Development and construction - are fundamentally different businesses

03.11.2010 00:04
Articles about real estate | Development and construction - are fundamentally different businesses Many Ukrainian companies joined in the structure of its construction and development activities. But such a "mix" does not strengthen their position, but only bad for business and leads to ruin in a period of economic fluctuations.

It so happened historically. Players Ukrainian construction market, which emerged in the 90 years, based its development on the principle: "If I build sites, I need to invest in them and they earn". Probably they thought that such an approach will make them stronger, will control the process from start to finish and most importantly, increase profitability, because income will generate not one but two full business direction. Example of his predecessors, followed by many companies that run their business in the early 2000's. They appeared like mushrooms after the rain, hoping to make a quick profit in the wake of a dizzying rise of the construction industry. Naturally, they wanted to take control of all processes - from investing in the facility and control of financial flows, before the crane and the foundation. As a result, we have an absurd situation, which is to adjust the difference between the concepts of "development" and "construction" and unthinking mixing of two fundamentally different activities in a monolithic structure. So with over 80% of Ukrainian companies. Nothing like this can not be found in countries with a rich history of the construction market, such as Turkey, European countries or the United States. There, if the company is positioning itself as a builder, it dealt exclusively with construction, if the developer, he focuses on investing in real estate and the return on investment through the use of square meters.

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What's wrong with Ukrainian approach? First of all it hurts the very same companies, especially in financial and economic turmoil. These companies make money by building a row, and the proceeds reinvested in develompent, shifting in this direction the lion's share of risks, and most importantly, commitment, because investing in our country is virtually impossible without the involvement of debt capital. Thus, when faced with financial problems, declining sales and heavy debt, their construction business collapses. The company not only nullifies the financial support of this direction, but often at the expense of cuts costs through the sale of assets and staff reductions. Inconsistency of the principle of combining construction and develompenta was manifest in times of crisis, when many Ukrainian companies on the verge of bankruptcy or gone bankrupt. To survive, they used all the existing arrangements until the reduction of the founders' shares or the sale of the company. I am deeply convinced that if they had time to divide these areas, brought each of them in a separate structure with its management, strategy and channels of funding, they managed to avoid major problems, or at least, saved from loss at least one business.
Andrew Kulik, vice president of the supervisory board, construction company «GEOS»
Content tags: Development
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