones. The “right ones” fight with developers for an idea, the “wrong ones” for money. But both the first and the second make life very difficult for many projects — even those that are practically crystal clear from the point of view of legitimacy.
No matter what you build — housing in an industrial zone, a high-rise in the center, low-rise housing near Kyiv, green, purple, round or square — there will always be a group of activists who will come and say that they are against it and that their interests must be taken into account.
But Ukrainian legislation does not require any approvals from any neighbors or public figures.
A professional activist is a completely different story. Blocking construction sites is already an entire industry: specially hired people, under the guise of good intentions and posing as residents of the neighboring yard, can stop any project if they receive such a command or if they see financial benefit in it. Working in the “Baba Yaga vs.” format is always very difficult.
DBN
An attempt to improve the unimproved always creates even bigger problems — this is just the case with Ukrainian DBNs. For example, DBN Gas Supply. A gas boiler exploded in a city — they banned installing gas boilers in buildings above the third floor.
Then they received a hundred lawsuits, because half of Ukraine is designed with such boilers. After that, they made another “improvement” and allowed installing boilers up to the 10th floor. Is that what you call it?
DBNs, which are written by assessors of institutes, and not by trade unions, only create problems. Therefore, all developers who want to build at least a somewhat modern and comfortable project “go for deviations.” What is a deviation? This is a procedure for coordinating all non-compliance with DBNs with the ministry with the registration of all necessary compensatory measures.
But the whole sadness of the situation is that most of the deviations that normal developers make are a MUST in the entire civilized world. In our country, to do this, you need to “violate” the State Building Code.
Therefore, most DBN, except for structural and fire safety, should be advisory, not mandatory. If the developer does not know how to design, let him design according to DBN. If he knows, he can design as he wants.
Andriy Ryzhykov, CEO and Managing Partner of DC Evolution
