The rental market in Ukraine: is evolution possible?

21.02.2018 00:00
Articles about real estate | The rental market in Ukraine: is evolution possible? The general director of the development company GREENOL Oleg Prikhodko on whether the state will be able to take demountable housing out of the shadow. Ukrainian realities for today are such that from 70 to 90% of rental housing in Ukraine is in the shade. With this type of activity, the state does not receive taxes. Attempts to take a segment of rental housing under control have been made repeatedly. Let us recall the last of them.

September 2015

Related article: Construction in Ukraine, dipped by 23%

The Ministry of Regional Development is developing a framework bill, which outlines the development of the real estate rental sector. It is assumed that rental housing can be built or reconstructed not only at the expense of state and local budgets, but also at the expense of private investors. The rental housing fund can include both new buildings and reconstructed buildings. The customer of such construction or reconstruction should be a newly created financial state structure or local organizations. Buildings should be built on lands that are in state or municipal ownership, communications for them should be connected to and for state funds.

The idea itself is a top-five plus, but the real estate market practices are perplexed and do not understand where the investments are for such a large-scale project and why engage in what is initially doomed to oblivion.

August 2017

The State Mortgage Institution (SMI) was given an opportunity to introduce a program for providing housing for citizens on the terms of financial leasing. The government of Ukraine amended the charter of the SMI. The corresponding resolution No. 616 was adopted at a meeting of the Cabinet on August 18, 2017. Housing in financial leasing is transferred after completion of construction, internal finishing works and installation of necessary equipment.

Real estate market practices are again puzzled. And this time the state machine tried to do something with the rental housing market, but it could not. And it is possible that officials have forgotten the folk wisdom, which reads: "Do not open your mouth to someone else's mouth, but get up early and start your own up". And as "his venture" did not work out, it remains to look at the stranger.

February 2018

Deputies are preparing a draft law that should define new rules for the rental market. According to its norms, the concepts of "rent of housing", the rules for obtaining registration, and eviction of persons from demountable apartments will be re-defined.

Of course, it is a savagery that today 70 to 90% of rental housing is in the shade and this state does not receive taxes from this lease. But is this situation only in this area? And does, for example, the taxation of wages encourage employers to pay a "white salary"?

As long as the dominant principle remains "to collect the maximum amount of taxes while not creating conditions for development," the country will not be able to develop. As soon as the main approach is to "create conditions for development and investment" of any of the markets, there will immediately be growth in each of them, including in the rental market, which will transform, develop and bring income to both owners and the state.

If the legal framework for renting residential real estate will be limited to liberalizing taxes, this will only partially improve the situation. There is no comprehensive approach in this issue, because for the time being the views of the Cabinet are focused on the final stage of the process. Nobody cares about the question of how to take money to create a rental market. Targeted loans? No. Simplification of taxation before the investor reaches the level of profitability? No. Encouraging the attraction of a foreign investor? Also no. But, that's when an enterprising person has already created a business, here his state lies in wait.

On the other hand, for a couple of decades the tenant market has been segmented. It is attended by both large landlords, who have dozens of flats for delivery, and those with one or two apartments. And if the first one is a full-fledged business, then for the latter it is a source of income that allows them to break out beyond the poverty line. The first ride on expensive cars and relax in the resorts, and the latter huddle in small apartments with several generations of the family and rejoice in the tangerines for the New Year holidays.

Realizing and accepting such segmentation as realities, it is also necessary to build a state approach on the fact that, as an option: from lessors who have up to 5 apartments (houses) of housing stock, to take a fixed monthly cost, by analogy with a "local" communal market, it's not a fact that some of the apartments will be rented for more than 5-6 months, and for those who rent is a business, it is necessary to establish a fair tax depending on the incomes, or even better - also to give short-term loans for repairs.

An integrated approach of the all-Ukrainian level should consider both the problems of the market and its opportunities on all sides. And you need to start with the fact that it is necessary to give the opportunity to create a rental business both for individuals and legal entities. After all, subject to the possibility of such a startup, the entrepreneur initially declares his intentions and in the future must get into the controlled-tax system. As a result, there will be a scheme: the state has created the opportunities, and when the result is received, together with the initiator, it enjoys the fruits of a successfully completed process.

And if the state wants only to reap the productive results of the work of its population, then, of course, entrepreneurs will hide their incomes, at the same time do it at all levels, because no one is deprived of an internal sense of justice, in which one does not want to share with those who are not only did not help, but also a little bit hampered.
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