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The report, authored by Scope analysts Nidhi Marwaha and István Braun, said the challenges stem from measures introduced by Hungary’s new government to tighten permitting and planning procedures and review some state contracts signed under the previous administration.
Scope said permitting and concession changes increase execution and business-visibility risks, while reviews of past transactions could create direct liquidity and contingent-liability exposure.
The rating agency pointed to Bayer Construct, rated B/Negative, whose state property acquisition contract related to the Zugló City Center project has been canceled. The government is also seeking repayment of around HUF 315 bln already disbursed, together with contractual penalties and compensation.
Scope identified four main measures introduced since May. These include the withdrawal of expedited permitting through “priority investment” status from some developments, returning them to standard approval procedures, as well as a temporary suspension until the end of 2026 of new building permits for certain projects linked to the state-subsidized Otthon Start housing loan program.
Projects that already hold valid permits are unaffected.
The government is also reviewing several long-term infrastructure concession agreements, including at least one motorway contract, with the stated aim of securing more favorable commercial terms for the state. It has additionally signaled its intention to revisit past state-private transactions, such as asset sales, that it considers unfavorable to the state.
Projects that have lost priority investment status can still obtain permits but must now go through standard approval procedures rather than a simplified administrative process.
Scope expects this to lengthen pre-construction periods and increase execution risk, although sales activity and cash inflows are unlikely to be affected immediately.
For projects covered by the temporary permitting suspension, construction delays are likely while developers await case-by-case reviews. Scope said uncertainty over completion and continued eligibility for subsidized financing could also lead more buyers to defer purchases.
The gap between construction expenditure and revenue recognition could consequently widen, increasing reliance on interim financing. Contractors heavily exposed to a small number of large developments with pending permits are more vulnerable than those with diversified, largely permitted backlogs.
Scope said the review of concession agreements also creates uncertainty over future contract terms, duration and continuation. Although no contractual changes have yet been implemented, the review process itself could weaken business visibility and complicate financing assumptions behind long-term investment plans.
Scope said the gradual release and absorption of EU funds could help offset some of the pressure on the construction and property sectors.
The government reached a political agreement with the European Commission in May to unlock about EUR 16.4 bln in previously frozen recovery and cohesion funding, according to the report.
Civil engineering and infrastructure contractors operating in railways, public transport, utilities and water management are expected to benefit most, alongside contractors focused on schools, health care and other social infrastructure. Scope said renewable energy, grid upgrades and sustainability-focused renovation should also see stronger demand.
Scope currently rates 20 Hungarian issuers across the construction and real estate sectors, with 10 in each segment. Five carry a Negative Outlook, while one has a Positive Outlook, indicating what the agency described as some pre-existing sensitivity in the rated portfolio.
Scope said it would continue to monitor policy developments and their implications for affected issuers as the relevant reviews and legal challenges progress.
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