Aleksandr Lukashenko holds session to discuss housing construction

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President of the Republic of Belarus Aleksandr Lukashenko urged to enhance order in housing construction. The head of state made the statement at the government session held on 4 June to discuss housing construction.

According to Aleksandr Lukashenko, starting from 1996, housing construction has been the most important priority of the social and economic policy of the state. About five million square meters of housing are built in Belarus every year. Belarus leads among post-Soviet states in terms of the per capita housing construction. The lion’s share of apartments is earmarked for people on the waiting lists and is constructed using budgetary funds. From 1996 to 2012 about 600,000 families on the waiting lists improved their housing conditions. “Although the overall number of the Belarusian population dwindled, the number of people on the waiting lists soared from 600,000 in 1996 to 800,000 in2013,” the head of state said.

“Of course, this cannot last forever. The demand for affordable housing is on the rise, but the state resources are limited. Today’s realities prove that approaches to using budgetary funds to subsidize housing loans need to be overhauled,” the President stressed.

Aleksandr Lukashenko drew attention to the fact that some people have started developing a welfare mentality. “It got to the point when they started reselling or leasing apartments they bought using subsidized loans. In other words, they started using them for the wrong purpose,” the President said. He noted that it was the reason why the concept of the government housing policy was revised. The new concept offers households more opportunities to resolve their housing issues on their own.

Aleksandr Lukashenko emphasized that it does not mean that subsidies and government support will no longer be available. They will remain, but in a different form and amount. The support will become more targeted and will take into consideration the real financial circumstances of people. A tougher control will be introduced to make sure state support will not be misused.

The new approaches include housing construction using a government contract, more opportunities for people to buy a house relying on their own resources, easier rules of participation in shared housing construction projects as well as construction of rented housing.

As for housing construction using a government contract, this option will be provided to people who are on the waiting lists and are entitled to subsidized loans. The relevant decree has already been signed. Aleksandr Lukashenko noted that in line with terms of a government contract, households will not be involved in housing construction. At first government contractors (capital construction divisions or other organizations where the government holds over 50% of shares) will build a house, after that apartments will be suggested to people who are on the waiting lists at the price effective on the day when the house was commissioned; this option involves providing subsidized loans.

“This approach will help avoid painful issues related to the time frame, quality and cost of construction works. People will not have to pay additional financial exactions because of the delay in house commissioning or other reasons. There will be better conditions to enable smooth operation of construction companies,” the President believes.

Aleksandr Lukashenko emphasized the government will toughen control over developers: “Now they will not be able to conceal their sluggishness and lack of discipline by payment disruptions or other reasons”.

According to the President, people who are on the waiting lists, but not entitled to a subsidized loan will get more opportunities to construct a house on their own. The participation rules in shared housing construction projects will be eased. Aleksandr Lukashenko reminded that in February several state-run banks decided to reduce the interest rate on Belarusian ruble-denominated loans for people on the waiting lists, which will contribute to the development of housing construction lending. Besides, upon individual decisions of the President, state-run companies and business entities will be authorized to provide their employees inscribed on the waiting list with subsidized loans to construct, renovate or purchase housing. Aleksandr Lukashenko noted that if there are no employees on the waiting list, companies will be able to provide such loans to other workers, but the amount of subsidies will be smaller.

Aleksandr Lukashenko noted that a requirement to strictly observe the terms and cost of construction works stipulated in contracts will be formalized by the law.

“We will switch from persuasion to direct requirements, the violation of which will result in immediate and unavoidable punishment,” the President warned. “If a developer breaks the contract through his own fault, he will incur all additional expenses. In addition, a developer will pay a fine in favor of the other party,” the head of state said.

The President emphasized that relevant draft decrees have already been prepared. The head of state is convinced that these measures will help considerably advance in resolving the housing issue.

Another avenue of housing construction development is rented housing. It will be provided for citizens who cannot afford to build or buy their own homes, including those not eligible for government support. The President recalled that this new project has already started in Minsk, with the construction of the first housing compound Magistr for representatives of the artistic and scientific communities.

Aleksandr Lukashenko emphasized that rental costs will be below the market prices and affordable for a middle-income family.

"Now the task is to expand the scope of such a construction, involve a broader range of participants, give this promising project a national priority," the head of state said.

The government, oblast executive committees and the MinskCity Hall had were instructed to take the issues regarding rented housing under control. They should take every effort to ensure that the construction of such housing with the use of budget funds should have minimum profitability and the one with the use of extra budgetary resources should not exceed market prices. Rented housing construction targets for 2013-2015 have been voiced at the meeting. According to the head of state, both state-run and private organizations will be working on fulfilling these goals with the use of various financing resources. “Two or three, or may be more, government rental homes should be built in every oblast in 2013-2014,” the President said.

Aleksandr Lukashenko stressed that the plan for the ongoing five-year period includes the construction of at least one million of square meters of such housing in the country.

The draft decree on rental housing has been prepared already.

The President emphasized that the regulatory framework to implement the concept of state housing policy is being completed. However, it is clear that the regulatory framework itself cannot ensure a complete success. Everything depends on people, primarily on workers of the housing construction industry, specialists and executives,” the head of state stressed.

The President reminded the meeting participants that he voiced his requirements for the construction industry at a government session on 1 March and addressed them specifically to Minister Anatoly Nichkasov and Deputy Prime Minister Anatoly Kalinin. “Three months have passed. Today I hope to hear clear answers on the status of the effort to address the problems,” the head of state said.

“People complain on the mounting costs of housing, protraction of construction and low quality of building works,” the President noted. “My requirement remains unchanged: the square meter of housing for those on the waiting list should not be higher than the average salary in the country. If the average salary is $300, then the price of a square meter should be as high. If the average salary is $500, a square meter for people on the housing waiting lists should be $500, not $1,500-2,000,” the President noted.

Aleksandr Lukashenko criticized the civil engineering industry for poor quality and labor productivity.

The President remarked that the situation in the housing construction industry had been evaluated prior to the session. “There are more than enough violations of the legislation, the industry is riddled with corruption. Here we will hear out reports about how, where, and to what extent,” the head of state said.

Aleksandr Lukashenko reminded about his instruction to switch the civil engineering industry to European standards. “Has it been done? How do designers operate these days? There are more than enough complaints. I would like to hear for what we pay designers. Are higher salaries paid because the cost of a project is higher or contrariwise?” the President remarked.

“It is unacceptable that the labor productivity of Belarusian construction workers is considerably lower than the average European level,” the head of state believes. “As for the remarks about the lack of workforce, the answer is simple: if you work well – quality and proper output, then salaries will be decent and there will be no problem of the shortage of manpower for construction projects. We also have to take a closer look at how much manpower we have. We can compare the percentage with Europe, let’s say, Germany. Then I think we will make conclusions whether we lack manpower or whether half of the manpower is good for nothing and, as I am told, there are two executives per every three workers,” the President remarked.

Aleksandr Lukashenko was concerned about downright failures to upgrade integrated home-building factories. Besides, it has been reported that housing construction targets in Vitebsk Oblast may be failed.

The head of state remarked that there are more drawbacks and problems to address in the industry and therefore the session will be serious.

“If we cannot enforce order, then all the efforts to improve the legal base will be worth nothing! We cannot forget that the construction industry deals with the most important matters that affect interests of virtually all the citizens,” the President stressed.

Aleksandr Lukashenko remarked that he wanted to hear precisely how the situation will be mended. The head of state told oblast governors to take an active part in the discussion because their construction enterprises will bear the bulk of the burden. The head of state drew attention to problems in the capital city: “We have most of the construction workers employed here, most of the money in the construction industry involved here, most of the homes built here and there is no larger mess anywhere else in the country than the mess you can see at every turn in Minsk”. Aleksandr Lukashenko added that housing problems are most acute in Minsk as far as the financing and the timely construction of the engineering and transport infrastructure for new residential areas are concerned as well as the allocation of land plots for home construction.

Vice Premier Anatoly Kalinin reported on the draft decrees relating to the legal regulation of housing relations, transfer of service accommodation into the category of rented housing, establishing common approaches to housing construction lending, abolishing the possibility of simultaneous design and construction of facilities.

There are plans to develop satellite towns with a view of controlling the population of Minsk and regional centers and providing accommodation to everyone. A draft decree, which will determine the status of these towns, has been prepared. Minsk’s satellite towns will be Dzerzhinsk, Zaslavl, Logoisk, Rudensk, Smolevichi, Fanipol. The satellite town of Brest will be Zhabinka and that of Grodno - Skidel.

The Vice Premier described some points which, in the opinion of the government, have a deterrent effect on housing development in Belarus. According to him, in a number of locations it is difficult to increase the volume of housing construction without the use of agricultural land.

“I do not see the problem here. There are many land plots around Minsk that are not agricultural land. And I am not even talking about regional centers. There is plenty of land within city limits which can be used for development,” Aleksandr Lukashenko remarked.

According to Anatoly Kalinin, 2.5 million square meters out of the 6.5 million square meters projected to be built in 2013 will be constructed with the use of state support. In January-April this year 1.5 million square meters of residential construction was commissioned, which represents 99.4% as against the volume commissioned in the same period 2012.

Proceeding from the capabilities of the state and financial status of citizens, the government suggests building 6.5 and 7 million square meters of housing in Belarus in 2014 and 2015 respectively, of them 2.8 and 3 million square meters with the state support.

With regard to rented housing, 220,000 square meters of housing will be built this year. There are plans to gradually increase the volume of rented housing construction with the aim to have at least 1 million square meters of such housing built by the end of the five-year term.

According to the Vice Prime Minister, the interest rates on loans are high. "In this regard we should continue to lower the interest rates on construction loans, and re-start issuing loans in foreign currency to citizens. For the time being the National Bank does not support the idea of foreign currency loans,” he said.

The session also focused on the efforts to raise the quality of construction planning, modernization of housing construction companies.

Anatoly Kalinin noted that the number of workers in the construction industry has gone down in past years. However, he noted that current strength of the workforce is enough for carrying out all investment projects and state programs. Outflow of personnel has almost stopped, with many workers who left Belarus in search for jobs coming back to the country.

“Of course we have not been lagging behind the schedule and having problems with the standards of quality in construction but in the nearest time we are going to introduce the most stringent requirements for builders and design engineers,” the Vice Premier said.

“We have carried out an analysis which shows that it is necessary to create two or thee large holding companies that will include from 20,000 to 25,000 workers and will be able to accomplish big projects in Belarus. They will also be able to expand into foreign markets. I think that in H1 2013 we will adopt the relevant resolution on the establishment of large holding companies,” Anatoly Kalinin added.

After the report of Vice Premier of Belarus Anatoly Kalinin Aleksandr Lukashenko stressed that еhe construction industry has so far failed to eradicate a number of negative things, both in terms of design and activities of intermediaries. “There are the firms employing 3 or 4 people. They apply for land permits, bank loans, and then become contractors of state-owned developers. They have business set up for a penny with the profitability close to zero. Then they sell accommodation for $1,500-2,000 per square meter, and pocket good profits,” the President said.

"We will address these issues in the near future. I think we will minimize them Anatoly Kalinin assured.