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Developers come down on sector regulations

The association of some of Hungary’s biggest property developers have raised a proposal package they believe would reduce the excessive debt situation that weighs heavily on the industry.

Accordingly, the group – comprising 16 of Hungary’s biggest property development firms – has developed a set of measures it believes will present a solution in the short to mid term.

The IKF believes that the current regulatory environment is hindering the rebound of the construction industry, even though the current state of stagnation is a positive change from the plunge witnessed during the more intense periods of the economic crisis. “While we are expecting things to get better as the economy improves, we still need the participation of the government in revising the regulations,” the IKF’s Adrienn Lovro, head of ABLON on behalf of the real estate developers’ roundtable association IFK, told reporters.

The standing regulations in Hungary’s real estate development sector are far removed from real life and are not suited to resolve the “chain of debt” phenomenon that has long troubled the industry, said Tibor Tatár, CEO of  Futureal. Tatár noted that the debt situation – referred to as a “chain” since more members of a set of subcontractors each owe the other money – is serious not only because it is usually those at the bottom of the order that are the worst off, but also because of the trust issues it creates.

Furthermore, the IKF identified several areas where the regulatory environment is making life difficult for developers. As head of the group, Gergely Árendás noted, several hundreds of billion of forints in new investments were abandoned because of the sluggish operation of the system which translates into roughly HUF 100 billion in lost revenues for the treasury.

These include undefined jurisdictions among the various authorities that have to be contacted when launching new projects, their sheer number and also their everyday operation, which developers feel is sometimes irresponsible and non-cooperative, Árendás said. Also, the construction trustee created earlier to provide financial guarantees behind projects and ascertain that every contractor will get paid is seen as ineffective and incapable of addressing several practical problems that regularly arise.

The IKF, therefore, proposes an experimental period of two to three years during which the trustee is suspended with various pilot projects being launch to make it more fit to actual market circumstances. They also recommend the simplification of bureaucracy by allowing every necessary permit to be acquired in one procedure and in one location. These various measures are expected to give a boost to the ailing industry in a matter of years, the IKF reps said.