NUCLEAR POWER IN BELARUS AND WORLDWIDE
As it always happens in difficult times, the number of prophets exceeds the number of listeners. Both mass media and social networks are full of grave predictions and the authors of the most apocalyptic forecasts describe the crisis of 2009 as a cakewalk compared to the coming difficulties. Coronavirus has affected the economies around the globe. However, in Belarus, the real estate market, for example, has not seen big changes. Chairman of the Board of Directors of Dana Holdings, the country's largest developer, Vibor MULIC gives his take on the real estate market prospects.
We have heard a lot of predictions that real estate prices will collapse, that rental housing will become cheaper, and that apartments on the secondary market and in new buildings will follow suit. But the statistics are a stubborn thing. For the second month the gloomy forecasts have continued to pour while prices have not changed much. In your opinion, why so?
I would like to say straight away that rent is determined not only by the desires of tenants but also plans of the owners of the housing. It is clear that the change in the exchange rate of the Belarusian ruble may affect the cost of housing in the rental market in the future. But for the time being this is not happening. The same is true for the secondary housing market, where we have seen a minimal decline in the segment of small apartments.
In the new real estate market there are no prerequisites for price changes. None of the major developers began to reduce or raise prices. Only small developers have cut down prices a bit. But they always have problems with liquidity. Prices are determined by the supply-demand ratio. In the crisis of 2009 the supply exceeded the demand by 200,000 square meters. Today the situation is the opposite. The demand is much higher than the supply on the market of new apartments, which is constantly shrinking in Minsk. There are no objective prerequisites for growth or decline in prices for new real estate in times of crisis. Prices will remain stable during the crisis and will increase after the crisis. In general, countries with an unemployment rate below 5%, including Belarus, are characterized by a stable real estate market, an insignificant price growth and a fairly rapid recovery of the economy after a crisis.
When do you think the crisis will be over?
If we mean the decline in GDP in the countries where economic development has been frozen on the heels of restrictive measures, it will take time to overcome it. It will also take time to restore international economic ties. If we talk about economic activity within different countries, the recovery will require much less effort.
All in all, I can say that I like Belarus' attitude to it. In fact, the pandemic hammered a number of industries, like public catering, passenger transportation, tourism, retail trade in consumer goods and entertainment industry. All the other sectors keep working. And this is right. Look at the enthusiasm that followed the removal of certain restrictions in Spain, Austria, Great Britain and the USA. Look how smartly the German economy was managed these months; the country did not put on hold its economic mainstays and industry giants.
Generally speaking, the construction of virtually all facilities was put on hold in Europe because of the crisis caused by the pandemic. But not in Belarus. Here the construction industry relies on its own resources, therefore it is capable of responding to emerging challenges. Our company cooperates with more than 20 general contractors and about a thousand subcontractors. These are dozens of thousands of jobs that were retained as people kept working. This is very important for the country's economy in general. In addition to that, we help many Belarusian companies stay afloat by giving them orders. Last year we purchased a huge batch of construction machinery based on MAZ vehicles – dump trucks and concrete mixers. Some 95% of building and finishing materials that we use are made in Belarus. This is another reason to believe that prices for new real estate will not change.
As for the crisis, I will tell you the following: those who want to buy real estate know that the situation will get back to normal anyway, but they feel insecure about tomorrow. However, we need to keep in mind that investment in real estate is a long-term investment. Just like in similar situations before, real income that has shrunk will bounce back soon, therefore those who need their own housing should cast away all doubts and make up their mind. In am confident that the global crisis is an opportunity to emphasize the advantages of the Belarusian economic and social model. Therefore, we have decided to speed up the pace of works in this difficult time. In recent months two houses in the Mayak Minska complex have been commissioned half a year ahead of the schedule. Investment in the construction will be increased. Every house gets another floor every week in the Minsk World complex. We are increasing the pace of construction works and involving new subcontractors.
Our company invests a lot in housing construction, so that people could afford to buy apartments in our complexes under a long-term installment plan. This is not just an investment in construction business but rather in Belarusian families who can benefit from an interest-free installment program for up to 10 years. We plan to invest at least $100 million in the Minsk World complex by the end of the year.
We are convinced that every Belarusian family with a stable income should be able to have a housing of their own! This is our principle and the purpose of our activity in Belarus.
Could you tell us what methods or tools can be used to achieve this? What does your company offer Belarusian buyers today?
We offer our clients a whole range of interesting options to make a purchase. These are special prices, attractive promos, favorable loan programs.
Some of them are strategic in nature as they influence the new property market in the country in general. Others are tactical to stimulate consumer demand.
Let us take our well-known 10% Off promo under which we offer a 10% discount for all the apartments in some of the houses in our complexes. Buyers liked this promo very much so we have extended the promo.
This is an example of a tactical promo. Our online service is a strategy! We have launched a user-friendly online service for booking and buying apartments on our website. It is very convenient for those who do not live in Minsk and do not have the opportunity to come to our sales office for consultations, as well as for those whose busy work schedule does not allow them to find a few hours for such a visit. It turned out that amid the ongoing pandemic, the service became a real way out for those seeking to avoid unnecessary contacts and visiting public places. In general, online sales are a more advanced option. With a view to promoting it, we decided to give customers a pleasant discount ranging from Br4,000 to 10,000 from the cost of an apartment, depending on its location.
Another important strategy is the availability of long-term installment plans. Such an option has been available for our clients for more than a year already. The Park Chelyuskintsev residential complex offers installments for four years, Mayak Minska for five years, and the Minsk World multifunctional complex for ten years. No interest, no guarantors, no overpayments, no verifications – you will need only a passport and a down payment of at least 30% to sign the contract. If the down payment is more than 50% of the cost of an apartment, you can save even more.
It is a very important promo. In order to be able to run it, we are investing huge funds in the construction of the complexes, including funds of our company and our foreign partners, primarily from the UAE.
Another example is also about tactics. We believe that as the global crisis has made our clients a bit indecisive and, in some cases, made them put their business on hold, we need to offer a way out. The Payment Holidays promo gives an opportunity not to make monthly payments for six months when buying an apartment in installments. Some will simply catch their breath and build up their strength. Others will be able to save for the upcoming refurbishment of the new apartment. Some will use this to continue paying rent as their future apartment is being constructed.
This promo is our know-how, as only a stable and reliable real estate developer can afford such a step.
Does your company offer an installment without any down payment?
A long-term installment plan for ten years without a down payment is offered under the promo “Buy now, pay later!”. This is a unique offer! This proves that our company takes its work on the Belarusian market seriously and thoroughly.
A client does not need to make any down payments. The most important is that the buyer is not required to produce special guarantees and is not subjected to a scoring procedure to assess their solvency. The buyer does not have to pay interest or additional fees: the price of the apartment is simply divided by the number of months of installments. They will pay a strictly fixed amount for the apartment of their dream.
The promo extends to a limited number of apartments in a lot of houses across various quarters of the Minsk World complex, so buyers can choose the size, layout, and floor of the apartment.
At the launch of the promo we stressed that monthly payments will start from Br1,170. Apartments at such a price sold in a mere three days! In essence, it is less than a half of the average income of a family with two working people in Minsk as of February. By the way, this is a nice detail in addition to the matter of the so-called dead real estate market and waiting clients.
I have spoken about the amount of investment we intend to pour in the Minsk World complex this year. We also invest huge sums - around €100 million this year - to offer our clients various financial tools and an opportunity of a long-term installment plan.
This offer has appealed to those who do not have their own housing and have to rent an apartment. The sums people pay monthly as part of a long-term installment plan are comparable to what people pay for renting an apartment in Minsk but you pay for your apartment.
You will not have to wait for ten years in order to move into your new home. All the apartments available as part of the promo “Buy now, pay later!” via long-term installment plans without a down payment are located in houses under construction. They are to be commissioned this year and the next one. The commissioning of these houses will begin in several months. Buyers will get keys to their apartments, will be able to do remodeling work, and move into the apartments before they pay the full price for them.
But the promo “Buy now, pay later!” is also very attractive for those who already have their own apartments. Buying an apartment via an installment plan is an investment in the future of your kids. As they grow up, you will have time to build and redecorate the apartment, rent it out, and get guaranteed income every month, which can be spent on paying the installments among other things. And in ten years you will be able to sell the apartment or gift it to the kids. Real estate in a prestigious residential complex is valuable!
Do you believe investing in real estate is still a smart thing to do?
The profitability of rented apartments in Minsk is still three times higher than profitability of bank deposits. If you want to have the apartment to yourself instead of leasing it, remember one thing: buy during a crisis, sell at a peak.
A simple example: today a Minsk resident needs roughly 88 average monthly salaries in order to buy an apartment as large as 48 square meters. Meanwhile, according to Polish statistics it takes at least 100 salaries to do the same in Poland, which is not a very expensive country in accordance with European standards.
I don't think there will be a more profitable time to buy real estate than it is today. Moreover, prices rise fast after any world crisis and prices for new apartments in Minsk will only grow in the long term. We have an example that speaks for itself. The price per square meter has increased by 100-150% in the residential complex Mayak Minska, which was one of the first landmark complexes we'd started building. Do the calculations yourself – according to independent specialists, the cost of real estate in Minsk may reach €3,000-5,000 per square meter in modern residential complexes in the future. Nearly on par with Warsaw or Prague.
In the past few weeks, we have seen clients who buy 5-10 apartments at a time. It is a profitable investment for those who think about the future. It is not that important, if a buyer is from a Belarusian city, Russia, Israel, or any European country, as purchasing new modern real estate in the Belarusian capital is a very attractive option.
So, real estate of in Minsk will remain a very profitable and wise investment for a long time!
It means that large-scale construction of urban complexes with well-developed infrastructure in Belarus will not just continue, but will be accelerated. Moreover, very many Belarusian families still need an apartment of their own. Our company works hard to resolve the problem for them.
