LUN, the largest real estate portal in Ukraine, interviewed the CEO of blago developer in Ivano-Frankivsk

LUN, the largest real estate portal in Ukraine, interviewed the CEO of blago developer in Ivano-Frankivsk

The Ukrainian primary real estate market is currently undergoing changes and, like other sectors of the national economy, is looking for the best ways to adapt to them. Crisis phenomena, difficulties with the supply of construction materials, limited energy supply and blackouts are creating difficult conditions for developers. Roman Korzhak, CEO of blago developer, an investment and development company, told about the situation on the new buildings market and its future prospects in a digest for the portal.

  • What was this military summer like for your company?

The summer of 2022 for blago developer was probably the same as for all Ukrainian businesses. We were adapting to changes in the market, setting up logistics, reviewing the terms of work with suppliers, building up stocks of building materials and, of course, doing everything possible to ensure the smooth construction of our residential complexes. Having survived the spring, we already had an understanding of how to diversify and what risks we might face, so we could respond quickly to them. Of course, we reviewed the changes in the behavior of apartment buyers, their preferences and adapted to these changes. We have added a new service “renovated apartment” and even accelerated the pace of construction, because we understand the need for ready-made housing. Our team also demonstrated social responsibility, and we organized all our projects to help the Armed Forces.

  • What was the situation in September and October, did the market revive?

We realized that the military conflict was dragging on. Therefore, we tried to increase the pace of construction to meet the growing demand for housing, which was provoked by the forced relocation of residents of the central and eastern regions. Sales dynamics have been positive since early summer and peaked in September. Of course, the reputation of blago developer played a role. People did not doubt our reliability and invested in housing right now and in Ivano-Frankivsk without fear. In October, due to the shelling, a small number of people postponed their purchase until November. But interest remains high, and investing in housing is the best solution today.

  • How do you see the future?

In all periods, construction is always the first to respond to crises and the last to recover. It is a capital-intensive business that is difficult to manage in times like these. Only large companies with a sufficient financial cushion and the ability to manage risks will be able to survive in the market. If we analyze the market across the country, it will be difficult for most companies to recover and complete the construction projects they have started. This is a real challenge for such builders, especially in the regions where active hostilities are taking place and residential buildings have been damaged. If we talk about the market in the western regions, including Ivano-Frankivsk, the competition will become tougher, there will be a fight for every customer, and only honest and open companies will be able to survive. We need to get closer to the customer, make communication with the customer even closer, and find new methodologies for such communication.

  • Does anyone invest in new buildings now? What are the dynamics of the number of investors now?

We can say for sure that more and more people are investing in new buildings at the stage of construction completion. However, systemic investors, realizing the profitability, continue to invest in the initial stages of construction. Large-scale companies have been working with such investors for a long time and have good trusting relationships with them. Their share is approximately 40%. Also this year, we received new investors from Kharkiv, Odesa, Kherson, Mykolaiv, Kyiv, and Dnipro, who are willing to invest in housing at the final stages of completion.

  • How have investor preferences changed? What are the most important criteria now?

The criteria for investing are always the same: price per 1 sq. m., location, developer’s reputation, infrastructure, construction time and total benefit from the investment. Only their priority can change. Given the recent transactions, I can say that the most important factors are the reliability of the developer and the potential of the area where the residential complex is being built.

  • How have prices for your new buildings changed and how will they change by the end of the year?

Price is what everyone is most interested in now. But you need to understand that the cost per square meter in each of our new buildings is the final result of the calculations of analysts, project managers and estimators, and it is formed on the basis of the cost of construction. Our priority is to use Ukrainian-made materials in the first place: concrete, windows, ceramic block, insulation. However, we also have to buy foreign-made materials, the cost of which significantly affects the cost of construction. In this case, we depend on the dollar exchange rate and the price quoted by the supplier. Since the beginning of 2022, building materials have risen in price by 40%. We also depend on the energy market. The salary of each employee and the company’s current expenses are also included in the price. Therefore, our apartments are gradually becoming more expensive. What will happen with prices in the future will depend on the cost of building materials, energy, etc.

As a developer, do you feel pressure from the secondary real estate market? Can we say that the competition between primary and secondary real estate, as well as between primary and “new secondary” has intensified now?

No, we have never felt and do not feel competition with the secondary housing market. Our buyers are people with well-defined needs, they want comfort, amenities, and modern infrastructure that older homes do not have. In addition, our new projects have innovative solutions that improve the quality of life. And they are willing to pay for it. Therefore, we invest a lot in new solutions to truly build the city of the future.

  • Did the restrictions on electricity consumption affect the construction process?

Our company had already been using energy-efficient appliances and energy-saving lamps. We also immediately responded to the government’s request to save energy and optimized the processes on the construction sites as much as possible, but, of course, without violating the order and urgency of the work. We turned off the building lighting, switched to an energy-saving mode in our offices, and turned off the installations and decorations that we donated to the city. Of course, we care about the comfort of all our employees, but we are also learning to reduce energy consumption. We have also purchased generators and continue construction.

  • What are the most significant challenges facing builders and developers today? How do you overcome them or adapt to them?

The biggest challenge is the war started by Russia, which has changed our priorities and moods. Many people do not know how to plan their lives and what to do next. Developers are facing global challenges. Banks have restricted lending to developers, and many specialists have gone to the front to defend our country. How do we deal with this? We are helping the Armed Forces of Ukraine and holding lengthy negotiations with banks. We recruit and train new employees, create additional jobs, and develop new competencies. Among those who have joined our team are many internally displaced persons. We continue to build and do so efficiently and as quickly as possible. We want to show our customers, the world and the aggressor that we are unstoppable.

  • How do they affect the price per square meter of new buildings?

The challenges have led to a near doubling of real estate prices in some regional centers. In Ivano-Frankivsk, we managed to keep the cost of new buildings at a level favorable for the client.

  • Will the government’s preferential mortgage programs affect the new construction market? If so, how?

Recently, eOselya, a government program of affordable lending for Ukrainians, has been launched in a test mode. There is a great need for housing all over Ukraine, but not everyone has the opportunity to buy a new building and renovate it at once. Therefore, it is clear that this service and other government programs of preferential mortgages can become an important stimulus for the revival of the real estate market. This will be beneficial primarily to the buyer, who will be able to afford a new apartment right now.

  • Government programs are good, but do you have any of your own support programs for the military?

Yes, we have a special program for the Armed Forces of Ukraine. We also often organize promotional offers that can be used by everyone without exception. By the way, blago developer has become a defense leader in the DOM.RIA rating with a score of 8 out of 10 for helping the military. We continue to work on other preferential programs for the Armed Forces of Ukraine to make blago developer new buildings more accessible to our defenders and their families.