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New NBU discount rate to lead to bankruptcies and crisis of unfinished construction — developers

The reaction of construction companies to the discount rate of 25%: Ukraine may face a shortage of finished housing. Photo: Shutterstock.com

The reaction of construction companies to the discount rate of 25%: Ukraine may face a shortage of finished housing. Photo: Shutterstock.com

Raising the discount rate by the National Bank from 10% to 25% makes it impossible to conduct a construction business in Ukraine, closing any opportunities for lending to both developers and potential buyers.

Such a decision will have serious consequences in conditions when the entire primary market has stopped, Serhyi Pylypenko, co-owner of the Kovalskaya group of companies, said. According to him, the state cuts off access for businesses to any funding.

Quote"In the construction industry, there is actually a struggle for survival across the entire horizon. Therefore, investment in any new projects is now a big question," Pylypenko stressed at the online conference "Marshall Plan" and the urban prospects of Ukrainian cities."

According to Volodymyr Sementsov, co-founder of INSPI Development, a 25% discount rate makes it impossible to develop any, even hypothetical, lending programs not only for developers, but also for potential housing buyers.

According to him, effective demand is unlikely to grow in the second half of 2022. With no lending, this may adversely affect the plans of developers, who, in the face of a shortage of funds, will be forced to suspend the construction of the lion's share of their facilities, focusing maximum efforts on the completion of semi-finished facilities.

Quote"The lack of affordable targeted loans at minimum interest rates for construction may lead to a major crisis of unfinished construction. Not only small and medium-sized companies that built mainly for funds raised from sales, but also large developers who have several large projects under construction may be at the risk of bankruptcy," the expert noted.

A halt in many construction projects, a large number of destroyed houses, migration processes, rising cost of building materials, and a shortage of labor force, according to Sementsov, are among the most important factors that will lead to a reduction in construction volumes. And according to his forecast, already in 2023 Ukraine will face a significant shortage of finished housing.

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