Developers are in a hurry to start construction of apartments – Rossiyskaya Gazeta

Update Post: November 30, 2023 5:09 pm

In the summer, amendments to the Tax Code were adopted, which abolished the VAT exemption for developer services provided during the construction of premises intended for temporary residence (without the right to permanent registration). That is, VAT should be applied to apartments. At the same time, the VAT exemption for construction is maintained under an agreement on the sharing of other non-residential premises in a residential building, for example, garages and parking spaces. The new procedure will apply to apartment complexes that will receive a building permit from January 2024.

Some developers are accelerating the launch of projects to the market, says Ruslan Syrtsov, CEO of Metrium. “It is worth noting that abandoning the initially chosen concept and reconsidering the type of permitted use of a land plot is often impossible or impractical, since this will require excessive investments. Consequently, developers gradually increase prices to compensate for future expenses or deliberately reduce their profits,” he says.

“We see a slight intensification of the projects that were planned to enter this market, we will see the beginning of the issuance of construction permits and, possibly, some beginnings of sales before the end of the year, although, in principle, only a quarter remains part. Left”, says the commercial director of the MIC group of companies “Pavel Lepish.

Buyers are not far behind either: in August, according to Metrium, there were 2.7 times more apartment transactions in the capital region than the previous year. This result was the most successful since December 2021. This high purchasing activity is explained not only by the expected increase in interest rates on all loans, but also by the fact that the Central Bank practically does not impose restrictions on the credit market. apartments, explains Syrtsov. Customers can obtain a subsidized apartment mortgage at a rate of 5% per year, with a 10% down payment, for a period of up to 35 years.

Interest in apartments is constantly high, and an increase in mortgage rates does not cause a decrease in demand, says Larisa Leonova, real estate agent at the Miel agency. Rates have increased for all types of loans, but the cost of apartments is still an order of magnitude less than that of an apartment. In addition, the target audience for the apartments, according to her, are investors and not those who want to equip the premises for family needs. The market has been waiting longer for the approval of the law on apartments, which could change their status.

According to Syrtsov, due to the introduction of VAT in the future, the number of apartment complexes will decrease. The companies will design apartments only in those areas where housing construction is prohibited, for example, in many prestigious locations in the historic center of Moscow.

However, so far the assumptions of many experts about rising prices and declining interest in apartments from both buyers and developers have not been confirmed by practice.

“We receive new orders for the design of apartments and the demand from developers for the construction of apartments continues. According to my estimates, the demand for the design and construction of apartments in Moscow and other cities will continue in the coming years. Regional projects will continue are developing quite actively, and not only in big cities,” says Maxim Dolgov, founder of the architecture studio DA.

Maybe the developers will find some solutions. According to the documents, they can sell an office center, but in reality they will be apartments, as the CEO of VSN Realty, Yana Glazunova, gives as an example. It is premature to talk about abandoning plans for the construction of this type of facility, it depends on the economics of each project, says Level Group sales director Alina Larionova.

The introduction of VAT will not significantly affect the volume of apartment construction, says Anton Amelin, director of development project management at Golos.Development. “The fact is that currently most of the construction costs of residential complexes and apartments for developers are already subject to VAT. These are general contracting services, network installation services and many others. “With the introduction of VAT , it will not be possible to build less.” “They will. Most likely, developers will continue to build apartments on plots that are not suitable for the construction of residential real estate. Overall, this will lead to a slight increase in construction costs.”

“Developers can start sharing their services against the total construction cost through an equity agreement to reduce the tax base,” suggests Syrtsov. “This is how companies acted until 2010. However, the changes will not affect the population in the format of micro-apartments in reconstruction projects, since they are implemented under purchase and sale agreements, therefore, the level of taxation of these objects will remain at the same level.” The concept of “development services” is not enshrined in a regulatory legal act, but in a letter of the Deputy Minister of Finance from 2005, notes Metrium. However, this same term is included in the new law on devolution “According to the initial interpretation, it was decided to understand the developer’s services as the difference between the amount of funds paid by the shareholder and the funds actually allocated for the construction of the complex (although all aspects are reflected in the shareholding agreement) However, given the legal vagueness of the concept in question, authorities may not “allow costs to be differentiated.” That is, it is not a fact that developers can take advantage of the legal loophole in the legislation.”

According to ERZ.RF, there are currently 327 buildings with apartments under construction in the country, which represents 4.1% of the total number of apartments (assuming that they are essentially apartments). By comparison, in the summer of 2019, apartments represented 2.5% of the lots under construction.

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September 23, 2023 2:22 am