New bill ensures fair regulation of shared construction

To clear the current situation and prospects of shared housing construction Vice-Chairman of the Committee for Construction, Housing and Utilities under the Ministry of Industry and Trade Nikolay Tikhonyuk was interviewed by Kazinform. Could you please describe the situation of the shared housing construction in Kazakhstan? There were about 450 shared construction facilities in the country in late 2007. 186 home facilities with 25.6 thousand home owners were completed during that period. Today every pending construction is under governmental control. There are three categories of them: those completed on their own funds; under public support and problem constructions. There is a strict launch schedule for Almaty, Astana cities including Akmola and Almaty regions with 95 per cent of shared construction facilities and every week deputy mayors make a report before the Government on the work done. As a whole the state allocated KZT 204.5 billion for completion of housing projects from which KZT 155.8 billion was allocated from the Republican budget and KZT 48.7 billion from the Governmental reserve. At present according to the available data 225 facilities of more than 41 thousand home owners are under construction. What are the specific problems of the pending constructions? The basic problem was caused by the fact that these facilities were built by those who do not know what construction is and were after quick money. The design documentation was not executed in complete volume ? as a result there are cost sheets and the entire work is impeded. It is urgent to restore all the design documentation and carry out state expertise. What is the essence of the new bill? The conceptual innovations of this bill consist in regulation of the relations between all shared construction participants. The bill also provides more rigid qualification requirements to the developer. According to the bill there will be four parties in shared housing construction: builder, home owner, special purpose entity and bank. As per the bill, a special purpose entity will be set up for each housing project by the developer. Such entity can appear both as client and construction company. The new amendment to the Licensing Law prescribes that a license issued for shared construction financed by home owners shall be one-time only and is issued for the construction of one particular dwelling building. Another requirement is that the developer must have certain experience in housing construction and own 25% of the estimated value of the building project and furnish a guarantee of the rest 75% from an investor or bank. Another novelty is that a developer is obliged to provide construction design and estimate documentation. Earlier developers used to present design documentation only, the estimate documentation being a commercial secret, which is not correct. The project documentation must be transparent and clean. Also as per the new law, the deadline will be determined by the design and estimate documentation approved by the state expertise. This will prevent any fraud or promises of unreal fast dates of completion. How does the new law protect the interests of home owners? - The essence of shared construction is to let a buyer make a deferred payment for the purchased home with a low market value. With the new law enacted, buyer will have access to the information about the estimate cost of an apartment or house and the declared market price spread. There were frequent cases when unaccounted expenses for utilities increased the estimate cost in the construction process, which could not but affect the home investors, who had to make additional payments. It is also important that, a buyer having entered into a shared construction agreement, can retrieve its money from the deposit within the next first month. After one month is experienced that will be impossible. However a home investor has full right to receive its money back if the developer fails to meet its liabilities. A big problem is when people having almost moved in their new homes could not legally formalize their apartments as their property, because the court levied distress for the property of the developing company, or because the building is on security in banks. We are resolving this issue jointly with the Supreme Court of Kazakhstan. On the whole this bill ensures accurate and fair regulation of the rights and duties of the shared construction parties.