Developers now offering new opportunities to customers

Minsk developers offer flats to clients via instalment payments — due to high banking loan rates

This Belarusian housing market is to receive a boost thanks to an alternative source of funding. Expensive bank loans are restricting buyers’ ability to purchase their own property, as rates remain high — even in Belarusian Roubles. Of course, foreign currency loans are strictly prohibited to individuals.

Construction of housing continues, nonetheless, with developers hoping to see flats sold on completion. “In maintaining our pace of construction, we’re seeing new flats rise in number,” explains the General Director of Univest-M, Vladimir Zdobnov. “We enjoy an investment agreement with the Minsk City Executive Committee, which obliges us to build a specific volume of accommodation over a certain period of time. It’s a matter of pride for us to complete our work on time.” To drive forward sales, the company is temporarily offering buyers the chance to pay in instalments, taking the role of a financial institution. However, this isn’t ideal so, as soon as the situation changes, with loan access extended, sale conditions will alter. The mechanism of paying in instalments is already common in Russia, having begun in the crisis years of 2008-2009.

It’s yet unknown whether the move will prove popular in Belarus. Developers can only offer the scheme where they have floating assets or access to cheap loans themselves. Meanwhile, the pace of construction influences the profitability of sales. “The quicker we build, the cheaper flats are; accordingly, we generate greater profits,” notes Mr. Zdobnov. Different prices exist for accommodation which is ready made and that bought ‘off plan’, with completed flats sold for a premium. Additionally, the developer receives the money ‘immediately’ rather than at some future unspecified date.

The mechanism of paying in instalments reduces financial risk and burden for buyers. They can move in after an initial payment of around 30-50 percent of the final price (Univest-M’s terms), with the remainder paid monthly over a five year period.

Developers note that the property market is slowing, with fewer sales registered. Moreover, buyers are being more modest in their purchases, calculating their finances carefully. At present, a three-room flat can vary in size from 70-150sq.m, with people often choosing a smaller option to save money. One-roomed flats (about 45sq.m) are most popular, followed by 60sq.m two-room flats and 80sq.m three-roomed apartments. According to Univest-M, about 40 percent of their clients are aged under 30 and are yet to have children. Those aged 45-60 comprise 30 percent, tending to buy a flat for their children. Couples with children account for just 20 percent of buyers, sometimes upsizing but also sometimes buying their first home of their own.

Will Belarusian developers be able to help buyers further? Mr. Zdobnov believes that most are currently only making around 10 percent profit, which leaves little room for reducing prices. It seems most likely that fewer properties will be built over the coming months, with the scale of this ‘disaster’ only becoming apparent by late 2012. Many companies are currently ‘locked in’ to finishing outstanding projects but would, obviously, have to consider their position in undertaking further building. Unsurprisingly, this is inspiring some buyers to move quickly to secure new flats — especially while payment by instalments is operational.

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