Businesses find constructive ways to cash in on the ever-expanding Ukrainian elite's need for more living room
Kyiv – the answer appears to be no.
The major players on Kyiv’s residential construction market have been recording impressive growth recently, with some seeing their profits more than triple in just one year.
Kyiv’s municipal construction company Kyivmiskbud is leading the drive. According to Top 100 ranking of Ukrainian companies compiled annually by InvestGazeta weekly business paper and Arthur Andersen consulting firm, Kyivmiskbud’s turnover rose to Hr 512 million last year from Hr 308 million in 1998.
The company’s rise on the list of Ukraine’s most profitable enterprises was even more impressive. Kyivmiskbud’s profits more than tripled to Hr 41.5 million last year against Hr 12.8 million the year before, according to the Top 100 ranking. That pulled Kyivmiskbud (short for Kyiv City Construction) up 39 notches on the list, making it Ukraine’s 59th most profitable company last year.
Part of the company’s growth is apparently due to extensive credit lines offered to potential buyers, a rarity in Ukraine’s residential construction market. Other companies, as a rule, either require clients to pay immediately or allow them to pay in installments while construction is underway.
Vitaly Zibarov, spokesman for Kyivmiskbud, declined to comment on the company’s growth and its sales methods. Other company officials could not be reached for comment.
Poznyakyzhylbud (short for Poznyaky Residential Construction), another major construction company in Kyiv, is also doing well. Poznyakyzhylbud, which offers more expensive, luxury?style apartments compared to Kyivmiskbud, sold more than 38,000 square meters of residential space last year, up from 29,000 square meters in 1998. Founded just four years ago by a group of businessmen, the company currently has 15 apartment buildings under construction in different parts of Kyiv.
The company’s upscale offers are proving to be a draw for potential customers, said Poznyakyzhylbud manager Petro Struts. Take a 25?story apartment complex currently under construction on Lesi Ukrainky. Once finished, the building will have round?the?clock security, underground parking, stores, a sports complex, and a medical center.
Struts said the would?be building’s 114 apartments were sold three months after construction began in early 1999.
Given that a square meter of space in the building costs about Hr 4,100 (about $700), or more than 17 times the official average monthly salary in Ukraine, Poznyakyzhylbud’s ability to dig up so many rich clients in impoverished Ukraine seems an achievement. Not so, Struts said.
“It’s a rule rather than an exception,” he said. “All our apartments are usually sold out before construction is finished.”
Struts noted, however, that the company’s prices are usually lower, averaging $350 per square meter, and vary depending on location.
Poznyakyzhylbud also said the so?called solid frame construction technology used distinguishes the company from other construction firms.
Unlike others, Struts said, his company first erects a monolithic frame with solid floors and covers it later with brick. Apart from creating an appealing design, the technology is also practical, he said. It gives future buyers complete freedom in planning the number and size of rooms in their apartments, he said.
Walls then can be easily positioned differently in each apartment, he said, unlike in most other buildings in Kyiv, where apartments on each floor match each other.
Struts said this technology is now gaining popularity among other Ukrainian construction companies as well.
Government statistics show residential construction in Kyiv continued to grow in the first half of this year, despite a 3 percent decline in volumes of residential construction nationwide.
The decline could have been more significant, if it weren’t for Kyiv’s construction companies, which account for nearly half of Ukraine’s overall residential construction (1.857 million square meters in January?June).
The capital’s construction companies have built about 850,000 square meters of residential space in January?June, a 20 percent increase from the same period last year.
The companies, however, are reluctant to discuss their clients.
Poznyakyzhylbud’s Struts said that most of his company’s clients are wealthy people.
“There are no pensioners among them,” he said. “Cynical but true.”
Crimea?based Consol, another company involved in residential construction, also enjoys growing sales. Ihor Hanotskty, head of Consol’s sales department, said the company’s sales nationwide jumped to 196,000 square meters of residential space last year from 147,000 square meters the year before. Consol builds apartment blocks in Kyiv, Kharkiv, Dnipropetrovsk, Odessa and throughout Crimea, Hanotsky said.
He said a square meter offered by Consol costs $350 to $520. As is the case with Poznyakyzhylbud, customers usually buy out all of the apartments by the time the construction is finished, Hanotsky said.
