Green homes with an “inflation” fee, if a customer refuses, return the money

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Many developers prefer to temporarily suspend the sale of apartments under construction in the hope of selling them at adequate prices when they complete the building. PHOTO: “24 HOURS”

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Bigger entrepreneurs are reinsured because no one knows how far prices will go

People with business in Russia and Ukraine refrain from buying at the last minute

Construction contractors are starting to charge an “inflation” tax in the contracts with which they sell homes for new construction, according to a study by “24 Chasa”. The number of cases in which concluded contracts are broken and the builder is forced to return the deposit and not even start the project, because the prices of materials are growing at such a rate that his bill does not come out at all. And there are cases in which homes under construction are not sold green at all,

deliberately detained

from sale,

because no one knows how much they will cost in time when they are ready.

Usually the construction of a new building takes 2-3 years and it has been a common practice for a long time for the houses in it to be sold green because there is a great demand.

The typical scheme is to pay an initial deposit of 10-20% of the price, when the rough construction is completed – another 30-40%, and when obtaining a certificate of operation of the building – the rest.

Banks also work under these schemes when granting mortgage loans – the money is not given all at once, but in parts depending on the stage reached by the construction.

However, the shock rise in prices for construction materials began in the second half of last year

changes significantly practice

Even then, the chairman of the Chamber of Builders in Bulgaria Ilian Terziev signaled that private entrepreneurs prefer not to start building at all, because they do not know at what prices they will finish the building.

“We have cases with our colleagues who have thought that it will be cheaper for them to return the deposit and even pay a penalty than to start building,” he said.

Basic building materials rose by 40-50%. For example, reinforcing iron, which at the beginning of 2021 cost a maximum of BGN 1,700 per tonne, is now difficult to find for less than BGN 2,400. Bitumen and wood have also become more expensive.

Specific raw materials used in the construction of residential buildings have become even more expensive, for example

glass profiles are more expensive

from 90%,

styrofoam – by 60%. “Given that 60-70% of the cost of construction are materials, the final price can not but increase by about 25%,” said Eng. Terziev.

The “inflation” fee in the contracts for the sale of housing is a clause stating that if, until the issuance of Act 16, construction materials become more expensive by more than a certain percentage, and

price of the home will

be promoted

with a certain value. With different variations we are talking about more than 40% increase for the three years of construction, in which the price of housing must be raised by at least 20%.

“We have not introduced such a clause in our contracts, but we hear that more and more colleagues are doing it. Prices are already unpredictable and investors can not guarantee that in 3 years they will be able to protect their interests. But we are still a big company, “Irina Kaneva, BLD’s commercial director, told 24 Chassa.

She drew attention to the fact that larger entrepreneurs do not rely on proceeds from buyers’ contributions to start their next building, as smaller ones do.

They have another prevention mechanism in place – they are slowing down the pace of green housing to ensure that when the building is ready, they will be able to sell housing at market-friendly prices. As a result, the supply of housing still under construction is visibly declining.

According to market data, however, the average cost of construction, at least in the capital, is still around 500-650 euros. It may increase by many, but the final price is at least double that, and in some areas of the capital it is much higher. Therefore, according to consultants, things are not so tragic, just in this case it is a precautionary measure taken by the builders in advance.

“I will not do such a thing, I prefer to finish my current projects and wait a while,” entrepreneur Dimitar Gaitanov told 24 Chassa. Although he has bought plots of land and has ready-made projects, he has decided to wait a while and nothing has started for 3-4 months.

“Because

what are we doing, if the prices of materials

begin to fall,

and we build and keep the apartments without selling them? We will get what happened in 2008-2009 – to see how prices fall by half in a few months “, Gaitanov reacted. Moreover, everyone expects interest rates to rise as the most popular means of combating inflation. This will severely affect the real estate market and, according to him, it is no wonder that homes will become more difficult to sell.

Meanwhile, the war has brought another change to the housing market, which is just beginning – there are already people who give up the final rights of a property purchase deal because their business is related to Russia or Ukraine. They decide to postpone the purchase, at least until it becomes clear whether their finances will suffer significantly from what is happening.

“I have had three such cases since the war began. There are still a few, but they impressed me. “Obviously, we will not only get away with the direct effects of the war in the form of rising food prices, but the housing market will also be affected,” credit consultant Tihomir Toshev told 24 Chassa.

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